Fisher 1

Grant Fisher

Mr. Phillips

English 3

3-May-2018

The Economic Crises of Venezuela

With mounting debt, low oil prices, and having to provide for its citizens, Venezuela is in

a great deal of trouble. To understand the current state of Venezuela we must go back to 1999,

when Hugo Chavez -- who was leading a socialist revolution in the country -- was elected. Ever

since the time of the Rockefeller family controlling most of the international oil market,

“Venezuela has had the equivalent of a one-crop economy,” (Erlich). One-crop economies are

dangerous, and for obvious reasons. When oil, like all other commodities, inevitably went

through somewhat drastic price changes (known as cycles) Venezuela was negatively impacted,

as it had -- for the most part -- nothing else to export. This being the main problem of one-crop

economies. As a result of socialist policies created by Hugo Chavez, the country had to take out

loans to cover the substantial costs of supporting its citizens. But, oil never recovered to the high

prices of previous oil booms, and Venezuela was now in serious trouble as it had to provide for

its citizens while owing money and having little income. From this it shall be clear that the

various economic crises that have affected Venezuela have made it very difficult to survive by

impacting the cost of living.

As it is familiar knowledge, it is hard to deny that inflation increases the cost of living. In

2018, David Biller, reporting for Bloomberg on the International Monetary Fund’s (IMF) most

recent report stated that the, “[IMF] sees Venezuelan inflation spiraling to 13,000 percent this

year.” One of the main causes of inflation, besides the various economic crises resulting from
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debt and lower oil prices, is that the government “prints money to tackle fiscal deficits,” this, in

turn, causes “confidence in its currency” to “evaporate,” (Biller). The government printing

money creates a compounding effect on the already awful situation that is ongoing, leading to

ever higher inflation.

Though few would argue with the fact that inflation often negatively impacts those who

use a currency, it is important to understand the real world consequences of these changes. An

excellent example of the effects of hyperinflation caused by the poor decision making of the

Venezuelan government comes from a report for Reuters by Girish Gupta in 2015. She states that

Venezuela, at the time of writing has “average wages less than… $50 a month,” and when

investigating the impacts of this discovered that, “three local councils and four international

welfare groups all confirmed an increase in parents handing children over to the state, charities

or friends and family.” Some may argue with this piece by stating that, the parents are just trying

to help themselves. The fact is that, whether these actions are altruistic on the part of the parents

is irrelevant, the fact that is was economically sound to rid themselves of their own children is

incredibly telling of the current economic state of Venezuela.

Being that the government of Venezuela is socialist, the citizens depend heavily on said

government. This fact alone is not inherently problematic, but since Venezuela is collapsing due

to low oil prices and poor management of finances on the part of the government, giving away

money is a tough thing to do. It is important to note that Venezuela does not just have to help its

citizens sparingly, since the wages are so low no one can provide for themselves. Thus, the

government is needed for more that just sparring support. The current president of Venezuela,

Nicolas Maduro has had the choice of “[paying] down debt to China, Russia, and foreign
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investors -- or buy food and medicine from abroad.” He has repeatedly choose the former,

resulting in “starving venezuelans and soaring deaths in hospitals,” (Gillespie).

Not only does sky-high inflation result in making it much harder to procure basic

necessities, it has, in this instance, led to shortages in food and other supplies. This is due to the

fact that citizens are making very little money and the government can’t step in and help out due

to the various economic crises. As has already been shown, Venezuela has something of a “one-

crop economy,” and exports and produces little else besides oil. This, in concert with the

government being unable to import necessities for its’ citizens, leads to great problems. A report

published in the New International in 2000 states that, “crop yields have declined sharply and

Venezuela’s agricultural producers now meet only 35 percent of the national food demand.”

Normally, decreases in domestic crop production would not be positive, and in this case it is

extremely negative as the Venezuelan government cannot afford to purchase food for its citizens

due to its massive debt burden.

The economic crises of Venezuela have made it very hard for its’ citizens to survive. This

being mainly the fault of the mismanagement of finances on the part of the Venezuelan

government as well as the country having something of a “one-crop economy,” with its one and

only resource and export being oil. This combination of inflation, decreases in domestic crop

production, and the government’s mounting debt. Again, these things alone would not be a

tremendous problem, but now, since they have grown out of control and the government is

forced to pay debts or feed its citizens it has caused a great deal of trouble for Venezuelan

citizens, many of them starving and having to give up their children as a result.

Works Cited

Biller, David. “IMF Projects Venezuela Inflation Will Soar to 13,000 Percent in 2018.”
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Bloomberg, 25 Jan. 2018. Web. 1 May 2018.

“Empty Stomachs (80% of Venezuelans Below Poverty Line).” New Internationalist, 2000.

Web.

1 May 2018.

Erlich, Reese. “What’s Really Going Down in Venezuela.” The Progressive, Oct. 2017. Print.

Gillespie, Patrick. “Venezuela: How a Rich Country Collapsed.” CNN, 30 July. 2017. Web. 1

May 2018.

Gupta, Girish. “Some Poor Venezuelan Parents Give Away Children Amid Deep Crisis.”

Reuters, 15 Dec. 2015. Web. 1 May 2018.