globalEDGE Blog - By Tag: venezuela

Venezuela’s 2024 crisis, sparked by a disputed election, has deepened the country’s economic collapse, affecting businesses worldwide. While political instability has been a recurring problem in Venezuela for years, the 2024 election—marked by allegations of fraud and unrest—has intensified the country's economic freefall.

This past Monday, the United States government gave the green light for the Willow Project, a controversial oil and gas development proposal in Alaska. The project, spearheaded by ConocoPhillips, aims to extract up to 600 million barrels of oil and 3.4 trillion cubic feet of natural gas from the National Petroleum Reserve-Alaska (NPR-A), a 23 million-acre area on the North Slope of Alaska.

In a recently published report by the Economist Intelligence Unit, Singapore was named the most expensive city in the world for the 6th consecutive year. It was joined by Paris and Hong Kong for a three-way tie for the number one spot.

Venezuela is in the midst of a political and economic disaster and has faced hyperinflation, an increasingly worthless physical currency, and heightening food and medicine shortages. Recently, Venezuela has turned to blockchain, and the cryptocurrency boom as a potential method to fund its debt and develop a stable currency. The Petro and Petro Gold have the potential to replace the bolivar, which was the countries primary currency in the past.

Inflation is a huge problem for many economies worldwide.   In countries like Venezuela, Argentina, and Ukraine the average consumer has been largely affected by the inflation currently occurring.  A basic definition of inflation is when the currency used in a country experiencing inflation buys fewer goods, the purchasing power decreases.  This is often bad for consumers, especially in countries experiencing very high inflation rates because they are not paid enough to compensate for the rising cost of goods and services.

Venezuela's international standing has suffered in the wake of its controversial presidential election and constitutional assembly. Amidst allegations of vote manipulation and crackdowns on protests and opposition, Venezuela's electoral process and ensuing government scandals have faced condemnation from several international leaders. Foreign ministers of fellow Mercosur countries voted to indefinitely suspend Venezuela from the trade bloc. The United States levied sanctions on numerous Venezuelan officials, including the country's president, preventing them from doing business in or traveling to the U.S. Other nations have refused to recognize the election results. The international response will likely impact the already-suffering Venezuelan economy, which has declined sharply over the past few years.

Venezuela has one of the largest oil supplies in the world, and oil serves as the primary source of income for Venezuela’s economy. The large drop in prices has severely hampered its ability to import products, and has prompted a rapid rise in inflation. The IMF is forecasting that inflation will hit 700% by year end 2016, compared to the Venezuelan government’s forecast of a 180% increase in inflation.

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.

Venezuela's economy is spiraling downward with no end in sight. The country has the highest inflation in the world, topping countries such as Sudan and Iran. There are five apparent causes that have led to the downfall in Venezuela's economy, including political instability, food crisis, oil prices, currency exchange rates, and the country's default. Because of Venezuela's hurting economy, many companies from around the world are taking hits on profits and cutting back business within the country.

In recent developments of the ongoing deterioration of relations between the United States and Venezuela, the U.S. government sanctioned multiple Venezuela government officials for alleged human rights violations, demanded the release of political prisoners, and warned against blaming American policies for the country's continued economic and political problems. While this exchange or harsh rhetoric and sanctions is nothing new for the U.S. and countries that differ greatly from its foreign policy goals, what makes this episode especially noteworthy is that it could entail significant consequences for American prospects for doing business within the Latin American region, and especially within Cuba.

Inflation has been credited with being the main reason for Moody’s Investor service choosing to downgrade Venezuela. In terms of currency, inflation has been more than fifty percent year to date, even after President Nicholas Maduro created the law to make businesses cut the cost of consumer goods. The high risk of a collapse and the economic imbalances of the Venezuelan economy have also been cited as a reason for the downgrade because the caused currency and bond ceiling ratings to move to a “speculative” grade. The government is planning on devaluing the Venezuelan currency in 2014. The current account surplus has also decreased by thirty five percent for the past three quarters in comparison to the three quarters last year. All of these statistics point to an economic collapse, but there might just be a way out.  

Venezuela experienced an extreme 12-month inflation rate of 54% last month and shortages of basic goods. Venezuelan President Nicolas Madura has responded to extreme inflation by forcing managers of local businesses to lower their prices with arrests and armed forces. The socialist leader stated that the seizure of these stores was just the tip of the iceberg and that he will take over more businesses. These events could have a major effect on Venezuela’s economy, including an outflow of foreign investment and firms.

One of the major events taking place right now in the Western Hemisphere is the death of Venezuelan President Hugo Chávez and the subsequent transition to a new leader. The leader died March 5^th due to complications from cancer that he had been battling the past few years. His death left behind a bitterly divided nation on the brink of a political crisis, with doubts of the economic future of his socialist revolution.

Two developing countries are taking a turn to produce more oil and gain a bigger stake in the oil industry.  Both Columbia and Venezuela hope to double oil production in upcoming years. Columbia hopes to reach 1.2 million barrels a day by the end of 2012 and Venezuela plans to increase oil production from the current 3 million barrels per day to 6 million barrels by 2016.  If these numbers hold true it looks like both countries will become imperative to the oil industry.

How can a used car be worth more than a new car? How can a car increase in value the second it is driven off the lot? The answer is that these events only happen in Venezuela. The UICIFD Blog recently had a post about this strange phenomenon in the Venezuelan car industry. 

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