FROM AN OIL RICH NATION TO THE HOTBED OF AUTHORITARIANISM, POVERTY, FOOD SHORTAGE AND ECONOMIC MISMANAGEMENT, THE DOWNHILL JOURNEY OF THIS LATIN AMERICAN COUNTRY IS ENTHRALLING AND FULL OF DESPONDENCE.
Many economic analysts had proclaimed that Venezuela was the world's 4th wealthiest nation in 1950. The oil rich nation had borne sweet fruits of its rich natural resources. Oil prices had spiked. Economy was healthy. After initial dictatorship, Democracy was back. Per capita income was also on the rise. How could things go so wrong then?
CHAIN OF EVENTS:
Venezuela has the world's largest oil reserves. Hugo Chaves was the President pf Venezuela from 1999 to 2013.
He was a populist figure who relied on socialist policies to appease the people . He subsidized food, gave unemployment allowance, and reduced poverty to a considerable level.
This was all good but it cost the economy billions of Bolivars (national currency) which was generated by state oil firms. Moreover, no steps were taken to diversify the economy and generate other major revenues
Chaves died i 2013. He was succeeded by Nicolas Maduro.
OIL PRICE: NOTICE 2014
Maduro was unlucky that in 2014, the oil prices fell drastically.
The oil dependent economy crashed. Previous socialist welfare programmes could not be susutained.
ECONOMY CRASH
Oil price falls-export value of economy reduces-supply of Bolivar reduces- Exchange rate rises-Bolivar depreciates.
This lead to hyper inflation rate of 1000%+ which was unseen since the times of Weimar Republic(Germany after world war 1). For perspective, current inflation rate in Zimbabwe is 161.8%
INFLATION RISE IN GRAPH
Due to this, majority of the people in Venezuela have no access to food, water, housing & clothing as their currency is almost worthless! Officially, in 2018 around 82% of the total population was poor!
MY ANALYSIS ON HOW TO SOLVE:
Venezuela can adopt a strong foreign currency as the legal tender to solve the inflation crisis. I agree that this will increase foreign influence drastically but it is the best way forward.
Maduro has infringed democracy and nullified the supreme court. He is a full blown dictator. Reinstating democracy by dethroning Maduro. Here the master of regime change USA can take steps.
MADURO- THE AUTOCRAT
THE RUSSIAN ECONOMY ALSO FINDS ITSELF IN A SIMILAR POSITION AS ITS ALSO RESOURCE DEPENDENT. READ ABOUT HOW IT CAN PREVENT A CRISIS HERE BY DIVERSIFYING ITS ECONOMY.
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