Venezuela continues to feel the negative effects of low oil prices around the World. During the term of Hugh Chavez, oil companies were turned into state owned entities. During this time, Venezuela flourished with the then high prices of oil. The country also spent most of this money leaving little savings. After the death of Chavez, Nicolas Maduro took over and has his hands full with a horrific economic situation. This economic situation has been defined by superinflation, scarcity and uncertainty. Oil currently makes up 97% of Venezuela's hard currency earnings, so it is no surprise the country is suffering the way it is.
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.
Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html
4 comments:
The plunging oil prices as mentioned is posing economic problems for oil exporting countries like Venezuela, Russia, OPEC countries.If oil prices don't recover Russia's economy could shrink by 0.7% in 2015 according to the World Bank. Despite such negative economic effects, none of these countries have confirmed to cut oil production. It will be interesting to see what happens if oil prices don't recover as there will be major winners and losers.
Even if oil prices do rise in the future, they will soon again decrease as they are now. So i think Venezuela should diversify their portfolio and find a different industry they can profit in.
It seems that Venezuela needs to find another way for them to grow and get themselves out of this rough time. I think it's everyone's hope that for the next election, Maduro is overturned and someone is put in office who has a long term plan to fix their oil problems. Although, I'm not exactly sure how they could fix this...
Given the increasing oppression the opposition and the media are facing, I doubt the political setting in Venezuela will change in the near future.
Maduro has repeatedly accused the US of flooding the market in order to drive oil prices down and thus induce economic shrinkage. Personally, I believe his traditional leftist view will most likely maintain him pursuing social programs (in order to keep the support of the poorest) while expecting oil prices to increase again.
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