Venezuela, the country which possesses the world’s largest crude oil reserves was a relatively stable democracy with one of Latin America’s fasting growing economy in the early 20th century. But in 2010, under the presidency of Hugo Chavez the country’s economy collapsed and was marked by hyperinflation, starvation, chronic food and medicine storage, disease crime and increasing mortality rate; leading to massive emigration from the country. The Venezuela crisis is considered to be more severe than even the great depression faced by the United States. Political corruption, closure of companies, unemployment, and deterioration of productivity, authoritarianism, human rights violations, gross economic mismanagement and high dependence on oil has further worsened the crisis.
1998- 2013: Chavez presidency
In 1922, oil was discovered in Maracaibo basin of western Venezuela, considered to be the world’s largest oil reserve. The then dictator allowed more than 100 foreign companies into Venezuela to extract the reserves and by 1928; the country became the world’s second-biggest petroleum exporter. The nation’s economic development was based on rising prices and profits in oil reserves. But in the 1980s, as the world was facing the worst oil crisis, the global oil prices fell and the Venezuelan economy collapsed; the country faced a massive foreign debt of 33 billion dollars. Ultimately, it was forced to accept an International Monetary Fund Bailout and impose austerity measures that resulted in sharp rises in the price of consumer goods and fares for public transport.
In 1998, Hugo Chavez was elected as the president of the country and he promised to use the country’s oil wealth to improve the lives of the poor. He expanded the social services and spent huge amounts on social programs such as education, health care, food and housing problems, at one point, even provided free heating oil for impoverished Americans. Though Hugo wanted to diversify the Venezuelan economy, his expensive strategy only increased the dependency upon the exported oil. As corruption was still rampant, a steady decline in the oil production reduced oil reserves and increased the government debt. To deal with the dire economy, Hugo introduced a lot of economic reforms such as currency devaluation and price controls but nothing was effective. He also declared an economic war due to the increasing shortages in the country. In 2013, after ruling for 14 years Hugo died of cancer at the age of 58, his chosen successor vice president Nicolas Maduro narrowly won the elections and became the president.
2013- 2020: Maduro presidency
After the demise of Chavez, elections were held and Maduro won the elections with a 1.5% margin. With inflation at more than 50% a year, the national assembly gave Maduro emergency powers for a year. Still, by 2014, the country had entered an economic recession and by 2016, the country had an inflation rate of 800%, the highest in its history. The healthcare system lacked funding, once-eradicated diseases like cholera and malaria returned causing the death of thousands of children due to hunger and malnutrition. The rate of unemployment increased at an alarming rate and the prices of goods rose to an unexpected level causing a situation of hyperinflation in the country.
In 2017, Maduro’s government created a new legislative body, which gave him the right to pass laws and he disavowed the National Assembly in 2017 leading to the 2017 Venezuelan constitutional crisis. Following the constitutional crisis and the push to ban opposition presidential candidate Henrique Capriles from politics for 15 years, protests grew to their most combative since they began in 2014. The government failed to handle the matter in a peaceful manner and started oppressing the mobs by using violence, which led to the death of about 6000 civilians by the special action forces.
With these ongoing social and economic crises, in 2018, Maduro won the presidency again in a low-turnout election that was seen by many countries as fraudulent because of low participation by opposition parties.
Soon after the elections, to tackle the situation of hyperinflation, the government slashed five zeroes from the face value of its old currency and tied the new “sovereign bolivar” to a cryptocurrency that can’t be traded. Despite various economic reforms by the government, nothing has helped the country’s economy to recover. Years of this economic and political instability in Venezuela have caused the largest population outflow in Latin America in recent years; about 5 million Venezuelans have left the country seeking food, work, and a better life since 2014.
In 2019, the opposition leader and head of the National Assembly, Juan Guido declared himself to be interim president according to the constitution. He is recognized as such by the U.S., Canada, and Venezuela’s Latin American neighbours.
In 2020, as the coronavirus pandemic spread in Latin America, border closings and the collapse of global oil prices have made life even harder for the Venezuelans. Child malnutrition has reached crisis levels in Venezuela, reports the U.N. children’s agency. The country’s GDP (Gross domestic product) has dropped by 25% in 2019 which is the largest since the Libyan Civil War began in 2014. The inflation rate has reached 10,000,000% making it almost impossible for people to afford even the basic services like food for their survival. The country is facing the worst economic and social crisis of all time with the high level of corruption, increasing poverty, no food and water, no proper healthcare system, increasing mortality rate, massive housing shortage, increasing crimes and illegal detentions, increasing unemployment, increasing hyperinflation and sinking of the oil reserves.
Conclusion
The country which was once considered as the richest in Latin America, due to the largest oil reserves in the world, is now facing the worst economic crisis in the history of the world. It is marked by hyperinflation, escalating starvation, increasing unemployment and a shortage of a proper healthcare system which has led to increased malnutrition and mortality rate. Due to the declining oil reserves and poor governance along with high corruption the economy of the country collapsed. The country is in a very dire situation with people lacking even the basic needs for survival. Various countries such as China and Russia are sending aids for the Venezuelan crisis; Russia sent tons of food and medical supplies in Venezuela in February 2020. The European Commission (EC) is the largest donor to organizations working inside Venezuela in 2018, according to the database. It has been sending humanitarian aid to Venezuela since 2016. The EC focuses on projects to improve access to food and nutrition, water, hygiene and sanitation for people in Venezuela. The United States and regional partners should also provide humanitarian relief and security assistance and accelerate change to a post-Maduro democracy. As Venezuela is floundering, these humanitarian aids by countries come as the only hope that the country, which was once considered as one of the richest countries of the world, can still overcome its crisis and improve the economic, political and social situation of the country.
