VENEZUELA: DESCENT OF AN OIL RICH STATE INTO ABYSS

Abstract

This paper aims to outline and examine the major political and economic drivers which have contributed to the current crisis in Venezuela. It focuses mainly on the policies and triggers that led to the present scary condition in the country. Venezuela, which has more oil reserves than any other country in the world, was at one time the richest country in Latin America. Many consider Venezuela as a classic example of “Dutch Disease” a term used to describe an economic phenomenon when growth of natural resources sector in the country attracts considerable attention and leads to decline in other sectors like manufacturing, agriculture etc. While this notion is not wrong, the facts in the study point to something more serious. It brings out that more than the 'Dutch disease' it was the country's political dispensation and grossly misplaced economic policies that have brought this misery to the nation. Venezuela is a grim reminder to the world of what can be expected when a government goes all out on populist measures and takes shelter in leftist ideology. The sheer waste of Venezuela's resources and foreign exchange and its transition to a failed state is a sad story of modern political and economic history. The fortunes of Venezuelan economy are linked to recovery in oil sector, but the Oil industry itself has been hurt by Government polices and needs massive investments which are nowhere in sight as the country is already reeling under debt burden. A broader political and economic restructuring needed to break this impasse appears nowhere in sight.