People protesting against Maduro's authoritarian government
367 11 mins 5 mths

There is not a single news channel on this planet that hasn’t broadcasted anything regarding the current crisis in Venezuela. This is probably one of the worst humanitarian as well as the worst economic crisis the world has ever witnessed. The worst part: such a situation can arise in any country. Poverty, hunger, lack of healthcare facilities followed by increased violence is the result of this crisis. Let’s take a look at what led to the horrible situation in this country.

VENEZUELA: LOCATION AND CURRENT SCENARIO

Venezuela is a country located in the north of South America, bordered by Colombia, Brazil and Guyana by land. The capital of Venezuela is Caracas and it is the largest city in the entire country. Spanish is the official language of this country and its currency: Venezuelan Bolivar.

Here is the most interesting part about Venezuela. Venezuela has twice the amount of Oil reserves than Iran and Saudi Arabia. It has the capacity to supply over 300,000 million barrels of petroleum.  Despite being so rich in natural resources, the value of one Venezuelan Bolivar equals literally nothing; doesn’t matter which currency you compare it to. Venezuela at one point was the go-to country in all of Latin America. Let’s take a look at how this happened.

THE CAUSE OF THE VENEZUELAN CRISIS

Venezuela, as discussed in the previous sections, is a country rich in oil. In fact, Venezuela supplies oil to almost every Latin American country and some other countries in the vicinity. In fact, Venezuela was THE COUNTRY in the entire continent of South America where people from across the world wanted to spend their holiday and have fun. Venezuela started developing its infrastructure to provide its people with top-class facilities. It followed the footsteps of certain developed countries like the United States. However, the US’s biggest fear/enemy (whatever you may call it) turned things upside down in this country. That fear/enemy is none other than “Communism”.

Hugo Chavez in Venezuela
Hugo Chavez, Former President of Venezuela. Source: History.com

Hugo Chavez, inspired by Karl Marx’s notable books, developed strong socialist ideas and wanted to implement them in his own country. He wanted to assume total control over the Venezuelan currency, the Venezuelan Bolivar. One might wonder “how can someone do that?” Well, the answer is fairly simple, nationalise everything in the country. That is precisely what he did when he assumes the president’s role in 1999. He started taking the giant private firms in Venezuela under the government’s control until there wasn’t any left. Eventually, all the creativity in entrepreneurs was gone, because there weren’t any incentives. Individual companies ceased to exist.

Now the question is, what drove the Venezuelan economy, since a large number of private firms were taken away by the government, no one would pay taxes? Taxes make up a large part of the country’s GDP, which affects the economy. Well, the answer lies in Venezuela’s oil reserves. Hugo Chavez wanted to drive his country’s economy solely through the export of oil and other resources available in the country. This move, however, proved to be catastrophic in the future.

Oil prices across countries are set by the OPEC (Organisation of petroleum exporting countries). This organisation decides the price of oil per barrel depending on the demand for that particular country’s oil. The logic is simple: as demand increases, the price increases. If a country doesn’t like the prices set by the organisation, it can cut down on its supplies to increase the prices. Venezuela saw the prices of oil skyrocketing, peaking at around 100$ per barrel in 2013. The life of Venezuelans was really good when the oil prices were high. Everything changed within a span of one year.

In 2014, the oil prices fell to around 70$ per barrel. There hit the Venezuelan economy very hard. Things got even worse from thereon. In 2016, the prices of oil per barrel fell to almost 30$. This crippled the Venezuelan economy as petroleum was the only source they relied on. Hugo Chavez had taken every other private organization under his control. No one would pay taxes to the government, which would somehow have filled in the economic void. Things don’t just stop here. Now comes the part where we introduce the villain of this story: NICOLAS MADURO.

Shortly after Hugo Chavez had died, Nicolas Maduro was elected as the new President of Venezuela. Maduro continued the disastrous economic policies of Hugo Chavez. Now, Maduro’s main intention was to fill in the economic void by any means possible. He did something that other countries would not even consider doing: HYPERINFLATION.

HOW DID HYPERINFLATION LEAD TO THE CRISIS IN VENEZUELA?

To understand this, let’s take a look at what inflation is. INFLATION, in simple terms, is printing money in excess. Inflation can prove to be beneficial if it is properly supervised. It leads to an increase in the country’s GDP. But, if inflation is continued beyond the threshold limit, it is termed Hyperinflation.

Because of inflation, people have more money in their hand. That means they have a higher purchasing power. Since they can spend more, the prices of commodities in the market go up, thus balancing the rise. However, in the case of Hyperinflation, people have excess money in their hand. To balance that, the prices of basic commodities go so high that people end up spending millions in buying the same thing that they used to buy for 1$ earlier. That is exactly what happened with Venezuela. The prices of commodities skyrocketed, but the amount of money that people earned was nothing in comparison because of the falling GDP due to the reduction in oil prices. This is the main reason why Venezuela is in crisis.

People in Venezuela right now are millionaires, but they still starve. A candy bar right now would cost them several thousand Bolivars. This reduced the value of the Venezuelan Bolivar completely. One USD would now be equivalent to over a million Bolivars. The worst part: Maduro denied the allegations of hyperinflation. He wanted to improve the economy by devaluing the Venezuelan Bolivar and introducing a new currency that would make up for the previous one. He also wanted to introduce a new digital currency that was solely driven by oil exports. These reforms would push the country to an even dire stage of hyperinflation.

people protesting against the unfair Maduro government
Venezuelan’s protesting and fighting against the unfair government. Source: CNN

People started fleeing the country. They were sick of an incompetent leader ruining their lives. Violence in Venezuela rose rapidly as people were fighting over food and other basic commodities. People couldn’t afford medical treatment and medicines as their prices were very high. Even during the COVID-19 pandemic, hospitals couldn’t sustain patients as they ran out of oxygen and other supplies. Things were, and still are pretty bad. Nobody can dethrone Maduro, not even his own countrymen. He has been accused of using force against his own people to silence them. His methods were humane compared to Syria’s Bashar Al Assad’s.

TWO PRESIDENTS WORSENING THE CRISIS IN VENEZUELA:

You read it right! Venezuela has not one, but two presidents. One of them is Nicolas Maduro, whom we have already talked about. The other president is Juan Guaido. In the 2018 elections, Maduro was declared as the winner. Many countries however disagreed with it because they were pretty sure that the ballots or EVM were tampered with and there were no countries that were allowed to observe the fairness of the elections. According to the constitution, the president of the parliament should take over and call new elections. That man was none other than Juan Guaido.

Venezuelan President Maduro promotes talks with opposition after Juan Guaido  dismissed talks with 'dictatorship' - The Indian Wire
Nicolas Maduro (Left), Juan Guaido (right). Source: Indianwire

Both Guaido and Maduro claim power over the country. However, Maduro seems to have an upper hand. He has got the military and the state security forces’ support. The oil industry is also believed to be run by high-ranking military officials. Maduro also had a great influence over the judges of the Supreme Court. Guaido on the other hand was only left with public support, which started diminishing as time passed. The reason: Maduro used violence against the protesters and many officials belonging to the opposition parties were prosecuted over petty issues.

Despite all this, Guaido is recognized as the president of the country by over 60 countries. He has the backing of the United States. Maduro on the other hand has the backing of China, Russia, Turkey and Iran. This complicates things even more. Let’s say that the US orchestrates a coup as they did in Iran and somehow manages to overthrow Maduro, China and Russia are ready to pounce on the US and its allies, resulting in a devastating war.

CONCLUSION:

The crisis in Venezuela doesn’t seem to have an end. People continue to starve and it is also predicted that they will continue to starve even in the future. Even the best solutions seem to have grave consequences. The crisis in Venezuela just keeps aggravating. There seems to be no way out of this. One can only hope that the situations there will eventually get better.

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