The oil
price collapse in 2015 took Venezuela from bad to worse from double to triple
digit inflation. In February 1 US dollar was 82 bolivars, now 1 US dollar is 676
bolivars. Caesar Chavez left a corrupt bankrupt socialist government with not
much except oil and now oil is below production costs. Businesses left and
grocery shelves are empty, but gasoline is still one penny a gallon. – Norb
Leahy See February article:
Five reasons
why Venezuela may be the world's worst economy, By
Patrick Gillespie, 2/20/15 @CNNMoney Venezuela might be the world's worst economy.
With 68% inflation, the highest
across the globe, Venezuela comes in just ahead of war-torn Sudan and
heavily-sanctioned Iran.
U.S. companies like Ford (F) and Pepsi (PEP) are quickly losing profits there due to inflation. U.S.
airlines have drastically reduced their flights to the capital, Caracas. Some
European airlines have already stopped flying there altogether.
Related:
Venezuela is causing havoc on U.S. companies
Here are five reasons why Venezuela's economy is spiraling down.
Political instability: The Venezuelan government, led by Nicolas Maduro, who
succeeded Hugo Chavez after his death, has become increasingly authoritarian. In February his government has taken over a
supermarket chain, and
arrested the mayor of Caracas, Antonio Ledezma. Maduro alleges that Ledezma was trying to overthrow him.
Ledezma, a vocal critic of the government, joins Leopoldo López, another
incarcerated opposition leader in Venezuela. Venezuelans face long lines for
basics
A food crisis: Venezuelans wait for hours in lines outside supermarkets
to buy milk, sugar and flour. There are food shortages at grocery stores across
the country because the government can't pay to import food. Sugar,
flour and other basic imports, account for 70% of Venezuela's consumer goods,
according to the Brookings Institution. McDonalds (MCD) in Venezuela ran out of french fries in January and
offered yucca fries instead. Maduro's
government took over the supermarket chain Dia Dia two weeks ago after the
president accused the chain's owner of hoarding food to hurt the economy. The
owner, Jose Vicente Aguerrevere, denied the accusations. Related:
Venezuela lacks a lot more than McDonald's French fries
Oil: From riches to rags: Venezuela is getting crushed by low oil prices. A barrel
of oil now costs about $51 on the global market, losing about half its value
from just six months ago. That's exacerbating the economy's acute problems. Venezuela
has the largest oil reserves in the world, and once flourished on its treasure
chest of crude. Now Maduro appears to be hitting the panic button. He recently
visited China, Russia and several OPEC nations, asking for funds to shore up
his government. Maduro said on Venezuela's state-owned television that China
has offered aid. But in return, Venezuela is giving China free oil. Experts say
that Venezuela isn't selling enough of its oil for profit, given these
agreements. Plus, Venezuelans pay next to nothing for gas. One U.S.
penny now pays for about five gallons of gas in Venezuela.
Dead money: Venezuela's currency is losing value faster than any other
in the world. Most Venezuelans now exchange money on the unofficial black
market. One U.S. dollar equaled about 88 bolivars a year ago. Today, one dollar
is worth 190 bolivars, according to dolartoday.com, a website that tracks the
black market exchange rate.
The process of simply exchanging
money is very confusing. Venezuela has four exchange rates: two that the
government uses to pay for its imports, the unofficial (black market) rate and
a new one Maduro introduced Thursday.
The latest exchange rate allows
Venezuelans to legally buy U.S. dollar for the first time in over a decade. But
there's a limit: Venezuelans can only buy $2,000 dollars a month.
Default: The country owes $11 billion in debt payment this year. Some
experts see Venezuela defaulting in October,
when the country must pay $5 billion.
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