CAP Diamond 2018

Lucy Gavin
Mogge
Complex pasts and uncertain futures

The roots of Venezuela’s economic crisis

Forty years ago, Venezuela was the most prosperous country in Latin America. They had

the highest growth rate and the lowest economic inequality rate. The middle class drove

expensive cars and the upper class was known for their shopping sprees in Miami. At that

moment, it seemed life could only improve. Venezuela was blessed with endless natural

resources and had the highest per capita GDP in South America.

This flourishing Venezuela, unfortunately, has become a thing of the past. Today

Venezuelans go days without food and are subject to abuse by their government. This sharp shift

has left many questioning what exactly happened to lead to this point. It was not one event,

however, that resulted in the crisis, but a collection of underlying and overt factors.

Political Unrest

Like most of Latin America, Venezuela has experienced periods of political instability

tracing all the way back to Spanish colonization. For the majority of Latin American countries,

these times of unrest occurred in the 19th and 20th centuries when they were struggling to find

their footing after gaining independence.

Simón Bolívar, who fought for independence from colonization for South America, once

stated, “Ecuador es un convento, Colombia es una universidad y Venezuela es un cuartel,” which

translates to “Ecuador is a convent, Colombia a university, and Venezuela a military barracks.”

Bolívar’s comment on Venezuela proved to be eerily accurate in the following years. The

Venezuelan military has always taken a large part in their politics. Most leaders of Venezuela

until 1899 had served in the military and represented either the Liberal or Conservative parties.
In 1899, however, the country shifted toward a military dictatorship rather than a party system.

Then, in 1945, Venezuela tried to form a democracy, but by 1948 the country had already fallen

under another restrictive dictatorship. The rapidly changing political system took its toll on

Venezuela; this left it to the military to encourage modernization and development.

Military involvement in government curbed attempts to instate democracy in Venezuela.

A stable democracy wasn’t achieved until 1958, 182 years after the US’ Declaration of

Independence. Venezuela settled into a two party system that created a “government of the

people, by the parties, for the parties,” says John Polga-Hecimovich in Origins. Their

“partyarchy” system was—on the surface—successful for some time, as evidenced by the period

of economic prosperity during the 1970s.

By the 1990s, success for the “partyarchy” had dried up. Venezuela had entered a stretch

of time of economic decline. The Revolutionary Bolivarian 200 Movement, a radical left-wing

group led by Army Lieutenant Colonel Hugo Chávez Frías, used this opportunity to take power.

In 1992, the group planned a coup but were unsuccessful. Although the attempt failed, Chávez

became a household name in the process. He ran for president on a platform of Bolivarianism.

His promises included “economic and political sovereignty, self-sufficiency, democratic

socialism, and participatory democracy,” according to Polga-Hecimovich. He planned to

eradicate public-sector corruption and poverty.

After defeating the conservative candidate, Chávez adopted “a majoritarian-style,

plebiscitary interpretation of democracy that largely ignored the views and values of his

opposition,” again according to Polga-Hecimovich. Chávez was well-known for how he treated

those who didn’t agree with him. In his speeches, he referred to political opponents as

“escuálidos,” which means feeble ones or “lackeys of imperialism.”

by packing the courts with his loyalists, further integrating the military into the government, and

suppressing independent media.

The Resource Curse

Although Venezuela has experienced severe economic hardships, the nation is one of the

countries with the most natural resources in the world. One would think that being so rich in oil

would aid development but what we find is that this wealth has the opposite effect. This is what

is known as the Resource Curse.

Oil exports have always been the determining factor of Venezuela’s economy. Unlike

Venezuela, many other single export countries diversified their economies to stabilize them. Oil

revenues account for about 95% of Venezuela’s export earnings, according to BBC News.

This abundance of one singular natural resource often leads to corruption. Since most of

the country’s wealth is from oil exports and the government is in charge of distributing the oil

and the wealth, there is ample opportunity for government officials to take advantage of the

situation.

From 2006 to 2011, during Chávez’s time in office, oil prices peaked and Venezuela

experienced another period of prosperity. But instead of using this opportunity to diversify the

economy, Chávez doubled down on oil exports.

“[Chávez] made three costly policy decisions: expropriating private enterprises,

establishing currency exchange controls, and instituting price controls on many basic necessities.

As oil prices have fallen since 2011 and the government is able to import fewer goods, the result

of these three economic decisions has been devastating,” says Polga-Hecimovich.

Today and Tomorrow

hyperinflation caused by Chávez’s policy. The price controls on goods caused companies to go

out of business because it was no longer affordable to produce them. Although the government

has not published figures since 2015, economist Steve Hanke from Johns Hopkins University

calculated inflation rose to almost 18,000% in April of this year.

The hyperinflation has resulted in severe food shortages across the country. The

government has responded to this by selling food packages to citizens at regulated prices, but

these packages only reach about a third of Venezuela’s population, according to El País. This has

had a dramatic effect on the health of Venezuelans. The New York Post reports that Venezuelans

are “losing on average 24 lbs in body weight last year.”

Different human rights groups have also reported many human rights abuses occurring in

Venezuela, ranging from police brutality to censorship.

Between April and July of 2017, the government activated what is known as the “Zamora

Plan,” which is meant to guarantee the security of the nation, in response to protest

demonstrations. The Bolivarian National Police and the Bolivarian National Guard were

deployed to the demonstrations resulting in “undue use of lethal force, including firing tear gas

directly at people’s bodies, shooting multiple munitions such as rubber bullets, beatings, and use

of firearms, all of which put protesters at risk of serious harm or death,” according to Amnesty

International’s report on Venezuela for 2017 and 2018. There have also been reports of people

being arbitrarily detained for political reasons and detainees being tortured while incarcerated.

Journalists, especially, have been subject to harm by the government. “Journalists faced

violence, obstruction, and detention by security forces while covering demonstrations held across

the country on several occasions,” according to Freedom House. It has also become common for
journalists who express dissenting opinions toward the government to be prosecuted on bogus

charges. Newspaper editor David Natera Febres, for example, was charged with “criminal

defamation” and sentenced to four years in prison for publishing an article that investigated

corruption in a state-run mining company.

Recently, Maduro announced that Venezuela intends to withdraw from the Organization

of American states (OAS). “We denounce the OAS and we’re leaving the OAS,” Maduro stated.

“When Venezuela leaves the OAS we will have a party, of the people. We will make it a holiday

for the entire country.” Doing so would release Venezuela from the authority of the Inter-

American Commission on Human Rights, making it even more difficult to protect victims of

human rights abuses there. Secretary of State Mike Pompeo also called for Venezuela to be

suspended from the OAS.

Venezuela’s future remains uncertain, but maybe one day they will regain their status as a

prospering country in Latin America.

Works Cited

Bello, Marco. “Venezuelans Going to Bed Hungry as Food Crisis Deepens.” EL PAÍS,

Síguenos En Síguenos En Twitter Síguenos En Facebook Síguenos En Twitter Síguenos

En Instagram, 23 Feb. 2018.

“How Venezuela's Crisis Developed and Worsened.” BBC News, 21 May 2018.
Polga-Hecimovich, John. “The Roots of Venezuela's Failing State | Origins: Current

Events in Historical Perspective.” Origins, June 2017.

Reuters. “Venezuelans Are Starving amid Economic Crisis, Food Shortages.” New York

Post, New York Post, 22 Feb. 2018.

“Venezuela 2017/2018.” Amnesty International.

“Venezuela.” Freedom House, 20 Oct. 2017.

“Venezuelan Editor Sentenced to 4 Years in Prison for Criminal Defamation.” Committee

to Protect Journalists, The Committee to Protect Journalists, 11 Mar. 2016.