Venezuela’s Economy Tanking, Little Chance of Recovery

Venezuela has shown consistently poor economic performance for many years. The communist regime, established by Hugo Chavez (who passed away in 2013) is largely to blame, thanks to its unusual politics and economic strategies. For many years, Chavez attempted to define policy primarily in terms of opposition to the United States, which he termed “Yankee Imperialists.” This led to ongoing economic sanctions over civil rights abuses, but that was only the beginning of the problem.

Venezuela has shown consistently poor economic performance for many years. The communist regime, established by Hugo Chavez (who passed away in 2013) is largely to blame, thanks to its unusual politics and economic strategies. For many years, Chavez attempted to define policy primarily in terms of opposition to the United States, which he termed “Yankee Imperialists.” This led to ongoing economic sanctions over civil rights abuses, but that was only the beginning of the problem.

As reported by the Huffington Post, even though Chavez is no longer running the show, the Venezuelan economy has failed to improve. In part, that has been due to the decline in oil prices, Venezuela’s chief export commodity. It is also due to some unusual economic policies, many of them hold outs from the time of Chavez, that allow for things like a bizarre multi-valuation currency system. This, in turn, leads to shortages in food and consumer goods.

Oil has squeezed out most other production in Venezuela, so the country is heavily dependent on imported products. This multi-valuation system is supposed to create favorable trading conditions so that the necessities, like food and clothes, can enter the country at an affordable rate, while other “luxury items” cost more. At the same time, the system works to keep oil prices as high as possible to maximize profits. The system is unique, but also largely ineffective.

The results of these bizarre policies, increased sanctions, and the decline of oil has some economists predicting the occurrence of hyperinflation by the end of the year. In fact, some models put the rate of inflation in Venezuela at 200 percent or more. As a result, officials in nations around the world have begun asking whether Venezuela will be able to make its sovereign debt payments in the coming years.

This bleak economic performance has led to an approval rating by the people of Venezuela of just 20 percent. Still, that may not be enough to shake up this government, given its strong military control and willingness to tamper with elections. Outside observers note that opposition parties have been unable to gain a foothold in government due to election tampering.

Thus, the future looks dark for this Latin American country. With no apparent means of arresting its momentum along its present course, no mechanism for bailout and an absolute resistance to change coming down from the leadership, Venezuela appears doomed to slide over the edge into default, hyperinflation, and economic disaster within the next few years.