Taxes & Economics World Politics & Affairs

Venezuela: Money, Politics and Chaos

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Venezuela is experiencing a socioeconomic crisis and national calamity. Presently, the country is in a state of emergency after two months of anti-government protests. This resulted in violent clashes between the government and its citizens. According to local sources, this situation has caused the deaths of over 50 people and led to violent confrontations with the police.

Venezuela has the world’s highest inflation rate, set to hit 475% in 2016 according to the IMF. The International Monetary Fund estimated that inflation will reach 720.5 percent this year, the highest in the Americas, and  2,068.5 percent by 2018. The country has already entered an economic recession and has also suffered from terribly large unemployment this year.

The country is a major producer of petroleum products, which is the base of the Venezuelan economy. Venezuela’s oil production has fallen in the last few years, producing only 2,300,000 barrels (370,000 m3) daily, down from 3.5 million in 1998, but with the recent currency devaluation the oil incomes will double its value in local currency. This proved to take a severe toll on the citizens.

Venezuela Political Crisis

Political corruption, scarcity of basic products, closure of companies, deterioration of productivity and competitiveness, and high dependence on oil are other problems that have also contributed to the worsening crisis. Citizen’s frustration due to food shortage, inflation and corruption is rising steadily.  Floundering oil prices have further intensified the situation.

This affected the life of citizens at various levels. There is the rise of unemployment, which ultimately resulted in the emergence of social movements aimed at changing the economic and productive model, as well as questioning the political system and demanding a democratic plot in the country.

Moreover, Venezuela is increasing censorship on internet, media and upon its citizens. The government responded to footage of protesters by censoring televisions that broadcast it, also by harassing and arresting the journalists. When the information started to share by SMS messages President Nicolas ordered an investigation into phone company Movistar, saying that it supported opposition to the government. Further, when people protested by online TV stations, the Venezuelan government responded by censoring them. As a result, protesters have now moved to social media platforms like Instagram, Snapchat, Facebook, Twitter, and WhatsApp – which have proved harder to censor.

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Venezuelans are afraid of President Nicolas Maduro’s government, who passed several laws since 2015 without congressional approval. However, President Maduro claims that he is doing so to fight an “economic war” with unseen enemies, but taxes on alcohol and tobacco followed by the collapsing economy have turned people against him.

Unfortunately, President Nicolas has failed to respond to these national problems. Maduro denounced his opponents as “traitors” and praised the military’s “unity and revolutionary commitment”. The government’s reaction to the protests discredited the Maduro administration.

As quoted by a journalist of CSIS, “There is a need to open a humanitarian channel by the Maduro government.” The administration has denied the humanitarian crisis and put a ban on humanitarian aid. However, the citizens are in an urgent need of basic food and medicine supplies. The prominent international organizations and countries should together pressure the Maduro government to welcome the humanitarian aid to the country.

Some economists strongly encourage the adoption of dollarization. This will not vanish Venezuela’s problems but it will help control the economic disaster and restore some purchasing power. A Large population of Venezuela supports either dollarization or a currency board system, which would mitigate the death spiral of the highest inflation rate in the world and a shrinking economy.

It’s also a good opportunity for the U.S to expand its horizons. The United States should keep a strategic approach to pressurize the Venezuelan government, to open a humanitarian channel and implement dollarization.

Organization of American States (OAS) and its members who aim to restore democracy in Venezuela must take necessary steps required to solve the problem and restore democracy in Venezuela. This would lead to regional stability and prevent further human rights violations in Venezuela.

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