Looting, black markets, riots, and nationwide anarchy – sounds like a nightmare, doesn’t it? Unfortunately, the situation unraveling in Venezuela is not too far off from your worst dreams.
On May 2, 2017, current Venezuelan President Nicolas Maduro announced he will create a ‘people’s body’ to write up a new constitution for the nation of 31.1 million people, all so he could defeat a “fascist coup” The rhetoric of Maduro makes it sound as though the liberty of the Venezuelan people is at risk due to fascist armies attempting to overthrow h and his regime – However, it could not be further from the truth.
At the moment, the number one enemy of Venezuela is hunger, not fascists – Importation and production of food have plummeted to a low the nation has never seen before. As of late 2016, the importation of foodstuffs such as bread and fruit have dropped a staggering 99%. Imports of meat have dropped 63%, fish has dropped 87%, and sugar has dropped 34%. To stave off starvation, it has been reported that many Venezuelan citizens have taken to searching dumpsters for scraps and even eating pink flamingos and anteaters just to get some protein. For those living in a country that over-consumes, it seems impossible to imagine ourselves living in the tragic circumstances of the Venezuelan people. How could it all go so wrong? How is something like this even possible, especially in a country that has oil reserves larger than Saudi Arabia’s? Simply put, this disaster was brought about by a perfect storm of governmental mismanagement and natural economic forces.
In 1999, Hugo Rafael Chavez ascended to the Venezuelan presidency. The party he led and created, the Fifth Republic Movement (MVR), championed Bolivarianism as the only method of liberating the ever-poorer citizenry from the prevalent poverty the country had been enduring throughout its entire existence. This hard left ideology not only seemed like the social revolution the nation’s poor craved, but also the economic solution they needed. After becoming president, Chavez instituted a number of economic policies intended to the general welfare of his constituents. This included the nationalization of large swathes of the oil, agriculture, steel, power, transportation, and even tourism industries. By early 2010’s, the Venezuelan government seemed to control every key industry in the country, all without the intent to make a profit from their consumers. However, chasing away nearly all of the private – and largely foreign – industry is not the wisest decision to make when managing a developing economy.
Venezuela’s relationship with foreign industry has been a rocky one, to say the least. For obvious reasons, Exxon has still yet to be compensated for these events, mostly due to the extremely limited amount of cash the Venezuelan government has on hand and partially due to the stubbornness of the regime itself. Situations exactly like this have been mirrored across the entire nation, ranging from beer to glass manufacturing industries. Now, with little to no private investment, it is apparent that the near sole provider of all consumer goods is the government alone.
These actions by the Chavez regime proved to be disastrous for the nation’s economy. Coupled with price controls intended to make products affordable, it quickly made products outright nonexistent. Massive shortages of foodstuffs and other consumer products hit the country like a wave beginning in the mid 2010’s, exponentially getting worse as time went on. The government had sworn that it would not make a profit off of the Venezuelan people, yet, this was one principle that would hasten their downfall. To put it bluntly, what the publicly owned industries were making were not profitable – at all. In fact, they were losing money from the moment they were nationalized, thus prompting the government into further deficit spending that was already out of control due to massive unsustainable social programs, or misiones. Nationalization and mismanagement of most industries made it so that they could not expand or meet the Venezuelan populace demands. Yet, for a time it seemed that Venezuela had a trump card; oil.
From the middle of Chavez’s reign (around 2010) to the beginning of Maduro’s (2013), Venezuela greatly benefited from sky-high oil prices. As of 2013, Venezuela has roughly 297 billion barrels of proven oil reserves – the largest in the world. As a member of OPEC, Venezuela along with the other OPEC states have direct influence on the price of oil, as the very organization is intended to keep oil prices high. However, this was a false sense of security that was held by the regime for the past decade, and in that time a major dependence on oil was fostered. Unfortunately, it is still evident that they have not broken away from this crippling reliance on oil, as oil accounts for 96% of their exports as of May 2017. In mid 2014, this dependence was rocked; the price of oil per barrel crashed from a price of ~$105.00 to ~$50.00 seemingly overnight.
Now that the government was earning less than half of what they were only a short time before, everything that could go wrong went wrong. They couldn’t pay to maintain public industry. They couldn’t pay their debt – 6 billion in payments per year. They couldn’t even pay to keep the power on. In order to keep the country (barely) going, they began printing money at an extraordinary rate, leading to hyperinflation. Just to give some perspective, the Venezuelan Bolivar lost 55% of its value in just one month last November. Now, the future of Venezuela is an enigma. From a historical perspective, most major insurrections and revolutions have occurred when a few factors are present; no food, no standard of living, and worthless currency. To put the current Venezuelan government’s economic naivete and shortsightedness into words is bordering on the inexplicable. Even with good intent, Chavez carefully restructured Venezuela into a house of cards; only to have it come crashing down when the slightest of winds came along.
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