Australia and the World Past and Present

Venezuelans are going through a tough time.

President Nicolás Maduro has been in power since 2013.

In recent years the the problems facing the country have led to a massive wave of migration with many opting to leave.

According to the UN Refugee Agency, 7.7 million Venezuelans have left their country since 2014. This amounts to 20% of the population.

Venezuelans are facing a prolonged economic crisis.

Hyperinflation has taken hold in recent years.

Presidential elections in 2018 led to a political crisis in the country. In response, the United States put in place sanctions on Venezuelan oil exports in 2019.

There has been concern over human rights abuses in Venezuela in recent years. In 2021 the International Criminal Court opened an investigation into the repression of demonstrations during the political crisis in 2017.

In recent times there have been reports of extrajudicial executions, forced disappearances and arbitrary detention.

The economy has significantly deteriorated over Maduro’s time in office.

Some argue that the lion’s share of the blame lies with Maduro. Indeed most of the deterioration has occured under Maduro’s watch. However others blame his predecessor – Hugo Chávez. Government policies often have a long lead time. Many poor policies were brought in by Chávez and it seems that the chickens have come home to roost.

Chávez pursued populist economic policies.

The price of oil was high in the early 2000s. During this time Chávez set up free medical clinics. Also, food and housing was subsidised.

But this was all a sugar hit.

Chávez’s spending on new social programs were like a house of cards and it was all built upon oil revenue.

Oil accounted for almost all of the country’s exports. And oil revenue made up around half of all government revenue. This meant that if there was a sudden drop in world oil prices, it would create a huge shock to the country’s economy.

At the same time the amount of oil that Venezuela was producing declined. According to OPEC, when Chávez came to power in 1998 petrol production was 3.1 million barrels a day. By 2013 production had dived to 2.3 million barrels a day.

Production continued to decline under Maduro and by June 2020 it was down to 336,000 barrels a day.

Some argue that US sanctions on Venezuelan oil have caused the crisis. However a downward trend in production was evident years before the US applied sanctions.

Under Chávez there was string of nationalisations.

In 2007 the government took a majority stake in many oil projects.

Also, the largest telecommunications company in the country was nationalised.

The government took out a majority share in Electricidad de Caracas – the largest producer of energy in Venezuela.

In 2008 the cement industry was targeted. International companies from Mexico, Switzerland and France were heavily involved in cement production in Venezuela. Some companies were actually exporting cement to other countries rather than sell it domestically. They could get higher prices in neighbouring countries due to Venezuela’s price controls. After the nationalisation of these companies cement production fell precipitously.

In 2009 the Chávez regime nationalised a major rice mill linked to US firm Cargill Inc.

In the same year the government paid $2 billion for a stake in the largest steel mill in the nation. Steel production fell.

The following year the government took over fertilizer company, Fertinitro.

Under Chávez the Banco Federal and Banco de Venezuela were natioinalised.

In 2011 Chávez moved to nationalise the gold industry in Venezuela.

The string of nationalisations led to a flight of capital from the country. The whole project was monstrously expensive for the government and that money could have been better deployed elsewhere. Foreign companies were seen as enemies of the state rather than potential partners in growing and developing the country. In every industry the government was less competent than previous management. Invariably, production fell after every nationalisation.

By 2015 hyperinflation was running at 180%.

By 2018, the use of the dollar for commercial transactions had become commonplace. It is ironic that although Chávez railed against American neo-imperialism, the currency of choice for many Venezuelans is now the Greenback.

Venezuelans have suffered mightily due to the policy failings of its leaders. Venezuela has some of the largest oil reserves on the planet and yet millions of its citizens are living in poverty. Policy decisions since the late 1990s present a case study in how not to run a country.