Forget for a moment how the ongoing economic collapse in Venezuela was triggered. Instead, realize that millions there live in increasing desperate economic conditions. The country has two big problems – the price of oil and a drought – and had no backup plan for when the price of oil fell and drought cuts electricity production. Hydropower accounts for 65% of their power.
Venezuela was doing great when the price of oil was over $100 a barrel. Unfortunately, they pegged their entire economy to that. When the price of oil tumbled, their economy started having stress fractures. Political unrest led to the government nationalizing, firing, or kicking out most everyone who knew how to produce oil. So, not only is the price of oil way down, oil rigs and infrastructure are in such bad shape now that oil production catastrophically down.
Inflation is so high street vendors are making woven goods from their worthless currency. One city is issuing its own currency. And the country is issuing a cryptocurrency, because of course that will solve everything. Or go into someone’s pocket.
Search “Venezuela” on Twitter and you will find an endless and vitriolic stream of “Hands Off Venezuela” vs. “See what communism does,” with no solutions being suggested becuase, really, no one has a clue what to do.
This will not end well for Venezuela.
The investment bank predicts that Venezuela’s oil production will average 1.43 million barrels per day (mb/d) in 2018, a shocking decline of roughly 700,000 bpd from the 2017 average. In the second half of 2018, output averages just 1.35 mb/d.
“Production is collapsing in a way rarely seen in the absence of a war,” Francisco Monaldi, fellow in Latin American Energy at the Baker Institute for Public Policy at Rice University, wrote in a new report published by the Atlantic Council. “The country is also suffering the worst economic depression ever recorded in Latin America.” GDP shrank by 16.5 percent in 2016 and 12 percent in 2017. The IMF predicts the economy will contract by another 15 percent this year
“Venezuela imposed electricity rationing this week in six western states, as the crisis-hit country’s creaky power grid suffered from a drought that has reduced water levels in key reservoirs needed to run hydroelectric power generator.”