Venezuela, all eggs in one basket?
Updated: Feb 10, 2021
Venezuela, the country known for its dramatic change of landscape where you can witness the snow covered Andes in the west and the mysterious Amazon jungle in the south. Known for its beautiful women (most victorious country in the largest international beauty pageants), great ethnic diversity and what seem to be endless oil reservs.
What went wrong in this country, where in the early 80’s other countries were praising their politic stability and the economy was booming?
There are many components that have contributed to the crisis that the people of Venezuela are experiencing today. I am gonna focus on the devastating consequence of “putting all eggs in one basket”, relying on only one primary source of income, their seemingly endless oil reserves.
When Hugo Chavez, or “hero of the poor” as he was known by many Venezuelans came in to power in 1999. He gained followers by offering a free health care system, subsidizing food, and offering free education for everyone. He managed to decrease the poverty rate in Venezuela by half, which was amazing but the questioned remained, where did all the money come from?
The correlation between Chavez popularity and rise of oil prices is evident, which is no surprise considering that oil accounts for around 95% of Venezuela’s export and roughly 30% of its GDP. The key of his presidency was in 2004 when the oil prices started to rise. At this point Chavez even started to borrow money from other countries and spending at an unsustainable rate, without considering the consequences once the oil prices would start to fall again. Which was exactly what happened around 2014, just after Maduro, the current president, came in to power. When the price per oil barrel decreased from $111 per barrel in 2014 to $27 per barrel in 2016, they could no longer support the lifestyle that they had once promised their people. Inflation rates increased drastically, GDP fell by 35%, murder rate increased making Caracas the most dangerous city in the world and poverty rate increased once again remarkably. Today, the poverty rate is even worse than before Chavez came in to power.
Venezuela’s crisis can be traced back to one major problem, the lack of economic diversification. Venezuela was not properly equipped to face this sort of crisis, which in itself is another problem because there are few people responsible for the suffering of millions. If Chavez or Maduro would have focused on creating an economy based on other commodities as well as oil, the crisis would not have been as though for the country.
Venezuela is facing a difficult 2018, with many challenges ahead but one bright spot in the darkness, which is the presidential election in May this year. However, the legitimacy of the election will be questioned and many are expecting an election overshadowed by corruption, political oppression and personal greed. Only time will tell the outcome of the election, but frankly the future seems to be even worse before things start to turn around.