Venezuela is a country located on the northern coast of Latin America, bordering Bolivia, Brazil, and Guyana to the south, and it has a 2,800-km-long coastline with the Caribbean Sea to the north. The country covers a somewhat triangle-shaped territory of 910,000 square kilometers, and has a population of 31 million. Venezuela’s GDP per capita has reached 5,000 USD.
Having surpassed Saudi Arabia’s proven oil reserves in 2014 (265 million barrels), Venezuela is now the country with the biggest oil reserves in the world (297 million barrels). It is estimated that if Venezuela keeps extracting oil at the same rate as it does today, their reserves will last for 250 years.
Despite being rich in natural resources, Venezuela is now seeing their shops close, while one third of their population is living in poverty. It has become common for people to queue for days to buy food and go home empty-handed. Venezuela gets its food and consumer products almost entirely from imports. It has been a year since they began frequently experiencing power cuts and seeing a shortage of medications in hospitals.
After Bolivia recently opened its borders, Venezuelans began traveling to Bolivia in large numbers to buy food and purchase goods. Some shed tears because they had not had meat, milk, or eggs for months.
All services in Venezuela today have a very long queue. CNN recently reported that people were waiting for a full day at a morgue to have a funeral. The President of Venezuela declared a state of economic emergency and has recently granted enforcement agencies the right to recruit anyone to work in the agricultural sector for up to 120 days.
In 2015, 90 out of every 100,000 people were murdered in Venezuela, which translates into one person becoming a victim of homicide every 21 minutes. With its soaring crime rates, Venezuela has become one of the most dangerous countries in the world.
IS THIS THE RESOURCE CURSE?
Why did the most oil-rich country in the world become the poorest and one of the most dangerous? Coffee and cocoa were Venezuela’s main export products until the 1980s, when they were replaced by oil. However, oil prices declined soon after, which resulted in a drastic decrease in their exports. It caused the country to be strangled by external debt and put the economy in decline for 10 years. Venezuela’s poverty rate reached 65 percent in 1995, while the inflation rate was 100 percent in 1996. This led GDP per capita to return to 1963 levels.
Hugo Chavez, who previously took part in a coup d’état, was elected president in 1998.
The oil prices, which picked up in 2000, brought unprecedented economic growth to Venezuela. Populist policies pursued by the government resulted in improvement in the economy, and a reduction in poverty and inequality due to increased social expenditures. Chavez started the leftist social movement dubbed as “The Bolivarian Revolution” and changed the Constitution.
Government revenue became dependent on oil, and the country soon fell victim to Dutch Disease. When oil prices started falling in 2010, Venezuela’s economy began suffering from another crisis.
An increase in commodity prices does not make the government and economic institutions of a country automatically serve the public’s interests. Hugo Chavez, who passed away in 2013 due to cancer, was succeeded by his vice president, Nicolás Maduro. In a presidential election shortly after the death of Chavez, Maduro barely won with 50.6 percent of the vote.
Due to increased crime, flourishing corruption, inflated prices, and a shortage of consumer goods, protests started happening throughout Venezuela in the spring of 2014.
More than 40 people were killed during the protests, and opposition leaders ended up detained. Although the opposition became the majority in parliament after the elections held in December 2015, President Maduro declared a state of economic emergency on January 16, 2016, and centralized the legislative and executive branches of the government under him.
The day after the elections, Maduro appointed his people to the judicial branch. As a result, the legislative, executive, and judicial branches of the government have been yielded by one person for the last seven months.
LESSONS FROM VENEZUELA
If resource-rich countries with weak governance experience periods of increasing commodity prices, their economic and political institutions work for the interests of a few as opposed to the public’s interests.
Venezuela has always had a high rate of corruption, and especially by the beginning of the 20th century, corruption became even more deep-seated in the government when large oil reserves were discovered. President Alfonso referred to oil as “the devil’s excrement” by the end of 1970s, since which the term has been commonly used. Venezuela ranked low on the corruption index for the last 20 years, and was ranked 158 out of 168 countries in 2015.
Democracy alone does not bring about flourishing development. There is a strong likelihood that democracy is used by political forces to acquire power and establish the dictatorship of an individual.
The focus must be kept on ensuring that all political and economic institutions serve the public equally, rather than a handful of people. In order to do so, people must all participate in public governance, decision-making, and overseeing and assessing the implementation of laws and governance.
Democracy benefits countries where civic involvement is high and people have faith and ambition. In such countries, the economy is regulated not by the government but the market itself, and everyone receives the fruits of their hard work, which brings flourishing development to the country.
If you would like to visit D.Jargalsaikhan’s website, please go to www.jargaldefacto.com.