It is quite extraordinary how Venezuela, which once was the world’s largest exporter of oil from 1908 to 1935, is now in shambles. Yes, we are talking about the Venezuelan economic crisis which has plagued this South American country since 2010 and resulted in the world’s highest inflation rate at 1 million%, a GDP fall of 35% - which is a sharper drop than that seen in the ‘Great Depression’ in the US, and the murder rate surpassing that of the most dangerous cities in the world.
So, how did this happen? Short answer: Over-dependence on oil. As a result of low oil prices in 2015, coupled with the lack of investment and maintenance in oil intensified an economic crisis began to take the country by storm. Maduro; who was the president at the time, failed to cut back on spending in the face of falling oil revenues and has dealt with the crisis by denying it exists and violently repressing opposition.
Nicolás Maduro can be associated with the director of this situation, but the plot was written by former president Hugo Chávez, with an increase in Oil prices since 2000 Hugo planned to gain the political supremacy by public sympathy and Venezuela saw a rise in infrastructure free medical supplies and poverty was cut down by 20%. All this helped Venezuela to rise up to the top but the negligence of presidential powers and economists they forced the country to fall into the Dutch disease i.e depending solely on one source of income and oil was it for Venezuela. Just like in the 1970s and 80s, petroleum prices significantly decreased and Venezuela didn’t have the income to meet its spending commitments. In the 2000s, as petroleum prices were bouncing back and forth, the government was spending an exorbitant amount of money on things like the Misiones. Meanwhile, it had committed to selling Venezuela’s petroleum to allies at extremely reduced rates. And so, not only was the revenue that should have theoretically been generated by the volume of petroleum that Venezuela was exporting not coming in but what was coming in was simply being spent away. In other words, it wasn’t being put back into the nation in terms of infrastructure.
Venezuela responded to this need for revenue by simply printing more money – and that has led to spiralling inflation, with the currency becoming increasingly weak in terms of its purchasing power. Chávez and his successor, Nicolás Maduro have each responded to this spiralling inflation in turn with major currency changes.
The first change occurred in 2008 when Venezuela switched from the standard bolívar to the bolívar fuerte (strong), the latter being worth 1,000 units of the old currency.
Then, in August 2018, Venezuela switched currencies again, this time replacing the strong bolívar with the bolívar soberano (sovereign). This currency is worth more than 1 million of the original bolívars which were still in circulation little more than a decade ago. But these changes haven’t helped. Some reports are now talking about Venezuela having 1 million percent inflation by the end of 2018. That in itself is significant. But what makes it even more significant is that it was only in June that this figure was being predicted as about 25,000 per cent.
The situation worsened day Nicolás Maduro was sworn into office, things took a turn for the worst. His hunger for power and his greed for money has caused Venezuela to suffer the worst crisis of the 21st century. Furthermore, his negligence for the economy and the corrupt functioning of his government are also to blame.
Day by day this crisis is only getting worse, sanctions imposed by U.S and Canada are only making this situation spiral out of control even more. Most people say that we should look at the ‘silver-lining in the cloud’, but there doesn’t appear to be one for Venezuela.
Situations like these are ones that require imminent solutions and platforms like DIMUN serve as a perfect medium for youth across the globe to contribute and discuss these issues in a formal manner. You never know the next solution for an international issue may emerge from a MUN.
Written By: Aarush Kesar & Harsh Vaibhav
