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Social, Trade & Political Crisis In Venezuela

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INTRODUCTION

The Bolivarian Republic of Venezuela, it is a country on the northern coast of south America. Venezuela is a country which has extremely high biodiversity and is ranked seventh in the world’s list of nations with the greatest number of spices and also has rich natural resources like oil, gold, diamonds and other minerals. Despite its rich land and resource, it is a country which is dishonoured for its unrestrained economic history and corruption. The country is now facing many crises mainly socio-economically. Despite the economic crisis, the country is facing many other crises in the form of social, trade and political crisis.

The Venezuelans are going on the roads of Venezuela demanding for basic obligations. Most of the people assumed that the crisis which was taking place in the country was due to the failure of the Venezuelan Government. It is in middle of an unprecedented economic crisis and the people of the country are trying to cope up with the severe debt and, chronic food and medicinal shortage. With an inflation rate of 400 percent and an unpredictable exchange rate, this is considered as one of their worst crises ever since their independence as a separate country in the year 1830.

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BACKGROUND OF THE CIRSIS

In 1998 Hugo Chavez, who was a former military officer who had honorable reputation, had become the president of the country, Venezuela. Winning through populist campaign, when Chavez was elected as the president, he made a promise to eradicate poverty and corruption in the country. Chavez used Venezuela’s quickly growing oil wealth in the setting up of social programs known as the Misiones, with the significant aim of the programme was eradicating poverty and reducing the inequality. The president has confiscated many acres of land and he has municipalized many private businesses and foreign owned assets, including oil projects which were ran by private institutions like the ExxonMobil and ConocoPhillips.

President Chavez was inspired by Simon Bolivar, who led the formation of ALBA (which is an inter-governmental organization based on the idea of social, political and economic integration of countries of Latin America and Caribbean), and launched the Petrocaribe alliance, in which the country has allowed the exportation of petroleum at less rates to the 18th Central American and Caribbean states of the world. As Chavez strived to change the nation with what he had called the 21st century socialism, but, his populist polices have started to take a profound turn, he nationalized industries and enlarged state bureaucracy at larger national expenses all were funded by high oil prices and unchecked scrounging. A lot of the Venezuelan citizens wanted intervention in the fixed disparity between the rich and the poor of the country.

Chavez’s main and most important aim was to remove poverty and corruption from the country and, there were many problems and challenges that he faced as a president. He helped the most defenseless of his country in ways that a predatory capitalist’s system which could never and ever do. The president was successful in removing the poverty and almost 60 percent of the unemployment was shown under his rule and even the infant mortality rates were significantly lowered.By the time of the death of Chavez which was in 2013, he handed over the reins of power to his hand-picked, successor Nicolas Maduro, who was the vice president of the country during the presidency of Hugo Chavez. Maduro has promised to continue his former president Hugo Chavez’s policy and called him his eternal father. While entering his presidency, he faced a lot of issues with inflation and there was an immense shortage of goods.

The primary cause of the crisis in Venezuela is a result of the policies which were executed by the government, which are under the control of the present president of the country, Maduro. Few of the governmental policies were related to petroleum industry, few social works related, some regarding health, infrastructure, house, transportation, food, few international policies were about the foreign debt, foreign trade, international assistance. The president blames capitalism for speculation that is increasing the inflation and creating a lot of shortage for basic needs in the country. In 2014, Venezuela’s economy noticed a significant fall in its economy. In December of the same year, Venezuela had 93 percent of chance of its failure. When Chavez had selected Maduro as his successor he thought that he would follow his legacy and he would also eradicate poverty and improve the economy of the country but Maduro couldn’t do as he promised, i.e., to the decline in the poverty rates in the country of Venezuela.

THE CRISIS

The economic crisis in Venezuela was in many forms. The economy of the country is in freefall. According to the UN 1.6 million of the estimated population of 2.6 million Venezuelans have fled from their home country to other countries due to the persisting economic crisis in the country. Since 2014, Venezuelans economy had been rapidly declining and they are in immense need of funding for mainly medical and food shortages that are being faced by the citizens of the country. Maduro’s government had been challenged by a number of protests which are against the government and in which dozens of Venezuelans have been arrested and a significant number of them were killed. Also, the recession in 2014, played a role in stimulating the drop in global oil prices.

In 2013, the excessive borrowing from the other governments made them lose the access for international capital markets and resulting in the boost for the start of recession. Later there was great fall in the oil market which led to a much deeper and much bigger of a collapse. There was a major collapse during the year 2015 and nothing could stop the event from happening. And with imports, outputs, and tax revenues collapsing, the government decided to print money to cover the problems which led to the hyperinflation. The country has become increasingly dependent on petroleum for income and making up around 96 percent of the earning from exports and 11 percent of the country’s GDP (Gross Domestic Product). Therefore, increasing the costs would mean involving higher rates of production of oil and also, reduced cash flow for the country’s state oil company, which led to the falling of the oil production.

Thus, it has caused GDP to be hitting hard in the coming years. The crime levels have touched the sky in the recent years which were accompanied by severe shortage of food and medical supplies, this only added more to the crisis and led to an increase in death & crime rates in the country. Due to the crisis, many women have also turned as sex workers (prostitutes), illegal activities of sexual nature so that they can earn a pretty penny.1.FOOD SHORTAGE: Due to the fall in the prices and rates of oil and raging inflation, food shortage also had a major role to play within the country. The situation in the country had deteriorated so much that the Venezuelans had to form a queue outside the supermarkets waiting for the store keeper to open the store so that they can grab whatever they can from the store, in these long queues smugglers also stand so that they could also grab something from the store and smuggle the goods at the border of Venezuela i.e., almost near Columbia to make some profit.

The stores have introduced something called the finger print scanners which would try to reduce the flicking of goods from the store. However, the economists are not sure about the this because they believe that the cause of this decline was due to the price controls and mainly, the smugglers who sell the goods which they have lifted from the stores on the informal terms so that they can make a huge amount of profit from it.Many economists say that the hunger scarcity isn’t about the policy but about the inevitability of the government, the real culprit of this situation is the economies which fail to offer everyone fair and equal opportunities, and the societies which places economic efficiency over compassion. The people of Venezuela say that the shelves of many stores in the country were always filled with a lot of food items in the past but now there are hardly any food items which are kept in the shelves of any store. Despite the severe scarcity which prevails in the country, the citizens of the country are not staying hungry as, The Food and Agriculture Organization saw that the half of the citizens of the country are not getting the required amount of nutrition or required amounts of food.

According to the president, Nicolas Maduro, the shortage or the scarcity is being induced by the opposition as he claims that they form a wider part of the plan invented by the CIA (Central Intelligence Agency) to destabilize the government and trigger power cuts. The president announced a creation of state council which would inspect the private companies and that would ensure that they are not deliberately slowing production or decreasing the production. The oil rich country will also ensure to it that the country will import about 600 million Venezuelan Bolivar worth food from the neighboring countries to ensure that there is food in the stores and the queues outside the store will decrease and eventually vanish.

HYPERINFLATION AND MORALITY RATES

Venezuelan government has recognized and has established the exchange rate system for its national currency, the Bolivar. One rate was established for what the government determines to be important, one was established for the non-essential goods and the other for the people of the country. These rates overvalue the Bolivar, but the value of the currency, Bolivar, is mostly worthless due to the black markets and thus, created a condition where the citizens of Venezuela are choosing dollars over the Bolivar. The government has increased the number of Bolivar which were available in the streets, as the money which is in circulation has not been enough to pay for the basic goods that today cost a lot more than they did in the past. This has raised the fear of hyperinflation among the citizens of Venezuela as well as the government agencies. On 30th of April, the president, Maduro has announced a 34.43 percent of increase in total salary of the citizens. With this percentage of increase in the wages, it is still difficult to deal with inflation which is deteriorating day by day. Venezuela’s currency had been collapsing for years now, the strict capital controls have created food and medical supply shortages which have turned into a full-blown humanitarian crisis.

HUMANITARIAN CRISIS

In 2016 the Venezuelan Pharmaceutical Federation has observed and declared that 85 percent of basic medicines are not available or are difficult to obtain by the commoners. The hospitals lack the supplies like antibiotics, gauze, and soap. The Maduro’s government is aware of the humanitarian crisis, but has consistently refused to offer humanitarian aid from international organizations, neighbouring countries and the catholic church claiming that these organizations are attempting an imperialist intervention.

THE OIL BASED ECONOMY

Venezuela is known for its oil exporting, it is the fifth largest country in the world with a largest reserve for conservative oil in the western hemisphere. The countries oil industry can be roughly divided into four periods namely; -The initial period (1912-1943) -The control period (1943- 1974) – The booming and nationalization period (1947- 1998)- The regain control (1999-2003).The initial period was all about discovering the oil and also involved production of the oil. The second period was all about the Venezuela’s assertion of control over the oil industry. The third period was about the oil booming and nationalization of the oil industry. And the last period was about the government’s efforts to regain the control over the oil industry.

The sudden hike in the revenue of oil in Venezuela has caused a serious problem in the government’s fiscal policies, it is the new revenue which caused the illusion that the oil income would be used to industrialize the country’s infrastructure through many new projects and deals. But when the income through oil has witnessed a huge down fall at a rapid rate, it was not easy to reduce the spending of the government. Soon after the decline of the oil income and the revenue of the country, there was also a decline in the per capita income of the country as a whole and also poverty rates have also increased significantly.

The country was vulnerable to external shocks due to its heavy dependence on oil revenues. The export earnings through oil was about 95 percent and the GDP were about 25 percent. The state-run petroleum company the PDVSA (Petroleos de Venezuela S.A) has the control over the production and exporting of the oil in the country. It is one of the biggest oil companies throughout the world after Saudi, PDVSA is almost like state within a state, its function is entirely related to the nation’s wealth and prosperity. In 1980 PDVSA has gained CITGO (a US based refinery) and it is now the world’s largest refinery. GDP dropped 10 to 15 percent and the inflation had an all-time increase of a whopping 800 percent. By the end of 2017, the country had dropped its revenue by 100 billion and the country now owes an approximate of some 150 billion to foreign creditors.

In 2010 PDVSA has made a strategic plan to increase the production up to 5 million per day for 2015 and 6.5 million per day for 2020. Many economists are confused about how the strategy of PDVSA would work because Chavez’s policies wouldn’t allow private investment. The present president Nicolas Maduro said that “gastro lines should be sold at an international price so that they could stop the smuggling which is being taking place in the country’’. But by doing so the millions of workers in Venezuela would be unemployed which would again lead to a decrease in the percapita income of the country and a rise in rates of unemployment. In 2017 Maduro has appointed a military general and a loyalist, Manuel Quevedo, to the control both PDVSA and oil ministry, which would be promoting the undemocratic consolidation of power. In 2018 February, Venezuela became the first government to issue its own cryptocurrency to petro, which is technically backed by the country’s vast petroleum reserves. Maduro has said the petro will help the Venezuelan government to avoid U.S sanctions, but the economists are skeptical about its ability to alleviate the country’s economic troubles.

THE ROLE OF THE UNITED STATES

The relationship between the United States of American and the Bolivarian Republic of Venezuela has traditionally been characterized by a significant trade and investment relationship as well as co-operation in opposing the production and transit of illegal drugs. Venezuela broke off diplomatic relations with the United States in September of 2008. Under the presidentship of Barack Obama the relations were re-established in 2009. In February 2014 the Venezuelan government ordered three American diplomats to leave the country on charges of promoting violence. In 2017 trump told news channels that “the government has many options for Venezuela including a possible military option if necessary”. In July 2018 Trump met with Venezuelan’s former military officers to discuss the plans for military coup.

As stated by the international crisis group “Venezuela’s socio-economic implosion is dragging in neighbours as hundreds of thousand flee the country, epidemics spread and violent crime spills over borders”. A coalition of countries in the America formed the Lima Group to address the political situation. In 2002 George W Bush’s administration supported a brief coup against Chavez. When Chavez was returned to power, the opposition sought to destabilise the country’s state-owned oil producer, PDVSA. The move back fried, helping Chavez assert control over the petroleum sector, which was central to the social and economic objectives of his “Bolivarian” revolution. The US’s current policy cannot be attributed solely to Trump’s idiosyncrasies. At the 2018 summit of America in Peru vice president Mike Pence pushed Latin American countries to further isolate Venezuela. Under Trump’s presidentship, the US has tightened its sanctions against the country, further squeezing its economy. Trump’s administration has floated the idea of banning imports of Venezuela crude oil while refusing to sell Venezuela refined petroleum products which would exacerbate the country’s humanitarian problems.(Rubric Beigon; 21st September, 2018; How Donald trump could make Venezuela’s crisis dramatically worse).

VENEZUELA’S CRISIS IN CONTEXT WITH NEOLIBERALISM

In recent years the relationship between the neo liberals and the crisis has been discussed a lot. The current crisis has made many scholars to question the characterization of economic crisis as a deteriorating moment for orthodox practice. If we focus on the relationship between the economic crisis a neo-liberalism after 2009 in Venezuela, it faces a very severe setback by international capital over a last decade. Instead of accepting the assumptions given by the neo liberals, that the government should respond to the disinvestment by assuring opportunities for profitable businesses, the Bolivarian Republic has reoriented its economy in the route of autarky (economic independency or self-sufficient) and has implemented rigorous controls on private producers. The neo liberal’s ideology was mainly to reconstruct reification and commodity fetishism in the consciousness of the working class. In other words, the approach of neo-liberals have been targeting at presenting social relations and relations between thing i. e, money and commodities. In implementing so, neo-liberals tried to sustain the assumption that the capital is an essential part of production.

In Venezuela, neo-liberal analysts have focused on the relative variation in the prices and understand a peculiar economic necessities which comes with oil abundance. By treating money and commodities as having a relationship of their own, rather than simply the product of social labour, neo liberals attempt to deflect attention from ruling class mobilisations and obscure the possibility of socializing the means of production. For a very long time observers and the followers of the movement which is been in Venezuela ,the dynamic has become a familiar one: shortages have been created by business shutdowns and resulting spike in CPI has been used as a pretext to the dismantle the leftist reforms of the Chavez/Maduro’s government’s. To end, this inflationary surge produced by a general capital strike in 2002-2003 and was used as the justification for discrediting the nationalisation of oil rents and controls on prices and capital flight. Similarly, the disinvestment and hoarding in Venezuela’s private food industry today have produced widespread shortage in basic staples. Once again the inflation rates have increased indices has been used to justify neo-liberal interventions, including removal of price controls on food and the relaxation of restriction on capital flight.

INTERNATIONAL MONETORY FUND

The IMF (International Monitory Fund) a vocal advocate of neo liberal strictness in Venezuela, used its world economic outlook immediately after the crisis had subsided in April 2004 to argue that misfortune will be anticipated Venezuela if it was unsuccessful to implement the neo liberal prescription. Other difference of opinions where that the IMF rebounded the political position of business leaders, who had convicted the proposed reorganization of land nationalization of oil rents as a hazard to purchaser and business confidence. These are not only claiming which are the false indicators of economic decline in Venezuela, but they disclose a great deal about the ruling class’s strategy in the outcome of a failed capital strike. The IMF scientifically attempts to shield capitalist interests using an intellectual framework based on the reification of international money flows. In doing so, the framework of IMF affirms to the central role of international finance capital in Venezuela’s national manufacture.

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