The Rise and Fall of Venezuela

on February 23 2019 a standoff at the Venezuelan border occurred between the military and the local indigenous tribe two people were killed and 17 were injured and while it might seem like a small Skirmish it was emblematic of the tragic fall of this once thriving country that's because it was an attempt by one man Juan Guido to get humanitarian Aid delivered into Venezuela against the wishes

of another man Nicholas Maduro this was notable because at that point both men were claiming to be the leader of the country it was a symbol of the chaos and tragedy that Venezuela has gone through economically and politically in the last 10 years and in that time seven million Venezuelan citizens have fled the country let's get into the rise and fall of Venezuela Venezuela's Journey can

be summed up in two categories oil and politics and not surprisingly these go hand in hand a century ago Venezuela went from being a poor agricultural country to being the second biggest exporter of petroleum on the planet and as such it has hitched its wagon to oil in times of high oil prices and healthy exports Venezuela has had serious cash flow and prosperity and when the

as we trace the roots of Venezuela's tumultuous history in theory having an economy that thrives on a precious natural resource and being a place that provides that resource should be a great thing basic supply and demand economics tells us that if Venezuela has a ton of oil and the world needs oil Venezuela should be able to benefit in a huge way and this has been partially

true over the last 100 years since the discovery of oil there but in the years since the country has failed to develop any other economies that can provide stability and success when say the price of oil goes way down as such Venezuela is what's known as a petrostate specifically it refers to a country where not only is income for the government super reliant on oil and

gas trade but also where there is a lot of political corruption and an elite minority generally have most of the political and economic power sadly this is the case for Venezuela and while it was able to find success in this system in certain ways it's led to utter ruin in more recent times 1922 saw the birth of Venezuela's position as an oil giant a well and

Maracaibo Basin in the west of the country started to produce more than a hundred thousand barrels every day Not only was that a lot of oil on its own but it hinted at the potential that there was a ton of oil hidden below the country the dictator ruling Venezuela at the time General Juan Vicente Gomez quickly acted on this find he decided to allow foreign oil

companies to set up shop in Venezuela and they began Excavating as much as possible from all over the country within six years it was the second biggest exporter of petroleum in the world in 1943 he decided to generate even better profits for the country by enacting a law stating any foreign-owned oil company had to give up half of their profits to Venezuela much of this money

was used to bolster the military though some was used elsewhere however because of the nature of Venezuela in the pre-oil era it wasn't set up to be able to effectively use this influx of money in productive ways for its infrastructure and citizens before the 1920s the agriculture sector in the country was not particularly well positioned for growth nor was the economy as a whole set up

on a national level land ownership was basically in the hands of several uber-rich families who quickly got even richer with the oil boom yet there was so much money coming in it allowed the national economy to grow somewhat in particular it allowed many citizens to leave the poverty of the deep rural areas and start new lives in burgeoning cities like Caracas as I mentioned earlier in

Petra States politics and government tend to be fully tied to the oil economy and starting in the late 1950s Venezuela experienced this phenomenon over the next 60 years oddly enough it seemed at first that the country was making progress they booted out an awful dictator Marcos Perez Jimenez in 1958 electing romulo Bettencourt president and while this established the beginnings of a democratic movement it also came

with concessions by the major political parties that oil revenues would remain with the government then things got even better for Venezuela in 1973 when the organization of the petroleum exporting countries or OPEC began an embargo against the United States and other countries resulting in skyrocketing oil prices Venezuela suddenly saw a cash flow of billions and while the per capita GDP did steadily rise in the 70s

the government used the opportunity to seize even more control of the oil industry president Carlos Andres Perez fully nationalized the industry creating the pdvsa the state-run oil entity it was now clear the government was in control of all the oil trade and since the country was basically funded by that trade the government had total control not surprisingly that meant when things got worse and the citizens

threatened unrest the government used its might to squash dissent for example during the 1980s oil prices steadily dropped and the Venezuelan economy suffered badly so much so president Perez was obligated to take a 4.6 billion dollar bailout from the IMF but in return for the money he had to implement some pretty severe domestic policies of austerity this meant prices soared for Venezuelan citizens for everyday Goods

protests began happening leading to violence in the streets Perez instituted a curfew as well as a removal of basic civil rights it had become abundantly clear that the Venezuelan government was willing to do whatever it wanted to its citizens in the name of their Reliance on the oil industry this was perhaps no more evident than in the rise to power of Hugo Chavez he joined in

on the political riots after the austerity measures from the IMF bailout even attempting a coup in 1992 while the coup failed it still garnered Chavez a lot of Fame and credibility throughout the country which he ultimately built on to win the 1998 presidential election he ran on a platform of socialism promising to use the oil wealth that the government was hoarding and spended on problems plaguing

the country like poverty and wealth inequality and to an extent he did in the early years of his rule he was able to reduce poverty by around 20 percent while providing more Social Services for the people but the origins of the recent economic decline in Venezuela were in the early days of the Chavez regime in the early 2000s Chavez took strong action against against workers of

the pdvsa during a work strike he fired almost 20 000 of them he then replaced them with workers who were loyal to his regime but who lacked the technical expertise to effectively run the oil industry this is in part due to the incredibly complex nature of the oil drilling and refining process in Venezuela because the crude oil there is considered extra heavy this was a big

mistake on his part his next big mistake came in 2007 as oil prices were going up he tried to renegotiate the terms of the drilling contracts held by Foreign companies so that the pdvsa would basically have control over them companies like Conoco Phillips and Exxon Mobil said no and were promptly stripped of their Assets in the country the larger problem however was that the Chavez regime

assumed that they'd be able to handle the oil industry internally but they didn't invest their profits back into the industry nor did they have the workers with the experience to take over for some of the foreign companies so production began a steady decline and during the rest of his time in office the country's foreign debt doubled and of course since this is a Petro State Chavez

used his time in office to consolidate political power he did away with term limits for elected officials he closed independent press operations and limited what the remaining press could report and he essentially became the overseer of the Supreme Court it had effectively turned into a dictatorship then in 2013 Chavez died but the damage was essentially done the economy was in shambles especially as oil prices were

heading downward Nicholas Maduro a Chavez Protege was easily able to take over and he continued in the path of the late dictator since coming to power Maduro and his government have enacted limitations to internet access jailed and prosecuted their opponents and generally restricted any semblance of democracy these Trends are what led to his election of 2018 being considered not Legit by most of the Free World

as such 60 countries including the United States chose not to recognize Maduro as the leader of Venezuela instead they chose to recognize Juan Guido the head of the National Assembly as the leader economically things have gone from bad to worse in the Maduro slash Guido era they have a continued Reliance on oil to fund a huge portion of their governmental budget and their production numbers are

still falling at an alarming rate the GDP of the country took a nosedive between 2014 and 2021 shrinking by nearly three quarters and Venezuela has suffered from extreme inflation as well in 2022 it was sitting at 234 percent when you add in the effects of the covid-19 pandemic and sanctions imposed by the U.S and other countries the results have been nothing short of disastrous as of

2023 roughly half of the 28 million Venezuelan residents are living in a state of so if we've learned anything today it's to diversify your assets try not to have your Investments or if you're a country your Economy based on one thing because then you're pretty reliant on that thing to have any Prosperity have any thoughts about the rise and fall of Venezuela pop them in the

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