No end to Venezuela’s economic woes

Venezuela home to the world’s largest oil reserves once was an affluent country from the 1950s till the beginning of this century but today the country is facing the worst economic turmoil due to its failed populist economic policies. The unpopular regimes of Hugo Chavez and later Nicolás Maduro policies have derailed the economic progress of Venezuela.

The power tussle between Maduro and opposition leaders has brought most of the Venezuelans to brinkmanship. Despite the international pressure, Madurao has been able to strengthen his grip on power. But this has come not without a cost, so far 7.1 million Venezuelans have left the country for a better future.

Poverty situation: In Venezuela three out of four persons live in extreme poverty. Since 2014 shortages of basic supplies and hyperinflation have affected millions of Venezuelans. The Venezuelan government has often blamed US sanctions for its economic crisis. But the critics claim that the crisis is mainly due to the result of President Nicolás Maduro’s economic mismanagement. Public services have collapsed, unemployment has soared and the local currency – the bolivar – is almost worthless.

According to an estimate, 76.6% of the Venezuelan population is living in extreme poverty. The lockdowns introduced to curb the spread of Covid-19 have and Chronic fuel shortages, which became worse in 2020 have been chiefly blamed for the rising poverty in recent times. In Venezuela, 50% of the population works in the informal economy which was worse affected as they were unable to find work in the country.

The situation has resulted in one of the largest displacement crises in the world, according to the UN, and more than 7.1 million people have left the country.

Sanctions on Venezuela: Several countries including the US and UK have imposed economic sanctions on Venezuela. The European Union and United Nations have also imposed sanctions to bring about change in Venezuela. In January 2019, the US specifically targeted the Venezuelan state oil and gas company, PDVSA, with sanctions. PDVSA is a crucial player in the Venezuelan economy, responsible for the exploration, production, treatment, and export of oil and natural gas. This had a significant impact on the oil production in Venezuela, the oil production dropped from approximately 2.3 million barrels per day to approximately 1 million barrels per day.

The UK started to impose sanctions on Venezuela in 2017. The assets of a number of high-ranking Venezuelan officials, including former Vice President Tareck El Aissami, who was accused of corruption and involvement in drug trafficking were frozen which was followed by a ban on the sale of arms to Venezuela and restrictions on the export of items that could be used for internal repression in 2018. The assets of President Nicholas Maduro, his wife, and other senior officials were frozen by the UK in 2019.

EU has also imposed travel restrictions and asset freezes on Venezuelan officials and individuals along with an arms embargo. The sanctions were first imposed in November 2017 and were later strengthened in January 2019.

A travel ban was imposed by the UN on high-level Venezuelan officials who were accused of violating human rights and engaging in corrupt activities in 2017. An arms embargo was imposed by the UN on Venezuela prohibiting the sale, transfer, or provision of arms to the country. This was followed by other sets of sanctions in 2018 and 2020 which included asset freezes, travel bans, and arms embargoes, aimed at holding those responsible accountable for their actions.

For over a decade, Washington has imposed sweeping sanctions against Caracas, the most significant of which have blocked oil imports from PDVSA and prevented the government from accessing the U.S. financial system. Still, Venezuela has retained oil-trading partners, and analysts say that support from China, Cuba, Iran, Russia, and Turkey is keeping the Maduro regime afloat.

Unprecedented refugee crisis: More than 7.1 million refugees and migrants have left Venezuela as a result of political turmoil, socio-economic instability, and the ongoing humanitarian crisis. Seventeen countries host around 80 percent of Venezuelans (more than 5 million) throughout Latin America and the Caribbean – triggering the largest external displacement crisis in Latin America’s recent history.

Thousands of Venezuelans cross various South American countries on foot. Many flee without knowing their final destination. Some have left behind their families, their communities, and their loved ones. Others are moving to reunite with them. Refugees and migrants are compelled to leave Venezuela using diverse routes to reach their destination including by land, plane, and sea, sometimes putting their lives at risk. More people are taking sea routes than in years prior too – taking short maritime routes toward neighbouring Caribbean islands.

Many leave without documents to cross borders. They face great risks at the hands of smugglers and traffickers. Countries in the region have generously opened their borders, providing Venezuelans with access to healthcare, education, and employment.

Venezuela is the archetype of a failed petrostate: Oil continues to play the dominant role in the country’s fortunes more than a century after it was discovered there. The oil price plunge from more than $100 per barrel in 2014 to under $30 per barrel in early 2016 sent Venezuela into an economic and political spiral, and despite rising prices in recent years, conditions remain bleak.

Annual inflation skyrocketed to just over 130,000 percent in 2018, and though it has slowed in recent years, it remained at 234 percent in 2022.

There is rampant hyperinflation and Venezuela’s debt burden has crossed $150 billion.

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No end to Venezuela’s economic woes
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