Venezuela’s path to obsolescence

There are no friends in the free market

Venezuela’s path to obsolescence

Leer en Español: Venezuela: en camino a la obsolescencia

Before the XX century, Venezuela was a stable nation whose main exports were coffee, cattle, sugar, tobacco, leather, and rubber. Its fate changed drastically after 1914 when the Zumaque-1 oil field was discovered, which immediately received attention from the Royal Dutch Shell and other oil companies who invested aggressively in the country after more hotspots were discovered. Venezuela gradually left its agricultural sectors to dedicate its efforts almost exclusively to the extraction of crude which remains the country’s main export and its sole source of government revenue.

Hugo Chavez’s administration of the oil reserves only seemed to fuel socialism. From 1999 to 2011, child mortality was at a record low and poverty was reduced by 50% according to the CIA. The socialist imprint being left behind in the South American country’s society would only able to last forever if the oil prices remained unaltered for years to come.

The year 2015 shook Venezuelan economic model. The government now led by Nicolás Maduro faced the obligation to keep its main stakeholders under stable conditions while the falling price of the crude weakens his relations with society; day after day revenues fall shorter and additional sources of money are needed to maintain the socialist government in place.

Who is aiding the Venezuelan economy?

Ever since Hugo Chavez was in power, the Venezuela’s administration speech has always stated that the United States of America was their main foe. Due to this, Russia grew closer to the South American nation, which later made great efforts to gain a share of Venezuela’s oil reserves, the largest in the world.

The Russian agriculture minister Alexander Tkachov made a breakthrough decision in September 2017 as the former Soviet nation decided to send $52 million dollars worth of wheat in order to provide a lifeline to the South American nation. 600,000 tons of wheat will enter the Latin American society. Far from a humanitarian sign, the deal shows an advancement in the bilateral relations which are starting to reach the public surface.

Reuters informs that Venezuela’s state oil company PDVESA has been negotiating with its Russian counterpart, Rosneft; the participation of the European country is being welcomed into 9 of the South American nation’s largest petroleum projects. Some experts state that the deal is leveraged under alleged loans given by Russian bankers who have helped Maduro’s government not default.

The result of a flawed economic model and the lack of interest of shifting towards a more sustainable path has led the once fifth largest economy in the world to become one of the poorest. Hugo Chavez’ quest for economic and political freedom is slowly turning into a self-inflicted dependence on an unpredictable government.

 

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

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