In 1998, with over 50% of the Venezuelan population below the poverty line and the annual inflation exceeding 30%, Hugo Chavez was elected as president. He conducted a social welfare program, including efforts to strengthen the infrastructure within the country, followed economic guidelines of the International Monetary Fund, and encouraged foreign investment. Hyperinflation in Venezuela is the result of the Bolivarian Missions and socialist stances taken by Chavez, as he implemented price control policies, and caused an increase in government spending due to the drop in tax income being used to subsidise the poor. In 2003, foreign currency controls were loosened, meaning that goods and services that were now being sold in dollars were largely unaffordable to the poor.
Moreover, a large percentage of Venezuela’s economy is entirely dependent on its oil sector, even though Venezuela has suffered a decline in oil production. One reason for this is the removal of expertise required to manage and develop the country’s oil supplies. In 2003, employees of PDVSA, a Venezuelan state-owned oil and natural gas company, were fired, and international expertise was excluded in 2007. The second reason for this is that Chavez’s policies did not take into account capital expenditures required to maintain the country’s oil development. Consequently, oil prices increased, and the oil production industry was not reinvested into, as new social programs took a large portion of its income.
Aside from the economic and social consequences of this crisis, there has also been a drastic political impact. Currently, the country’s leadership is in question due to the uprising political position of Nicholas Maduro’s presidency, partly due to an increase of both poverty and unemployment, a result of the socialist nature of Venezuelan politics. Social inequality has been steadily increasing and many have turned to crime and other drastic measures to support their families.
This crisis has not just affected Venezuela. About 5.4 million refugees, asylum seekers and migrants have left Venezuela in the search of better living conditions, and many of these have arrived in Brazil’s coastal areas. Because of their lower wages, they have replaced local Brazilians, thereby increasing local unemployment. This increase in migration has also disrupted Colombian socio-economic stability and increased illegal activities in Peru, affecting Peru’s economy and government expenditure, although arguably this increase in migration is beneficial to Peru’s economy since they provide cheap labour.
The USA’s response has included imposing a range of sanctions on Venezuela, which could have a harmful humanitarian impact, and providing $1.4 billion of humanitarian aid, in an effort to coordinate the regional response to the Venezuelan migration crisis. It has also supported a variety of humanitarian programs for Venezuelans, including food assistance.
Negotiations have been taking place since 2014, but these are largely unsuccessful due to mutual suspicion. For now, a coalition of Columbia, Brazil, the USA and the Netherlands, have settled with providing goods. One possible solution to this crisis could be military operations. However, with Russian troops present in Venezuela, this could increase geopolitical tensions. The Plan Pais was created to help the most vulnerable populations and to incentivise foreign investment, particularly in oil, but is challenged by the absence of basic law, order, and political stability. This absence of law can be countered by the UN Charter, which enables the Venezuelan government to request a security force.
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