“It is no longer, easy, charming or picturesque to be poor in Maduro’s Venezuela”. Forbes Magazine coined this phrase earlier this year in relation to Venezuela’s fiscal situation. Whilst ethically it may be seen as insensitive and unsympathetic to the plight of the poor, economically the term couldn’t be more pertinent to the nation’s current financial climate.
However, let’s back up a little. In the winter of 1992, a band of military officials stage a coup against Venezuela’s democratically-elected leader Carlos Andrés Pérez. Whilst the topple attempt goes down unsuccessful, the man at the head of the operation Hugo Chávez is able to establish a platform that would later launch himself and his leftist ideologies to presidency in 1998. Thus begins Chávez’s socialist Venezuela and its so-called ‘Bolivarian revolution’, named after Venezuelan revolutionary leader SimónBolívar.
In his early years as president, Chávez is able to introduce sweeping constitutional reforms, nationalise a host of land and oil-based corporations and subsequently go against the kleptocracy that had plagued previous Venezuelan leaders. The government makes health care and education affordable for all whilst increasing pension payments to help the elderly. Extreme poverty plummets, unemployment dips and the oil-fuelled economy is moving along nicely. Chávez is establishing himself as the people’s leader, deemed a ‘Robin Hood’ by many Venezuelans. Put simply, if you had to be poor, you’d choose to be poor in Venezuela.
However, the fruits of Chávez and his Bolivarian movement’s labour would come to a halt; a halt so drastic that to even find fruit or other basic necessities such as bread and milk can be a difficult task in modern day Venezuela.
Much of the nation’s economy relies on its production of crude oil. It leads the world in proven oil reserves, even ousting oil giants Saudi Arabia and Iran to claim top spot. However, in recent times, global oil prices have taken a serious hit in the international market. Just a handful of years ago, a barrel of oil was selling for US$155; comparing that to today’s price where a barrel goes for a mere US$30. This has severed the nation’s economy where to put it into perspective, according to Venezuelan consultancy firm Ecoanalitica, every dollar lost on the price of oil costs Caracas a whopping US$700 million in government revenues.
However, the economic shortcomings of the ‘petro-state’ go beyond the plunge in global oil prices. Both inflation and the rise of the unofficial ‘black market’ have created economic havoc for current president Nicolás Maduro.
Caracas has taken measures to keep the ever-inflating Venezuelan bolívar down by introducing price controls on certain products. However, these price controls have deterred manufacturers from producing specific goods, as it is no longer profitable for them to do so, leading to a shortage of particular items. Furthermore, Maduro has blocked large exchanges of foreign currencies in an attempt to reduce inflation, so importing goods such as food, is made to be much harder for citizens.
This, in turn, gives rise to the‘black market’ whereby certain products are only made available through this medium… yet at an inflated rate.Because items are more expensive, the cost of living subsequently goes up, and thus so does inflation. However, in response to rising inflation, Maduro has introduced further price controls, failing to realise that by doing so, he is only continuing the vicious economic cycle that the nation currently sees itself in.
Such economic turbulence has left the nation’s more impoverished citizens in the most vulnerable position of all. The socialist revolution was intended to help the poor, but now it is the poor that is suffering the most.