VENEZUELA'S ECONOMIC CRISIS IS DEEP,COMPLEX AND COMPARABLE.NICOLAS MADURO'S SOCIALIST GOVERNMENT HAS LED OIL RICH VENEZUELA INTO ITS WORST ECONOMIC CRISIS IN WORLD HISTORY.
Venezuelan president Nicolás Maduro has proposed the launch of a oil-backed cryptocurrency to solve the country's economic crisis. But he's barking up the wrong tree.He also railed against Donald Trump's "imperialist" administration, which slapped sanctions on him over the new Assembly.America, he charged, wanted to get its hands on Venezuela's oil reserves, the largest in the world.
Things are not going well in Venezuela. Citizens of the once-wealthy South American country are facing chronic food and medicine shortages, child malnutrition has reached a crisis point and hundreds of people have been killed this year in a series of major anti-government protests.The economy of Venezuela is largely based on the petroleum sector and manufacturing. Revenue from petroleum exports accounts for more than 50% of the country's GDP and roughly 95% of total exports. Venezuela is the sixth largest member of OPEC by oil production. From the 1950s to the early 1980s, the Venezuelan economy experienced a steady growth that attracted many immigrants, with the nation enjoying the highest standard of living in Latin America. During the collapse of oil prices in the 1980s, the economy contracted the monetary sign, commenced a progressive devaluation, and inflation skyrocketed to reach peaks of 84% in 1989 and 99% in 1996, three years prior to Hugo Chávez taking office.Venezuela manufactures and exports heavy industry products such as steel, aluminum , and cement. Production is concentrated around Ciudad Guayana, near the Guri Dam, one of the largest dams in the world and the provider of about three-quarters of Venezuela's electricity. Other notable manufacturing includes electronics and automobiles as well as beverages, and foodstuffs. Agriculture in Venezuela accounts for approximately 3% of GDP, 10% of the labor force, and at least one-fourth of Venezuela's land area. Venezuela exports rice, corn, fish, tropical fruit, coffee, pork, and beef. The country is not self-sufficient in most areas of agriculture.In spite of strained relations between the two countries, the United States has been Venezuela's most important trading partner. U.S. exports to Venezuela have included machinery, agricultural products, medical instruments, and cars. Venezuela is one of the top four suppliers of foreign oil to the United States. About 500 U.S. companies are represented in Venezuela.According to Central Bank of Venezuela, between 1998 and 2008 the government received around 325 billion USD through oil production and exports in general.Also, according to the International Energy Agency, as of August 2015 the production of 2.4 million barrels per day supplied 500,000 barrels to the United States of America.
Venezuelan President Nicolas Maduro announced Friday his government will sell oil and other commodities in currencies other than the dollar, in a bid to weather US-imposed sanctions on the embattled country.“I have decided to start selling oil, gas, gold and all other products that Venezuela sells with new currencies, including the Chinese yuan, the Japanese yen, the Russian ruble, the Indian rupee among others,” he said during a television broadcast.“A economy free from the US imperialist system is possible.
Only to the era of wars in the 19th and 20th centuries, when a series of military dictatorships from 1830 to 1935 caused widespread hunger and political instability, undermining confidence in Venezuela both at home and abroad.But the current crisis did not begin then, nor did it start during the Chávez regime, as many believe.
Since Hugo Chávez's "socialist revolution" half-dismantled its PDVSA oil giant corporation in 2002 by firing most of its 20,000-strong dissident professional human capital, and imposed stringent currency controls in 2003 in an attempt to prevent capital flight, there has been a steady decline in oil production and exports and a series of stern currency devaluations, disrupting the economy. Further yet, price controls, expropriation of numerous farmlands and various industries, among other disputable government policies including a near-total freeze on any access to foreign currency at reasonable "official" exchange rates, have resulted in severe shortages in Venezuela and steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country, as has been the case with several technological firms and most automobile makers. In 2015, Venezuela had over 100% inflation – the highest in the world and the highest in the country's history at that time.The rate increased to 800% in 2016 with Venezuela spiraling into hyperinflationwhile the population poverty rate was between 76%and 82% according to independent sources.
Venezuela 2016 inflation hits 800 percent, GDP shrinks 19 percent.Venezuelan consumer prices rose 800 percent in 2016 while the economy contracted by 18.6 percent, according to preliminary central bank figures seen by Reuters, the sharpest contraction in 13 years and the worst inflation reading on record.The extended slump in oil prices has turned the OPEC nation's once-prosperous oil-boom economy into a mirror of the latter day Soviet Union, with rampant product shortages leading leaving to skip meals and wait hours in food lines.
Chaos has in fact been brewing here since the early 1970s. Once an exemplar of economic growth, largely thanks to the oil industry, Venezuela saw its per capita gross domestic product (GDP) grow 250% between 1958 and 1977, according to figures from the Venezuelan Central Bank.Starting after the death of military strongman Juan Vicente Gómez in 1935 and continuing through the administration of president Carlos Andrés Pérez (1974-1979), Venezuela had very low inflation, a strong currency and an urbanisation process that was renowned worldwide.It was hailed as a beacon of democracy for the Americas.Most of this was, alas, a mirage. By the mid-1970s, president Pérez’s nationalisation of the Venezuelan oil industry would reveal the fragility of an economy heavily dependent on a single resource and one rather poorly managed.Maduro railed that they amounted to a financial and economic blockade, as ratings agency Fitch downgraded Venezuela and warned default was now likelier.The country has to make $3.8 billion in debt payments in October and November, while its foreign currency reserves have sunk under $10 billion.Another complication, whose effects are yet to be fully felt, came with Hurricane Harvey in Texas. The storm ripped through a part of the United States that is home to a third of American refining capacity some of it geared to handling Venezuelan crude.PDVSA’s president, Nelson Martinez, said last week that one of the company’s refineries, in hard-hit Corpus Christi, was not damaged but had to shut down.The aftermath of the storm, which saw oil tankers unable to offload crude, could prove to be a tough blow to Venezuela’s fragile oil export system.
Demonstrators against Venezuela’s economic crisis facing sky-high inflation and shortages of food and consumer goods — took to the streets in their thousands Saturday, banging pots and demanding an end to President Nicolas Maduro’s term.Opposition leaders, fed up with shortages of milk, coffee, sugar, meat, toilet paper, diapers, deodorant and corn meal, and with Maduro’s refusal to overhaul the increasingly state-managed economy, say the elected socialist should go.
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