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Economic Crisis Continues in Venezuela

Via the BBC:  Venezuela economy: Nicolas Maduro declares emergency

The Venezuelan government has announced a 60-day economic emergency to deal with the country’s worsening crisis.

President Nicolas Maduro will govern by decree for two months.

The edict includes tax increases and puts emergency measures in place to pay for welfare services and food imports.

The government’s move came as official figures released by the central bank showed that the Venezuelan economy had contracted by 4.5% in the first nine months of 2015.

[…]

Venezuela has the world’s biggest known oil reserves but the huge fall in oil prices in the past 18 months has slashed its revenues by 60%.

[…]

Annual inflation up to September 2014 is said by the Venezuelan Central Bank to have reached 141%.

[…]

Oil exports account for as much as 95% of Venezuela’s revenue.

The most striking part of this entire situation is how man-made it is.  Yes, the fall of oil prices was going to have a serious effect on an economy so dependent on oil revenues, but the current state of the economy can very much by blamed on poor policy decisions and gross mismanagement by first Hugo Chávez and then by Nicolás Maduro.

Given the outcomes of the recent legislative elections (a big opposition win) and the ongoing serious problems in the country, we appear to be heading for a serious conflict.  The current situation does not seem sustainable.

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About Steven L. Taylor
Steven L. Taylor is Professor of Political Science and Dean of the College of Arts and Sciences at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Ron Beasley says:

    The really scary thing is something similar is going on in Saudi Arabia because of low oil prices. I would bet that the Saudi royal family has their fleet of private jets fully fueled so they can escape to their bolt holes – condos in NYC and estates in the Hamptons.

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  2. Ron Beasley says:

    I might add the US is not immune. Shale oil fraking is very leveraged and most of the smaller operators and many of the mid sized ones are no longer able to service their debt. Many of them are going to go bankrupt leaving North Dakota with a lot of unemployed people and a mess to clean up. The major oil companies have for the most part avoided shale oil fraking operations.

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  3. JohnMcC says:

    Having done a lot of reading over the last few years in books that enclosed the Great Depression in their time frames, I feel a slight lifting of the hair on the back of my neck when deflation of commodities starts having rolling effects on markets everywhere around the world.

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  4. Meritorious says:

    For those who think a defeated party can’t or won’t cling to power once the voters take it away, I give you Venezuela and ask you to be watching after the White House is handed to Republicans in November.

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  5. RGardner says:

    @Ron Beasley:

    I find your Saudi argument to be too USA-centric. For every property the ibn Sauds own in the USA, they have several in Europe, and one in London, both way closer to their home. The Riviera is a favorite, as well as Italy.. Due to favorable property tax rules for foreigners, they also have sizable Canadian holdings (not only the Chinese are investing in Vancouver BC). South and Central America? No idea, but I’m sure they have many bolt-holes prepared.

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  6. Guarneri says:

    Mix one part revenue concentration, one part contractionary tax policy, one part wild-assed money growth. Add a dollup of corruption. And you get……

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  7. @Guarneri: As well as price controls, haphazard nationalizations, and other capricious economic policies.

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  8. grumpy realist says:

    @Steven L. Taylor: Plus with all the political and economic craziness Venezuela has been losing its educated middle class, who have been vamoosing to more stable locations. This has gone on for YEARS. One of my classmates in grad school was from Venezuela and was completely determined to never return.

    (They’ve also got a totally screwed up IP system at present.)

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