Venezuela is home to the largest oil reserves in the world. However, the vast amount of oil exports could not save Venezuela from the economic crisis it is now experiencing. The International Monetary Fund has predicted that the overall GDP for Venezuela will fall by 8 percent, and the inflation rate will rise by 720 percent in 2016. Economic turmoil has caused extensive damage to the country, and Venezuela is in need of change to help save the country from economic collapse.
Alejandro Velasco, an author and associate professor at New York University spoke with the WorldPost in response to questions about the disarray of the country and the reasons behind it. Velasco explains how Venezuela is dependent on its one resource commodity, oil, and therefore is unable to maintain economic stability due to untimely spending sprees by the government, and the lack of alternative ways for the country to profit other than oil. In addition to the spending habits of the Venezuelan government, Hugo Chavez played a substantial role in scaring off foreign oil companies and replacing people at the state-owned oil companies with those who would be loyal to him. Venezuela is experiencing the consequences of a corrupt government, and the country has swayed far from a stable nation.
To put into context of how serious this economic crisis is in Venezuela, many necessities to life have been cut off, or are severely limited. Government offices have resorted to staying open only two days a week to save electricity, and clocks have been pushed forward a half an hour in order to save light at night. In addition to the lack of electricity, there are serious food shortages, and water has become extremely scarce in the last couple of weeks. The failing economy and the lack of formal necessities has sparked an abundance of black markets in Venezuela.
As for the collapsing economy, many question what other countries are going to do. China, one of Venezuela’s greatest economic supporters, could potentially halt its loans to Venezuela, which could cause an immediate failure of the state. China has provided roughly $125 billion of aid or loans to Venezuela since 1990. As for now, Venezuelan President, Nicolás Maduro has extended the state of economic emergency, and believes it will remain in a state of emergency for the rest of 2016 and possibly 2017.