Life in Venezuela is described by a local as “A lot of people are going hungry. People are losing their jobs. Kids are looking for food in the trash”. Once a promising country with rich agriculture and a developing economy is now in a recession. Streets are filled with riots for impeachment and 9-hour lines waiting for food to restock. Venezuela is a latin country located on the northern coast of South America.
Colonized in 1522, it prospered in exporting goods like petroleum and oil. Natural resources soon quickly drained out and now is left in debt. The man, who locals hold responsible for the economy’s fall is the president, Nicolas Maduro. The political future of Venezuela is in crisis due to its economic uncertainty. It has brought the United Nation’s attention that it’s in a state of emergency. Citizens aren’t being funded by their government and are in need of a change. An impeachment is an option that citizens have been proposing but 4 years have passed and change has not been made.
According to International Monetary Fund, “prices are set to rise a staggering 720% this year”. Today Venezuela’s bolivar bill is worthless and it keeps on losing value. It’s experiencing major shortage crisis due to hyperinflation. Components for essentials are at a deadstock and is a luxury no one can afford. Background Story In the 1999’s, a charismatic Hugo Chavez blamed government corruption for the economy’s imbalance. His political approach of taking profits from the oil and petroleum industries and using that to subsidize social welfare programs appealed to the country’s poor.
Chavez subsidized food, improved the educational system and healthcare system, and reduced poverty by half. For his re-election, he needed to keep the Venezuelans happy. So he rigged the economy.
He didn’t take into consideration of Venezuela’s dependence on oil which caused him an overspending leading to a growing deficit. Also, he tore up contracts with multinational oil/ gas companies and demanded much higher royalties. Refusal from companies opted to no compromising, therefore no business.
With the late passing of Chavez, Maduro took over and claimed that government would run businesses better than private enterprises. During Maduro’s presidency, the economy has gotten worse. The oil price has fallen and inflation has made necessities nearly impossible to afford. Maduro rigged the economy to keep himself in power altering to hindering the poor.
AnalysisVenezuela’s hyperinflation and shortages have enacted a price control. Since Venezuela is ruled by a socialist, Maduro has the ultimate power over businesses and the military. Maduro set the official exchange rate at 10 bolivars per US dollar but this only includes himself and his political allies. Overall food shortages are happening because the military has complete control of the food supply. The military imports the food at the official exchange rate and sell it on the black market, making high profits.
These shortages are not realistic for the cost of living. To put in perspective as of June 2017, “$1 dollar bill is equivalent to 7,980 bolivars”. In a grocery store, it costs, “$150.76 for a dozen eggs, $703.54 for powdered milk, and $301.50 for a box of pasta”.
A hyperinflation in Venezuela is causing staggering pricing on different markets making essentials unaffordable. Venezuela is experiencing food and medicine shortages because price ceiling is below equilibrium. Having one of the largest oil reserves in the world, Venezuela economy heavily depends on its oil and petroleum. Oil demands comes from China and India which increases global prices, helping Venezuela’s currency income. The profits are all spent because of Chavez’s overspending on social programs which led to debt. According to Forbes, ” Oil sales are 50% of Venezuela’s GDP and 95% of its export revenue”. Venezuela’s 2016 break-even point for oil is “$117.
50 per barrel”.Venezuela is exporting less oil each year due to decreasing of oil price. Conclusion Shortages and inflation have affected Venezuela into a state of emergency. Socialist Maduro controls price control, it’s stopping Venezuela from progressing. He is keeping price control at 10 bolivars because it’s in favor of the military selling food to the black market. The black market benefits from shortages and currency dropping.
The government is gradually abandoning regulations as the country is in severe economic crisis. With the fail adjustment of Madura, Venezuela’s corruption of the government inflicts on price control.