Venezuela, the country with the largest oil reserves in the world, that was once the power house of Latin America has fallen into destitution. Weakened by hyperinflation, power cuts, and food and medicine shortages, the country has now become almost impossible to live in, forcing around 2.3 million people to leave the country as refugees since 2014.
Members of the opposition in Venezuela and people from all around the world blame Venezuela’s socialist government lead by Nicolas Maduro for the country’s disastrous economic crisis.
The biggest problem facing Venezuelans on a day-to-day basis is hyperinflation. The annual inflation rate reached 83,000% in July (2018), according to a recent study by the opposition-controlled National Assembly, and the FMI predicted that by 2018 the inflation rate will reach 1,000,000%.
Prices have been doubling every 26 days on average, which has meant that the average Venezuelan cannot afford to buy basic items such as food and toiletries. The rapid inflation rate has meant that small items like a cup of coffee cost around 2.5m bolivars, making it increasingly difficult to buy goods with cash on hand.
It can be argued that Venezuela’s richness in oil is the one factor that has underpinned the country’s failure. With so much oil, Venezuela has never needed or had the desire to diversify its economy. For years, the South American country has sold oil to other countries, and with the dollars in turn has imported the goods Venezuelans want and need from abroad.
However, when oil prices fell in 2014, Venezuela was faced with a lack of foreign currency. For that reason, it became more difficult to import goods at previous levels, and so imported items became scarcer, which ultimately lead to business increasing their prices and the currency’s inflation rising.
Add to that the government’s willingness to print extra money and regularly hike the minimum wage in an effort to regain popularity with Venezuela’s poor, and you get money which loses its worth fairly rapidly.
The government is also increasingly struggling to get credit after it defaulted on some of its government bonds. With creditors less likely to take the risk of investing in Venezuela, the government has again taken to printing more money, further undermining its value and stoking inflation.
Additionally, the Venezuelan government made things worse by printing extra money and regularly hiking the minimum wage in order to maintain their popularity amongst Venezuela’s poor. These actions means that the Bolivar (Venezuela’s currency) began to lose more of its worth and rapidly.
The only option for many Venezuelans is to leave their country behind. With 2.3 million Venezuelans having left the country since 2014 the majority of these migrants have chosen to cross the border into neighbouring Colombia (600,000.) South American countries like Ecuador, Peru, Chile and Brazil have also received thousands of Venezuelan refugees.
Spain and The United States have also felt the brunt of the humanitarian crisis in the South American nation with 208,333 Venezuelan migrants in Spain and 290,2224 in the US in 2017.
For those Venezuelans that choose to stay in the country, they are faced with empty shelves in supermarkets, water shortages, power cuts and a growing rate of violence with the governments crack down on the opposition, protests and high crime rates with 27,479 people killed in 2016, it seems that all chaos has broken loose in a once more secure nation.
The lack of medicines and run down facilities in hospitals in Venezuela has even forced pregnant women to cross the border into Colombia to give birth and to have their children vaccinated.
So Who Is To Blame?
Some of the problems that the country is experiencing can be traced back to many years. The socialist government rose to power under 1999, first under the late President Hugo Chávez and more recently by President Nicolás Maduro, many Venezuelans blame these two men for what is happening. It is argued that although these socialist policies were aimed at helping the poor – Venezuela was a country of huge inequality when he came to power in 1999 – they did not work.
For instance, price controls were introduced by President Chávez to make goods more affordable for the poorest by capping the price of products such as flour. As a result of this, Venezuelan businesses producing these items soon no longer found it profitable to make them.
Critics also blame the foreign currency controls brought in by President Chávez in 2003 for a flourishing black market in dollars. For years Venezuelans wanting to exchange bolivars for dollars have had to ask for permission by a government-run currency agency. Only those with ‘valid reasons’ to buy dollars are permitted to do so. For that reason, dollars have been able to flush the black market because many Venezuelans are unable to freely buy dollars. At one point, the dollar was trading for 6.5m bolivars.
With a population starving, sickly and desperate it is clear that for Venezuela’s humanitarian crisis may have brought the country to a point of no return.