Venezuela’s Economic Crisis

The South American country of Venezuela is currently facing the most serious economic crisis of any Latin American country. President Nicolas Maduro, the successor to Hugo Chavez, recently declared a state of emergency in the country. According to Forbes, inflation will likely top 400% this year, and many parts of the the country are already seeing a lack of electricity access. Matt O’Brien of the Washington Post recently stated, “[Venezuela] has the world’s worst economic growth, worst inflation and ninth-worst unemployment rate right now. It also has the second-worst murder rate, and an infant mortality rate at public hospitals that’s gotten 100 times worse itself the past four years.”

As if this weren’t enough, major corporations in Venezuela are having to shut down, putting tens, or even hundreds, of thousands of Venezuelans out of work. The country’s largest beer company Alimentos Polar—responsible for 80% of the country’s beer supply—recently had to shut down all of its beer plants after months of struggling to buy malted barley for production. As a result, the country has added whiskey to its list of rationed goods, which already includes basic grocery items like milk, flour, vegetable oil, toilet paper, and laundry detergent. Coca-Cola has been struggling there as well, as the company cannot buy sugar to keep producing its soda.

Currency-wise, the Venezuelan bolívar has lost 99% of its value over the past four and a half years. The currency there is so weak that it would make more economic sense to use paper currency as a dinner napkin than it would to actually purchase napkins—at least that’s what one viral picture of a man holding a greasy empanada with a $2 Venezuelan bolivar bill would indicate.

Economic instability in the country has led to water and electricity rationing; riots over food shortages; rising levels of violent crime; and a decline in the quality of hospital care, leading to a spike in the number of preventable deaths. Even more, Venezuela is seeing more and more anti-government protests, which could ultimately end in the removal of President Maduro from office by means of a recall referendum (or by violence if the referendum continues to be blocked by Maduro’s control of the judiciary).

According to Latin America analyst Grant Sunderland, who was recently interview for Forbes, any solution to the current economic situation will require aid from either a multilateral institution or a foreign partner. Major capital investments could help restore the country’s industrial production capabilities, but major reform will be required to attract investors.