Venezuela is currently in a serious crisis. In addition to questioning the legitimacy of the Maduro administration internationally Venezuela is plagued by serious economic and domestic problems. Hardly any country was hit harder by the fall of the oil price than Venezuela. Unemployment reached 38% in 2019 and Venezuela's gross domestic product has fallen by 18% since the previous year. [1] [2] [3]
In addition to the economic problems the domestic situation also worsened. In 2013 Venezuela recorded 39 murders per 100,000 inhabitants. In 2015 the number of murders in Venezuela increased to 62 murders per 100,000 inhabitants. This leaves only Honduras above as the most dangerous country with 66 murders per 100,000 inhabitants. Not least because of this an estimated 1 million people have left the country since 2015. [4] [5] [6] [7]
These economic and domestic problems are reflected in the mood of the population. In 2006 63 % believed that their standard of living improved and only 10 % that their standard of living worsened. In 2015 only 18 % believed that their standard of living improved and 58 % that their standard of living would deteriorate. Confidence in the justice system is fell from 51 % in 2012 to 16 % in 2016. And while 44 % still felt safe at night alone in 2006 only 12% did so in 2016. Government approval has fallen from 37 % in 2005 to 20 % in 2016. On the other hand the approval rating of the government rejection fell from 30 % in 2005 to 67 % in 2016. [8] [9] [10] [11] [12] [13]
The Oil
Venezuela is the country with the largest oil reserves in the world and has always exported almost only oil. Since the election of the predecessor of Nicolas Maduro Hugo Chavez this trend has intensified. The revenues from oil exports were used directly and used by both administrations to raise the living standards of the population. The increase in oil exports however meant that the exchange rate of the local currency initially increased and forced a process called the Dutch disease. As a result imports are becoming cheaper and imports of goods erode the local economy that is not ressource based. And exports become more expensive and cause dwindling demand abroad. Ressource exporting countries can prevent this if they invest the revenues abroad and thus accept a lower but sustainable revenue. [14] [15] [16]
Venezuela is dependent on the export of oil. 50 % of the government finances come from the revenues from oil exports. So the government has laid a fertile ground for an economic crisis. And from July 2014 to January 2015 oil prices dropped from around 100 to around 50 US-Dollar a barrel and have barely increased since. In addition world demand for oil and thus oil exports from Venezuela declined. The combination of both led to economic crisis that pushes Venezuela to the brink of existence. Everyday goods are scarce and people have to queue for more and more goods. [17] [18] [19] [20] [21]
source: tradingeconomics.com
In addition Venezuela depends on no country as much as the US. The largest exporter is the USA with 39 % and the second largest exporter is China with 18 % of Venezuelas exports. The largest import country is also the United States with 34 % and the second largest import country is also China with 17 % of Venezuelas imports. No one has as much influence on the economy of Venezuela as the US. [22] [23]
The Sanctions
The US government is open that it rejects at least President Maduro. To achieve this assets of the state-owned oil company PdVSA worth 7 billion US dollars were sanctioned. According to national security adviser John Bolton this could result in losses worth 11 billion US-Dollar. And Bolton already said what he wants to achieve with it. [24] [25] [26] [27] [28]
It will make a big difference to the United States economically if we could have American oil companies invest in and produce the oil capabilities in Venezuela.However the US government so far uses only a small part of the influence available to it. The government of the United States aims to block the payments of the state-owned oil company PdVSA. If payments to the US were blocked it would also risk 39 % of Venezuela's foreign exchange earnings. [29]
John Bolton, National Security Advisor [28]
The Inflation
Venezuela is currently experiencing an inflation rate numbers can no do justice. Venezuela had high double-digit inflation during the time of Chavez. Meanwhile hyperinflation prevails. For a long time the exchange rate for the US dollar was subsidized for the population. [30] [31] [32]
However the economic problems have forced the government to reform the exchange rate policy. The subsidized exchange rate is simply no longer affordable for the government. However this attempt is not the first and all previous ones have already failed. Again and again the exchange rate on the black market was different. [33] [34] [35] [36]
The Land Reforms and the Food Supply
Land reforms were announced early in the Chavez era. Land should be given to the poor to grow food. [37] [38]
Between 1998 and 2011 calorie demand per capita in Venezuela increased by 45 % and the population grew by 25 %. Thus the total demand for calories in Venezuela grew by 81 %. However grain production increased by only 50 % between 1998 and 2011. And overall food production increased by only 22 % between 2002 and 2009.
From 2003 to 2015 5.8 million hectares of land were redistributed. Nevertheless only 3 of the 27 million hectares were used in 2015 for agriculture in Venezuela. And even before the fall of the oil price food imports rose sharply while exports of food fell dramatically. [39] [40] [41] [42] [43]
China and Russia
China is the second largest export country and the second largest import country of Venezuela. However China and Russia have also became the main partners of Venezuela since Chavez became President in 1988.In 2008 Chavez signed a five-year plan for arms imports from Russia for 4 billion US-Dollar and shortly thereafter armed forces from Russia and Venezuela began joint military maneuvers. The US government was concerned about developments at the time. The US government then sayd it is not concerned by the developments, but equally it cannot be happy about the encroachment by Russia, or China, into a region US government has long considered its backyard. In 2009 Venezuela and China agreed to double their investment in Venezuela. China committed itself to 8 billion US-Dollar from a plan to invest 12 billion US-Dollar. In 2009 a delegation of Russian companies committed to invest 20 billion US-Dollar. In return the drilling rights were granted for the Junin 6 field in which 53 billion barrels of oil are estimated to be. [44] [45] [46]
Thus the major US rivals China and Russia are playing a significant and growing role in the immediate environment of the USA. And it will shown how much they are willing to invest in Venezuela and whether this will be enough to keep Venezuela afloat.
[1] Venezuelans face collapsing economy, starvation and crime 2016-06-21
https://www.pbs.org/newshour/show/venezuelans-face-collapsing-economy-starvation-and-crime
[2] Unemployment rate
https://www.imf.org/external/datamapper/LUR@WEO/OEMDC/ADVEC/WEOWORLD/VEN
[3] Maduros letztes Öl-Juwel 2019-01-31
https://www.dw.com/de/maduros-letztes-%C3%B6l-juwel/a-47294946
[4] Attorney General’s UN Gaffe Reveals Venezuela’s Record-High Murder Rate 2015-07-07
https://panampost.com/thabata-molina/2015/07/07/attorney-generals-un-gaffe-reveals-venezuelas-record-high-murder-rate/
[5] Hungry Venezuelans Flee in Boats to Escape Economic Collapse 2016-11-25
https://www.nytimes.com/2016/11/25/world/americas/hungry-venezuelans-flee-in-boats-to-escape-economic-collapse.html
[6] Venezuela’s Health Crisis: 40 Percent of New Medical Graduates Have Already Left 2017-12-12
https://panampost.com/sabrina-martin/2017/12/12/venezuela-health-crisis-medical-graduates/
[7] Diego Beltrand: Más de 1 millón 642 mil venezolanos migraron en 2017 2018-04-30
https://www.lapatilla.com/2018/04/30/diego-beltrand-mas-de-1-millon-642-mil-venezolanos-migraron-en-2017-video/
[8] Life Ratings Plummet in Venezuela, Thriving at 10-Year Low 2016-05-12
https://news.gallup.com/poll/191474/life-ratings-plummet-venezuela-thriving-year-low.aspx?g_source=link_NEWSV9&g_medium=TOPIC&g_campaign=item_&g_content=Life%2520Ratings%2520Plummet%2520in%2520Venezuela%2c%2520Thriving%2520at%252010-Year%2520Low
[9] Venezuelans Lose Faith in Rule of Law 2017-06-14
https://news.gallup.com/poll/212129/venezuelans-lose-faith-rule-law.aspx?g_source=link_NEWSV9&g_medium=TOPIC&g_campaign=item_&g_content=Venezuelans%2520Lose%2520Faith%2520in%2520Rule%2520of%2520Law
[10] Venezuelans' Approval of Leadership Remains at Record Low 2016-05-20
https://news.gallup.com/poll/191663/venezuelans-approval-leadership-remains-record-low.aspx?g_source=link_NEWSV9&g_medium=TOPIC&g_campaign=item_&g_content=Venezuelans%27%2520Approval%2520of%2520Leadership%2520Remains%2520at%2520Record%2520Low
[11] Four in 10 Venezuelans Would Leave Venezuela Behind 2018-03-06
https://news.gallup.com/poll/228338/four-venezuelans-leave-venezuela-behind.aspx?g_source=link_NEWSV9&g_medium=TOPIC&g_campaign=item_&g_content=Four%2520in%252010%2520Venezuelans%2520Would%2520Leave%2520Venezuela%2520Behind
[12] Venezuelans have little trust in national government, say economy is in poor shape 2019-01-25
http://www.pewresearch.org/fact-tank/2019/01/25/venezuelans-have-little-trust-in-national-government-say-economy-is-in-poor-shape/
[13] Millions of Venezuelans Say They Would Leave If They Could 2019-01-29
https://news.gallup.com/poll/246323/millions-venezuelans-say-leave.aspx?utm_source=twitter&utm_medium=o_social&utm_term=&utm_content=&utm_campaign=
[14] The House That Chavez Built 2013-03-07
https://foreignpolicy.com/2013/03/07/the-house-that-chavez-built/
[15] Column: Chávez was a charismatic leader - but his economic legacy should be a warning 2013-05-09
https://www.thejournal.ie/readme/column-chavez-was-a-charismatic-leader-but-his-economic-legacy-should-be-a-warning-824076-Mar2013/
[16] What does Venezuela export? (1995-2016)
http://atlas.media.mit.edu/2z8etf
[17] Crude Oil
https://tradingeconomics.com/commodity/crude-oil
[18] In shortages-hit Venezuela, lining up becomes a profession 2015-01-21
https://www.reuters.com/article/us-venezuela-shortages/in-shortages-hit-venezuela-lining-up-becomes-a-profession-idUSKBN0KU1BX20150121
[19] Looking Into the Black Box of Venezuela’s Economy 2015-07-13
https://foreignpolicy.com/2015/07/13/looking-into-the-black-box-of-venezuelas-economy-caracas-bolivar-maduro/
[20] Venezuela's decline fuelled by plunging oil prices 2016-02-20
https://www.bbc.com/news/world-latin-america-35622188
[21] Hugo Chavez leaves Venezuela in economic muddle 2013-05-05
https://www.bbc.com/news/business-20795781
[22] Where does Venezuela export to? (2016)
http://atlas.media.mit.edu/z0aowh
[23] Where does Venezuela import from? (2016)
http://atlas.media.mit.edu/d92r1k
[24] Venezuela crisis: Former UN rapporteur says US sanctions are killing citizens 2019-01-28
https://www.independent.co.uk/news/world/americas/venezuela-us-sanctions-united-nations-oil-pdvsa-a8748201.html
[25] Trump approves sanctions on Venezuelan oil company 2019-01-29
https://edition.cnn.com/2019/01/28/politics/us-sanctions-venezuelan-oil-company/index.html
[26] U.S. imposes sanctions against Venezuela's state-owned oil company 2019-01-29
https://www.cbsnews.com/news/watch-white-house-press-briefing-live-stream-first-since-shutdown-today-2019-01-28-live-updates/
[27] Trump administration announces sanctions targeting Venezuela’s oil industry 2019-01-29
https://www.washingtonpost.com/national/health-science/trump-administration-announces-sanctions-targeting-venezuelas-oil-industry/2019/01/28/4f4470c2-233a-11e9-90cd-dedb0c92dc17_story.html?utm_term=.9b426fea8b60
[28] John Bolton: I don't think Maduro has the military on his side 2019-01-24
https://youtu.be/8av-cPP1uPE
[29] Factbox: U.S. sanctions on Venezuela's oil industry 2019-01-30
https://www.reuters.com/article/us-venezuela-politics-usa-sanctions-fact-idUSKCN1PN34I
[30] Entering a ‘world of economic chaos,’ Venezuela struggles with hyperinflation 2016-12-12
https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article120451593.html
[31] Declaring war on common sense, Venezuela bans its own money 2016-12-15
https://www.washingtonpost.com/news/global-opinions/wp/2016/12/15/declaring-war-on-common-sense-venezuela-bans-its-own-money/??noredirect=on
[32] Exchange Rate in Venezuela
https://www.focus-economics.com/country-indicator/venezuela/exchange-rate
[33] Venezuela eliminates heavily subsidized DIPRO forex rate 2018-01-30
https://www.reuters.com/article/us-venezuela-economy/venezuela-eliminates-heavily-subsidized-dipro-forex-rate-idUSKBN1FJ040
[34] Venezuela: Foreign exchange system overhauled 2018-02-12
https://www.focus-economics.com/countries/venezuela/news/exchange-rate/foreign-exchange-system-overhauled
[35] Venezuela approves parallel currency exchange system amid political crisis 2019-01-28
https://www.reuters.com/article/us-venezuela-economy-idUSKCN1PM2AA
[36] What is Venezuela’s new currency system Interbanex and what is it supposed to achieve? 2019-01-29
https://www.independent.co.uk/news/business/analysis-and-features/venezuela-currency-new-bolivars-dollars-interbanex-maduro-a8751996.html
[37] Venezuela land reform gets going 2005-04-29
http://news.bbc.co.uk/2/hi/americas/4498293.stm
[38] Venezuela to speed up land reform 2005-09-26
http://news.bbc.co.uk/2/hi/americas/4282672.stm
[39] Clash of Hope and Fear as Venezuela Seizes Land 2007-05-17
https://www.nytimes.com/2007/05/17/world/americas/17venezuela.html
[40] Why Hasn’t Land Reform in Venezuela Done Much More to Boost Production? 2014-07-14
https://www.telesurenglish.net/opinion/Why-Hasnt-Land-Reform-in-Venezuela-Done-Much-More-to-Boost-Production-20140801-0042.html
[41] This Land Was Your Land 2015-11-13
https://foreignpolicy.com/2015/11/13/this-land-was-your-land-venezuela-land-reform-chavez-maduro/
[42] What does Venezuela import? (1995-2016)
http://atlas.media.mit.edu/wluxr2
[43] What does Venezuela export? (1995-2016)
http://atlas.media.mit.edu/2z8etf
[44] Venezuela signs Chinese oil deal 2008-09-25
http://news.bbc.co.uk/2/hi/americas/7634871.stm
[45] China and Venezuela boost links 2009-02-19
http://news.bbc.co.uk/2/hi/americas/7898809.stm
[46] Venezuela-China sign 16bn Dollar oil deal 2009-09-17
https://www.aljazeera.com/news/americas/2009/09/200991741755683835.html
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