Venezuela holds the world’s largest proven oil reserves,[i] and the state has relied on oil revenue for the provision of government services. This system, established by former President Hugo Chavez, was mostly stable until after his death and the ascension of his successor, Nicolas Maduro. Political and economic troubles confronted the Maduro government in February of 2014.[ii] Since these protests shortages, inflation, questionable elections, and mass emigration have plagued Venezuela. The government has attempted to correct, only worsening the situation.
Politics: Political problems for the current government are varied. Protests have continued widely in Venezuela since 2014 as a result of food shortages and economic problems. Opposition leaders and politicians have been jailed and abused.[iii] Maduro has usurped the constitutional legislature with a pro-government “Constituent Assembly.”[iv] Prominent opposition leaders were barred from running in the most recent election of May 20, 2018[v] which was undemocratic and staged.[vi] The Organization of American States, as well as many Latin American countries individually, has called out Venezuela for corrupt electoral procedure and abuse of the Venezuelan Constitution.[vii] The problems shown above are worsening as the overall economic situation deteriorates.
Inflation: Venezuela has since 2015 logged rates of inflation in its currency the Bolivar above 100% annualized. This year that rate is reported at 13,860%.[viii] The IMF has rumored an annualized rate for this coming year of over 1,000,000%.[ix] The overall rate is difficult to track due to government efforts hiding real inflation rates and the impact on the overall economy.[x] Using the Dollar is dangerous as the government tries to stamp out trading in foreign currencies that hold value.[xi] Bloomberg has created the now notorious “Café con Leche Index”[xii] to show the real cost of inflation on the consumer. Holding wealth in Venezuela, as in any hyperinflation state is tremendously difficult. Wages are difficult to set, bartering is rampant, and food and other necessities are scarce and outlandishly expensive.[xiii] President Maduro’s economic “magic formula” is failing to turn the tide.[xiv]
Emigration: Venezuela is facing a mass-exodus of its population. Some analysis claims over 4 million Venezuelans, or over 13% of the country’s 30 million inhabitants, have gone elsewhere.[xv] This only furthers the overall basic services problems the country is seeing. OEA states have stepped in to host the economic refugees.[xvi] The number of Venezuelans fleeing the country increases daily as inflation and supply of basic goods and services deteriorate.
Venezuela is approaching failed state status. As more citizens flee, the currency deteriorates, and the government becomes less popular, the increasingly probable alternative was proposed by Colombia’s President Ivan Duque: “regime change.”[xvii]
[i] “Statistical Review of World Energy.” 2018. Bp.com. British Petroleum. June. https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.
[ii] “Venezuela Student Protest Ends in Deadly Violence – BBC News.” 2014. BBC. BBC. February 13. https://www.bbc.co.uk/news/world-latin-america-26166094.
[iii] “Venezuela: Events of 2017.” 2018. Human Rights Watch. January 12. https://www.hrw.org/world-report/2018/country-chapters/venezuela.
[iv] “Analysis | Venezuela’s Controversial New Constituent Assembly, Explained.” 2017. The Washington Post. WP Company. August 1. https://www.washingtonpost.com/news/monkey-cage/wp/2017/08/01/venezuelas-dubious-new-constituent-assembly-explained/?noredirect=on&utm_term=.9050461aad0f.
[v] Romo, Vanessa, and Philip Reeves. 2018. “Venezuelan Supreme Court Bans Opposition Leaders From Upcoming Presidential Election.” NPR. National Public Radio. January 26. https://www.npr.org/sections/thetwo-way/2018/01/26/581136290/venezuelan-supreme-court-bans-opposition-leaders-from-upcoming-presidential-elec.
[vi] The Economist (US). 2017. “Divide and Rule; Venezuela Holds Another Flawed Election,” October 19, 2017.
[vii] “Resolution on the Situation in Venezuela.” 2018. Washington D.C.
Organization of American States, AG/RES. 2929
[viii] I“IMF Inflation Rate DataMapper.” 2018. IMF. International Monetary Fund. Accessed September 14. http://www.imf.org/external/datamapper/PCPIPCH@WEO/WEOWORLD/VEN.
[ix] Rosati, Andrew. 2018. “Venezuela’s Inflation to Reach 1 Million Percent, IMF Forecasts.” Bloomberg.com. Bloomberg. July 23. https://www.bloomberg.com/news/articles/2018-07-23/venezuela-s-inflation-to-reach-1-million-percent-imf-forecasts.
[x] Young, Rob. 2018. “Can Venezuela Halt Hyperinflation?” BBC News. BBC. August 21. https://www.bbc.com/news/business-45258262?intlink_from_url=https://www.bbc.com/news/topics/cg41ylwvwgxt/venezuela&link_location=live-reporting-story.
[xi] Gonzalez, Sarah. 2018. “Why Trading Venezuelan Bolivar For U.S. Dollars Is Dangerous.” NPR. National Public Radio. August 10. https://www.npr.org/2018/08/10/637390619/why-trading-venezuela-s-bolivar-for-u-s-dollars-is-dangerous.
[xii] “Venezuela Café Con Leche Index.” 2016. Bloomberg.com. Bloomberg. December 16. https://www.bloomberg.com/features/2016-venezuela-cafe-con-leche-index/.
[xiii] The Economist (US). 2018. “Unfed and Unwashed; Venezuela,” May 12, 2018.
[xiv] The Economist (US). 2018. “Leaders: Nicolás Maduro’s Magical Thinking,” August 25, 2018.
[xv] “The Exodus from Venezuela Threatens to Descend into Chaos.” 2018. The Economist. The Economist Newspaper. August 20. https://www.economist.com/graphic-detail/2018/08/20/the-exodus-from-venezuela-threatens-to-descend-into-chaos.
[xvi] “Latin American States to Accept Venezuela Expired Papers.” 2018. BBC News. BBC. September 5. https://www.bbc.com/news/world-latin-america-45419665?intlink_from_url=https://www.bbc.com/news/topics/cg41ylwvwgxt/venezuela&link_location=live-reporting-story.
[xvii] “Colombia’s Duque Calls for ‘Free Elections’ in Venezuela.” 2018. BBC News. BBC. August 24. https://www.bbc.com/news/av/world-latin-america-45298169/colombia-s-duque-calls-for-free-elections-in-venezuela.