The devastating impact of the Venezuelan financial crisis
For years, the Venezuelan financial crisis has been a staple in our headlines. Thousands of people have protested the government which has resulted in 120 deaths, over 5,000 arrests, and countless reports of torture.
This begs the question: how did things go so drastically wrong? Furthermore, what’s the wider impact on the world?
Here’s the situation
The economic crisis is complex. However, in the simplest of terms, it occurred shortly after Nicolás Maduro became president and the price of oil drastically dropped. This was a massive economic blow to Venezuela because oil accounts for as much as 98% of their export earnings.
The government responded by basically printing more money which only devalued their currency and worsened the economic situation. Hyperinflation soon took its course which made buying everyday goods a struggle for the Venezuelan people. This prompted the government to implement price controls on food staples like flour and cooking oil. When you couple this with the collapse in foreign imports, you end up with a food shortage, which is precisely what Venezuela is suffering from.
Obviously, this the 30,000-foot overview of Venezuela’s problems, and there are tons of other factors that have contributed towards the mess, but for our purposes here, let’s move on to who exactly the crisis hurts and how.
The impact on Venezuelan people
The Venezuelan people are obviously paying the steepest price of their country’s rapid economic decline. These 2017 stats say it all:
- As many as 64% of Venezuelans lost weight due to food shortages and poverty
- The average weight loss was 25 pounds
- 82% live in desperate poverty
The cost of basic groceries increases month on month, and the food shortages frequently force Venezuelans to wait hours to buy their food. Consequently, reports of Venezuelans searching for food among the garbage is becoming increasingly common.
The desperation facing the Venezuelan people has undoubtedly taken its toll on the rule of law. Take the capital, Caracas, for example; this city has an approximate population of three million, and in 2017 it suffered a whopping 387 murders. That’s a rate of 111.19 homicides per 100,000 people. Let that sink in for a sec.
Unsurprisingly, healthcare and hospital conditions have also rapidly declined due to a lack of funding. This is reflected in the abysmal infant mortality rate which is now a shocking 30%.
Electricity and water rationing is also a feature of the decline, and the country has experienced power outages lasting as long as 13 days.
Lastly, many public schools have been forced to shut down due to governments cuts. It’s expected that an entire generation will suffer abnormally high levels of illiteracy.
The effect on non-Venezuelans
This biggest impact this crisis has had on non-Venezuelans is the fact it has created thousands of fleeing refugees seeking asylum in nearby countries. Since 1999, roughly two million Venezuelans have emigrated from the failing state. For the first time, Venezuelans comprise the highest number of asylum seekers in the United States.
In addition to the financial and logistical burden that comes with coping with an influx of refugees, there are concerns that Venezuelans may become victims of their home country’s anti-American sentiments. General feelings of mistrust over time could be detrimental to the relationship between the two countries.
As things stand, the relationship is pretty fragile. Back in 2006, Venezuela’s then-president Hugo Chávez compared President George W. Bush to the devil.
More recently, Chávez and now Maduro sought to align with Russia and Iran, both of which have been critical of the U.S. government. Hostilities have only worsened when Trump enforced new sanctions on Venezuela back in 2017. These restrict the government’s ability to either give or restructure debt.
While the world continues to watch the fall of Venezuela unfold, the country’s people, unfortunately, seem to have little to hope for in the coming years.