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Venezuelan Economic Crisis

By Saransh Goyal

Since its discovery in the early nineteen hundreds, Venezuela has been a country that has been largely dependent on its oil resources. Venezuela, once a country which stood tall and proud in Latin America today is dealing with one of the worst financial crises in recent years. A country which sits on the world’s largest reserves of oil (more than 298 billion barrels of proven oil resources) is also home to one of the worst economies in today’s world. A country so dependent on oil that almost all of its exports and half of government revenue are entirely reliant on oil exports. Although the crisis began in 2012, it happened due to the policies of previous leaders of the country. In 2016, when the GDP contracted severely by 10%, inflation jumped to 720%, people faced widespread shortages of consumer goods, and their central bank international reserves dwindled. The main cause of the current economic crisis is the fall in oil prices which entirely finance the social policies of the Venezuelan government. The crisis has left the country in shambles. The number of protests in the country is rapidly rising as the general public constantly clashes with the security forces.

The economic conditions of Venezuelan citizens are so bad that the state has to provide food and fuel at extremely subsidized rates. What this leads to are long lines which further lead to the resources going out of stock quickly. While these subsidized rates are beneficial to many Venezuelans who can't afford products sold by private businesses, there are many who profit by buying food and fuel at these low prices and then selling them at a much higher price in a growing black market. Those who don't find the resources at state-owned due to shortages, must then go those black-market vendors and buy at higher prices than they should need to pay. This is further aiding in the worsening of the economic conditions in Venezuela. The crisis has led the country into such bad conditions that the health care system of Venezuela is in shambles. There are grave shortages of basic healthcare resources such as antibiotics. The shortage of food makes it worse. Add to that numerous blackouts caused by the poor energy resources of the country.

The number of people that have lost their lives due to this collapse is untold but it can be assumed that the number is high. There are some hospitals that don't even have soaps and gloves. There is not enough water to wash the blood from operating tables. The clinics in the country resemble infirmaries found on battlefields but even those infirmaries are better stocked. The government never saved when oil prices were high and now the health care system is one sector that is paying a major price. When thieves start refusing money, you have to know that something is wrong. The Bolivar, Venezuela's currency, maybe seeing days when even thieves would refuse the Bolivar. Inflation rates continue to rise up to staggering numbers, especially for a country with the world's largest oil reserves. It is difficult to get accurate numbers for Venezuela's economy given that the government refuses to release basic information like inflation rate or gross domestic product but it is not difficult to realize that its currency is in a terrible state given that its value compared to other currencies continues to fall. The government has fixed an extravagant rate of exchange with the dollar which is only available to a select few government officials while the black-market rate of the bolivar is manifold the real rate.

On the brighter side, this massive drama about the Venezuelan Bolivar has led to a mass exodus of not just mid-aged adults and elderly people, but also students who are taking up courses inforeign universities. Native Venezuelan people who left their country has benefited their country of destination by contributing to their GDP, technology, skills, and even political ideas. Their plight can be inspiring stories for other people.

The simplest way to explain how the government of Venezuela can get Venezuela out of its crisis is that the Venezuelan economy must stabilize. An unstable economy cannot recover from the economic crisis, no matter what is done. The only reason Venezuela hasn't completely been decimated by this crisis is because of unsustainable solutions. They are paying off their debt to the world by running down their foreign reserves and when they run out of foreign reserves, there may not be a way for the economy to recover internally. The Venezuelan Economy only had US$ 10 Billion in net reserves in 2016 and they may have nothing left as of right now. Venezuela can no longer issue bonds abroad anymore either, seeing as it exhausted during its last boom period. It is imperative that policies to stabilize the Venezuelan economy are introduced or else the economy of Venezuela may never recover from its fall. One of the most important factors at play here is the current political scenario in Venezuela. A leader who follows outdated and unfeasible policies of a leader in whose time those policies have led to crippling effects onthe economy cannot be considered to be a suitable leader for bringing back sustainable growth and massive reforms in government policy. Thus solving the current political crisis is the very first step to solving the economic crisis in Venezuela.

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