South American country, Venezuela, was one of the most secure and stable economies in the world, and then the nation got some self-serving politicians in power, who shook the country’s foundations by creating hyperinflation in the country. Isn’t it scary to live in a place, where the annual rate of inflation is 1,300,000% on average? Isn’t it horrible to deal with corruption, social unrest, capital controls, self-serving politics, a global economy bust, and price-fixing? Indeed it’s quite a terrible situation, and Venezuela is sadly going through with all the negative stuff that can destroy any economy’s growth.
What happened to Venezuela?
It all initiated in 1998 when Hugo Chavez came into the government, and he raised the oil prices, which only rose government finances and allowed the socialist regime to boost the spending and borrowing. The conflict began in 2003 when the labor protest at PDVSA, which is the state’s oil company. The strike influenced the production of oil negatively, and it also crippled the entire Venezuelan economy as the Gross Domestic Product fell by 27% within the first four months of the year 2003.
Chavez instituted some measures like nationalization of many industries, installation of import controls, the introduction of a currency peg, and the establishment of subsidies on food and other consumer goods, which were enough to raise the inflation crisis. When the crude oil price collapsed in 2014, the Venezuelan economy faced another challenge; the country’s economy shrank 30% from the duration of 2013 to 2017, which is a drastic change. Moreover, in 2018, the Real GDP was fell by about 18 percent.
The ongoing President, Nicholas Maduro first won the elections in April 2013 after the death of his mentor and predecessor, Chavez. He elected twice for six years, and in his first term, Venezuelans blame him for ruining the economy by choosing fiscal deficits rather than promoting welfare spending.
What are the challenges the Venezuelan economy is facing?
Venezuela is one of the prosperous countries that have oil reserves, and its economy is highly dependent on crude oil exports. When Maduro came into power in 2013, then he didn’t have any backup policies for future fluctuations in the oil prices. He didn’t know how to save its country from the collapse of crude oil prices in 2014, which led the economy to move downward, and people have to face hyperinflation.
The hyperinflation caused many Venezuelans to flee the country, and as per the UN report, almost 3 million people have moved to other countries in the last three years. Those, who are still living in it are facing the challenges of scarce resources, poor healthcare system, and the shortage of clean water, electricity, toiletries, and high unemployment.