Its been 5 years since the crisis in Venezuela — has there been any improvement? (part 1)
Written by Arnav Srivastava
Venezuela is a small country located in the continent of South America, bordering Brazil, Colombia and Guyana. The country’s capital city is Caracas. Millions worldwide witnessed the collapse of the Venezuelan economy on the news and the country has been suffering and going through a harsh time of political instability and major economic damage.
Venezuela used to be the richest country in Latin America. It has the largest known oil reserves in the world and the democratic government used to be praised worldwide, due to the equal and fair treatment to all and how democracy was so emphasised. Unfortunately those prosperous times came to an end as Venezuela’s economy suffered badly resulting in the country having the highest inflation rate in the world, leaving many Venezuelans with no access to basic necessities such as food and medicine. The economic downfall also lead to an increase in crime rates, as the country saw its murder rate spike, surpassing the most dangerous cities in the world. The sudden increase in crime rates lead to violent protests across the whole country against the government.
But how did these terrible circumstances come about?
About 10 years ago Venezuela was experiencing a period of economic prosperity. During this time oil prices were high and rising. At the time Venezuela was exporting and selling large amounts of its oil, making the government billions every years. The man in power at this point in time was the beloved Hugo Chavez, who became a symbol of economic prosperity and good times for the country. Hugo Chavez had one mission: to improve the life of those in the country and help the poor of the country. He allocated large portions of the billions made into providing subsidies for food, travel and medicine. This made him be liked and favoured by the poor of the country. However oil was the only commodity Venezuela had, and with Chavez spending large sums of the country’s wealth on improving and developing the nation, there was a lot up for risk. If the oil prices were to fall or go down, the Venezuelan government would be in big financial trouble and Chavez’s spending habits would come to an abrupt end.
Many say this was the fatal flaw for the Venezuelan government, with only one commodity (oil) the government was relying too much on just this one product. Many economists argued that Venezuela needed to diversify its economy so it did not have to rely on oil prices too much.
With so much outflow from the government, they were relying on one thing and one thing only — oil prices. If the global oil price dropped Venezuela would face big problems.
They cant afford oil prices to drop, but it did…
read the rest in next week’s issue
