Discourse of the Day, Meanwhile in Countries not called America

Meanwhile in Countries Not Called America-Venezuela’s Economic Crisis

It’s no secret that Venezuela has been a mess for a while now. The country’s particular brand of Strongman Socialism has discouraged foreign investment and resulted in an economy that is almost entirely reliant on the nation’s oil production. This would be a precarious economic model under even the most ideal circumstances, but under the corrupt regimes of President’s Chavez and Maduro, it has proven to be downright disastrous.
Back in 2003, Chavez replaced the executives of Venezuela’s state-run oil company PDVSA with his own corrupt cronies. Their ineptitude and graft have resulted in a steady decline in Venezuela’s oil production. His successor Maduro’s desperate attempts to cling to power over the last year have created political chaos and civil unrest which only served to accelerate that decline.
Facing a sharp reduction in available revenue, the Venezuelan government has been forced to make deep cuts to its social programs and print large quantities of bolivars (Venezuelan currency) to cover their financial commitments.
As any follower of this blog would know, this tactic has resulted in a prolonged bout of hyperinflation fueled by an ad hoc fiscal policy and a shortage of basic necessities like food and essential medicines. If things are not already bad enough to be considered a humanitarian crisis the odds are they will be shortly.
Maduro’s solution is to simply cut three zeros off the back of all Venezuelan currency. As any 90’s African dictator (or first-year economics student) will tell you, this is merely a cosmetic fix that does nothing to address the underlying structural issues in Venezuela’s economy.
It is safe to say that without a change in regime and a replacement of the current PDVSA management with energy professionals the economic situation will continue to deteriorate. Complete economic and political collapse is not outside the realm of possibility. This is a bleak prognostication and for the sake of the Venezuelan people I hope it does not come to pass but, at this point, it seems unlikely that the nation’s situation will stabilize without it first undergoing a major upheaval.

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