A country in crisis
What’s wrong with the economy?
Venezuela has the world’s largest underground oil reserves, but crude production continues to crash. Its natural wealth made it once one of Latin America’s wealthiest countries. Oil has been Venezuela’s prime source of hard cash, and leaders historically haven’t developed other sectors of the economy. Output now has plummeted to less than a third of its historic high, and critics blame that on years of rampant corruption and mismanagement of the state-run oil firm PDVSA.
What’s happening with inflation?
The economy in 2019 will continue to contract and inflation will skyrocket at a staggering 23 million per cent, forecasts Francisco Rodriguez, a former Venezuelan official who is chief economist at the New Yorkbased Torino Capital. That is a result of low oil prices compounded by the declining production, Venezuela’s growing financial isolation, years of price and currency controls and heavy government spending in the collapsing local currency. Many Venezuelans struggle to afford food and basic goods. The minimum wage is less than US$5 ($7.40) a month — and shrinking.
What’s the political backdrop?
Maduro has successfully maintained power, opposed by a fractured opposition. The handpicked successor of Chavez, he won a second term in a May election that opponents and many in the international community reject as a sham. Maduro’s Government has jailed or driven into exile its most popular opposition leaders.
Internationally, the United States and a coalition of a dozen Latin American countries reject Maduro’s Government. However, leftist allies such as Cuba and Bolivia maintain their support, while Maduro has deepened economic and political ties with Russia, China and Turkey.
How are Venezuelans responding?
An estimated 2.3 million people have fled hyperinflation, and food and medical shortages over the past two years, according to the United Nations, most going to nearby Colombia, Brazil, Peru and Ecuador. Leaders in those countries say they struggle to handle the influx. Many of the migrants arrive sick and hungry, needing medical care.