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Venezuela:
A Country in Crisis
__________________________________________________________________________________________
Fella Opheliani, Christopher Hans & Adam Reeves

Table of Contents

Introduction
...
4
Oil Price
...
6
Nicholas Maduro Period
...
11
Conclusion
...
15

Introduction

Venezuela is in a state of worsening crisis
...
It has been widely
reported that shortages of basic necessities have led to frustrations spilling out into the
streets 1
...
The target of this
widespread and growing discontent is the administration of Nicholas Maduro, who has
led the nation since being hand-picked as president in 2005 by his formidable
predecessor, Hugo Chavez
...
This paper will argue that the Venezuelan crisis is fundamentally driven by the
significant drop in oil prices, exposing poor domestic governance and economic
inflexibility
...
This
discussion includes an analysis of the contemporary economic factors which drive oil
price fluctuation
...
It is also worth noting
that this situation is currently developing and in a state of flux
...
Yet, the unfolding crisis clearly demonstrates the ways that global conditions

1

“Venezuelans Take To the Streets in Protest Against the Government”, NPR International,
September 1, 2016, accessed September 15, 2016, http://www
...
org/sections/thetwoway/2016/09/01/492260941/photos-venezuelans-take-to-the-streets-in-protest-againstthe-government
2 “Venezuela: The Opposition Mobilizes for the Presidential Referendum”, New York Times,
September 15, 2016, accessed September 17, 2016,
http://www
...
com/2016/09/16/opinion/venezuela-the-opposition-mobilizes-for-thepresidential-referendum
...

Venezuela was particularly vulnerable to the dropping of oil prices because its economy
was rigid and undiversified
...
The resulting scenario is that Venezuela, the nation with the
largest proven oil reserves in the world, is on the edge of economic disaster
...
The country emerged alongside
Ecuador and New Granada (which became Colombia) from the collapse of Gran
Colombia in 18303
...

Previously, this country relied on agricultural commodities such as coffee or cocoa as
their main export
...


3“The World FactBook – Central Intelligence Agency,” http://www
...
gov/, accessed
September 19, 2016, https://www
...
gov/library/publications/the-worldfactbook/geos/ve
...
“Venezuela – An introduction” Geographia
...
geographia
...
worldatlas
...
worldatlas
...
html
6
“Venezuela Overview” http://worldbank
...
worldbank
...
This causes oil-producing countries like Venezuela
to suffer from economic and political turbulence
...

There are a few other elements that causes the oil prices to drop
...
If demand decreases and supply
remains unchanged, then it leads to lower equilibrium price and lower quantity
...

The second is the change of the United States’ oil import
...
United States, one of the biggest oil importers in the world, increased its
domestic oil production by almost double the amount over the last several years and
become the world’s largest oil producer9
...


7
“Saudi Oil Chief Khalid al-Falih Tells OPEC Changes Are Coming”
http://www
...
com/, accessed September 19, 2016,
http://www
...
com/2016/06/03/business/energy-environment/opec-meeting-oilproduction-saudi-arabia
...
brookings
...
brookings
...
S
...
eia
...
eia
...
cfm?id=26352

Oil prices are also partly determined by speculations
...
But their speculations are wrong
...
1 million barrels a
day10
...
He won the election in December
1998 with 56% vote and started his career in 1999
...
Chavez was
first widely known by his attempt in overthrowing the previous President Carlos Andres
Perez, gaining him admirers and followers
...
A socialism is a way of organizing a
society in which key industries are owned and controlled by the public sector instead of
private interests
...

The brand of socialism enacted under Chavez is a movement is known as the “Bolivarian
Revolution”
...
A key component of Bolivarianism
is economic self-sufficiency and the rejection of capitalism
...
This emphasis on the
oil industries above all others, led had the effect of discouraging private production and
the country became forced to depend on imported food and supplies as its agricultural
production gradually decreases over the years
...
investopedia
...
investopedia
...
asp/
11 “Venezuela Today
...
S and the world
...
S foreign policy
...
The media has also reported that Chavez criticized Bush as “fighting
terror with terror” after the attack in September 9th 200112
...
Major steps that he took towards his vision of 21st
Century Socialism were to nationalize key private industries such as the electricity,
telecommunications and oil sectors
...
The money
from the oil revenue is then used by Chavez to win people to his side and increase the
living standards of the poor in Venezuela through one of his policies: The Bolivarian
Missions which is a form of social program to provide food and housing subsidies,
medical services and educational programs for the poor
...
For a while, things are going great in Venezuela as the
minimum wages of the workers were increased sharply and many of the Venezuelans
were lifted from poverty
...

His popularity can also be traced back to his extravagant spending of the oil money and
foreign debts in campaigning for his presidential election
...

Despite the country’s oil wealth and Chavez’s earnest attempt to tackle poverty,
unemployment and food insecurity still remain rife in the country
...
Latin America & Caribbean,
http://www
...
com/news/world-latin-america-10086210
...
cfr
...


that was supposed to help his people ended up hurting them
...
His policies have resulted in Venezuela reaching the highest rates of inflation
in Latin America, widespread food shortages and a doubling of the country’s crime rate
...
Yet, the legacy of Chavez is largely seen in the complex social issues and
unbalanced economy that he left to be faced by his chosen successor
...
He was appointed as the vice president of Venezuela by Chavez in 2012 and
was immediately elected as President of Venezuela succeeding Chavez in 201314
...
He was under the
impression that the US capitalism caused the crisis happening in Venezuela
...
Seeing the
world through the lens of realism he has sought to pursue the interests of Venezuela in a
‘zero sum’ competition for power
...
The inflation that has long loomed over the country
worsened with the downfall of oil price in 2014
...

Maduro declared “a state of emergency” for 60 days after a week of
demonstrations for a recall vote which has escalated quickly into violence
...
Shoichet CNN, “Maduro: From Bus Driver to Venezuelan Leader CNN
...
cnn
...
html
...
businessinsider
...
id/venezuela-military-exercises-amidnationwide-unrest-2016-5/
...
The declaration is supposed
to give the army and the police more power in moving around to keep order and increase
the president’s ability to work around the legislature
...

In the face of crisis, Maduro scrambled to formulate a policy which might
remediate the situation
...
He established a
policy using ID numbers to ration the food in grocery stores
...
However, opposing members have accused CLAP leaders of discriminating the
food supplies against those who had publicly opposed the government
...
Some Venezuelans have
been driven to criminal acts and hospitals are filled with the sick and injured despite
insufficient medical supplies17
...
A few hoarders sold staple
needs in the black market at an exorbitant price and desperate people shops at the
black market as the grocery store isn’t always stocked despite the rationing and hourslong wait
...
Starving animals
also filled the nation as the zoo can no longer afford to feed or care for its animals
resulting in starvation and deaths of a lot of animals
...
telegraph
...
uk/news/2016/05/14/venezuelan-president-nicolas-maduroorders-crackdown-as-countrys/
...
washingtonpost
...
html
...
breitbart
...


peak point when a group of men stole a black stallion and butchered it for meat19
...
Projections of future inflation rates are so dire that money will be greatly
devalued and may result in difficulties printing sufficient currency
...
Though the deal is yet to be finalized, Maduro is
optimistic regarding the result of the meeting with OPEC as he is also desperate to save
his country from starvation
...
He also tried to protect the image of Venezuela’s economic
state by manipulating information and not letting statistics or reports regarding its
economy be printed or distributed
...

Maduro’s wariness of the outside world proved to be deadly for the country as his
policy in prohibiting humanitarian aid from entering and helping Venezuela resulted in
the anger of its people, the policy is ineffective in rebuilding the economy of the country
...
His recent policy, which involves opening the borders between Colombia and
Venezuela (the first time in years) between July and August 2016 to let Venezuelans buy
necessities in Colombia showed his willingness to compromise with his ideals during
19

“Hungry Venezuelans Break into Zoo and Butcher Animal for Meat | Fusion,” accessed
September 26, 2016, http://fusion
...

20 “This Is The End: Venezuela Runs Out Of Money To Print New Money | Zero Hedge,”
accessed September 19, 2016, http://www
...
com/news/2016-04-27/endvenezuela-runs-out-money-print-new-money
...
cbc
...
3768353
...
smh
...
au/business/world-business/in-venezuelas-datablackout-its-all-a-guessing-game-20150421-1mqdta
...


crucial times
...
They are seeking to collect signatures to
hold a referendum vote that could remove Maduro prior to the next presidential election
in 201823
...
Yet, his actions in the face of plummeting economic conditions have so far
proved ineffective
...

However, in moving beyond these facts it is necessary to situate the crisis within existing
theoretical frameworks of international political economy
...
Its philosophy can be drawn back to the early evolution
of capitalism and most notably in the work of Enlightenment thinker, Adam Smith 24 Put
briefly, this outlook promoted the view that economies are most harmonious and
prosperous with minimal interference from the state and with every economic agent
seeking to maximize their own utility
...
These

assumptions have given rise to enormous development, not only materially, but also in
building institutions and regime designed to proliferate liberal economics around the
world
...
In many respects, the approach of the Venezuelan government is the
23

“Venezuela Gov’t Doubles Down on Policies Blamed for ‘Economic Disaster,’” accessed
September 19, 2016, http://www
...
com/news/article/mark-browne/venezuela-govtdoubles-down-policies-blamed-economic-disaster
...
1-9
25 “The Invisible hand in Economics: How Economist Explain Unintended Social
Consequences” N Emrah Aydinonat, Taylor & Francis 2009, pp
...
From the nationalization of the main oil
company, PDVSA in 2004, to various quotas on consumer goods, the Venezuelan
government clearly does not subscribe to what have become mainstream economic
policies in the post-cold war world
...

While it is no doubt true that authoritarian political cultures limit economic opportunity,
there is certainly more to the Venezuela crisis than this ideological discourse
...
1 percent growth and from the
period 1999-2011, the private sector’s share of the economy increased from 65 to 71
percent 27
...

An alternate theoretical approach to international political economy is referred to
as ‘realism’ or ‘statism’
...
This approach helps to describe the actions of the Venezuelan
administration without using ideological terms
...
This view is certainly
evident in the behaviour of Venezuela
...

However, this framework has clear limitations, continually miscalculating the need for
adaptive economic policy in an increasingly interconnected world
...
forbes
...
thenation
...
Yet, the story of the
crisis does not completely validate the absolute wisdom of free-market economics
...
If
foreign direct investment and corporate interests had been given unfettered control,
perhaps no benefit would have trickled-down to the Venezuelan people
...
A short-sighted
outlook of successive administrations resulted in a situation where the Venezuelan
institutions were ill-equipped to adapt to the rapidly changing economic landscape
...
Its distinct history gave rise to a unique brand of socialism which outlasted
most centrally-governed or communist states of the 20th century
...
Hugo Chavez was a leader
who, over his long period of leadership, developed the oil industry with strict national
control
...
He consolidated governmental power domestically, engaged in an
independent foreign policy and was the architect of genuinely bold social policies
...
Unable to stem corruption or enact meaningful
economic reform, he created a state with a dangerous reliance on oil revenue
...
Nicholas Maduro, the successor to Chavez, leads a country in a
state of deepening crisis
...
As the economy slips further into chaos, the most brutal effects are felt by the
Venezuelan people
...
The example of Venezuela
demonstrates that, in the contemporary world, states must be adaptive to change and
build diverse economies to secure opportunity for their citizens
...
”201614, Frances Martel18 Sep
...
http://www
...
com/national-security/2016/09/18/venezuela-15percent-eat-garbage-survival/
...
”Charles L Griswald
...
, 1–9
...
d
...
com
...
Shoichet
...

Accessed September 19, 2016
...
cnn
...
html
...
“Venezuelan President Nicolas Maduro Orders Crackdown as Country’s Crisis
Intensifies
...
http://www
...
co
...

“Global Economics Monthly May 2016
...
Accessed September 26, 2016
...
cfr
...

“How the Military Could Play ‘king-Maker’ in Venezuela’s Political Crisis
...

http://www
...
co
...

“Hungry Venezuelans Break into Zoo and Butcher Animal for Meat | Fusion
...
http://fusion
...

“In Venezuela’s Data Blackout, It’s All a Guessing Game
...

http://www
...
com
...
html
...
”N Emrah
Aydinonat, Taylor & Francis
...
, 1–5, n
...

“OPEC Deal to Stabilize Oil Markets Close, Venezuela’s Maduro Says - Business - CBC News
...
http://www
...
ca/news/business/oil-opec-deal-maduro-1
...

“Profile: Hugo Chavez
...
Latin America & Caribbean
...
bbc
...

“This Is The End: Venezuela Runs Out Of Money To Print New Money | Zero Hedge
...
http://www
...
com/news/2016-04-27/end-venezuela-runs-out-money-printnew-money
...
’” Accessed September 19,
2016
...
cnsnews
...

“Venezuela Today: An Introduction to the Main Actors Related to the Bolivarian Revolution
...
com
...
https://venezuelanalysis
...

“Venezuelans Are Storming Supermarkets and Attacking Trucks as Food Supplies Dwindle
...
Accessed September 19, 2016
...
washingtonpost
...
html
...
” Accessed September 25, 2016
...
cfr
...

“Venezuela’s Failed Socialist Experiment
...

http://www
...
com/sites/ivonaiacob/2016/07/24/venezuelas-failed-socialistexperiment/#7776f4ad58d4
...
Accessed September 26, 2016
...
thenation
...




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