Population 32.7 million. Land area
353,841 square miles. Nominal GDP $96.328 billion. Nominal Per Capita GDP
$1.00. Unemployment 44.3%. Poverty 90%.
Inflation 10,000,000%. Government debt $150 billion. Debt to GDP 273%.
Venezuela oil production dropped
from 1.85 million bpd in 2017 to 0.80 million bpd in 2019. Active oil rigs
dropped from 80 in 2011 to 20 in 2019.
Chavez introduced a Land Law in 2001 permitting the
expropriation of agricultural land. Seized estates were turned over to
co-operatives and regime supporters. The new farmers lacked the technical
know-how, management skills and capital necessary to maintain production.
Moreover, as state retained title to the land, the regime would repossess it if
the new farmers did not continue their political support. By 2010, the
government had seized 20% of the agricultural land in Venezuela. The remaining
private farmers do not invest in their farms for fear of expropriation.
These expropriations destroyed
Venezuela’s agricultural capacity. According to the National Confederacy of Agriculture and
Livestock Associations,
agricultural productivity dropped sharply from 2007 to 2011. Maize production
fell by 40.3%; rice by 38.9%; sugar by 33.6%; coffee by 46.5%; potatoes by
63.5%; tomatoes by 31.0%; and onions by 24.6%. Livestock farming was also devastated. Beef and veal production have dropped by 75% between 1998
and 2014.
Nationalization also affected
Venezuela’s food processors. The government expropriated 18 of the 27 plants
producing the staple corn flour. All are now making a loss and are in various
stages of collapse. One of the most egregious nationalization cases is the Cariaco
Sugar Plant: within two years of being nationalized it was only
producing at 11% of its
previous production levels. The Ezequiel Zamora Sugar Plant, started in 2002 as
a new state enterprise by Chavez in his home state, has cost a huge amount but is largely in ruins and barely producing any sugar. Workers in nationalized food-processing
firms who protest the situation are treated with no mercy. In February this
year, the regime arrested several trade union leaders at the Lacteos Los Andes “Hugo Chavez”
plant in Cabudare who protested corrupt and incompetent management.
Chavez also nationalized food retailers,
such as the large supermarket chains Exito
and Cada in 2010. These were turned into a state-owned
operation called Bicentennial
Supplies that by 2017
had largely collapsed, with 60% of its shops shut and 6,000 of its 9,000 workers
dismissed.
The cost of goods and the value of currency - What we pay for
goods and services reflects not only their cost of production but also of the
value of the currency we buy them in. If that currency loses value against the
currency the goods are sold in, the price of those goods goes up.
By 2014
the value of Venezuela’s currency, the Bolívar, and the prosperity of the
Venezuelan economy, was highly dependent on oil exports. More than 90% of the
country’s export earnings came from oil.
These
export earnings had enabled the government headed by Hugo Chavez from 1999 to
2013 to pay for social programs intended to combat poverty and inequality. From
subsidies for those on low incomes to health services, the government’s spending
obligations were high.
Then the
global price of oil dropped. Foreign demand for the Bolívar to buy Venezuelan
oil crashed. As the currency’s value fell, the cost of imported goods rose. The
Venezuelan economy went into crisis.
The
solution of Venezuela’s new president Nicolas Maduro, who succeeded Chavez in
March 2013, was to print more money. That might seem silly, but it can keep the
economy moving while it gets over a hump caused by a short-term price shock.
The Venezuelan crisis, however, just got worse as the oil price
continued to fall, compounded by other factors that reduced Venezuelan oil
output. International investors began looking elsewhere, driving the value of
the Bolívar even lower.
In these conditions, printing more money simply
made the problem worse. It added to the supply of currency, pushing the value
down even further. As prices rose, the government printed more money to pay its
bills. This cycle is what causes hyperinflation.
Norb Leahy, Dunwoody
GA Tea Party Leader
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