Living inside the world’s worst economy, Venezuela

In oil-rich Venezuela, people don’t have enough to eat, infant mortality is soaring at a faster rate than in Syria, and according to the UN, some three million people have fled the country since 2015. Once Latin America’s richest nation, Venezuela and its people are suffering from the ravages of hyperinflation.

On January 23, the leader of the legislature, Juan Guaido, began a push to remove current President Nicolas Maduro by declaring himself interim president. The United States has imposed an embargo on Venezuela’s state oil company PDVSA, with sanctions aimed at transferring control of Venezuela’s oil wealth to those opposing Maduro.

So what is it like to live in one of the world’s worst economies? How did a country with the world’s biggest oil reserves end up so impoverished and bankrupt? And how will US sanctions affect the nation?

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by ”Jairo

Maduro doesn’t have that connection with the people, or charisma … he also doesn’t have the money.”]

Describing the living situation on the ground, Jairo Lugo-Ocando, director of executive education and graduate studies at Northwestern University in Qatar, explains “It (life) is very difficult at the moment. My own sister is living with a salary of $10 a month as a teacher.”

“I was there last year and I could see thousands of people crossing the border. People on a basic salary cannot buy basic food. They depend on the staples provided by the government, which do not reach the majority of the population.”

Lugo-Ocando says “there’s a dramatic situation. Hospitals have collapsed; over 22,000 doctors have left the country since 2015. Cancer mortality rate has risen because there’s no chemotherapy treatment available and the entire situation goes down to the mismanagement of the economy and political turmoil.”

Unlike former leader Hugo Chavez’s charisma and connection with the people, “Maduro doesn’t have that connection with the people, or charisma,” explains Lugo-Ocando. “He also doesn’t have the money. The price of oil has gone down from $112 a barrel just to over $60, and that represents a huge dramatic drop in the coffers of government. On top of that, the government has indebted itself.”

“Obviously, the poor people are the most affected because they cannot reach the basics, but the crisis is also affecting the middle class.”

Venezuela’s assets

The Orinoco Belt holds one of the world’s largest reserves of heavy crude oil and oil accounts for 98 percent of Venezuela’s foreign earnings. 

US sanctions on Venezuela’s oil sector are “a game changer,” according to Diego Moya-Ocampos, principle analyst at IHS Markit. “It will make it very difficult for the government of Maduro to get access to oil sale profits and this will accelerate pressure on him to step down.”

He says “the reason why Venezuela’s economy is in such a dire state is because of widespread corruption and epic mismanagement by government officials. Some of these assets have been laundered in different places, like the Carribean, in the US and in some Latin American countries.”

“At the moment, it’s difficult to precisely know the location of these assets and who, from Maduro’s top men, has been operating them. What’s clear, is the national assembly in Venezuela, which is controlled by the opposition, and is the only legitimate democratically elected institution in the country, has legislated to establish the necessary mechanism so that these assets can be frozen abroad and be channelled to the administration of Juan Guaido … this is the first step in trying to get control of these assets.”

But oil is not the only resource in Venezuela. The country claims to have the world’s fourth-largest gold mine. There were reports this week that President Maduro is getting ready to ship 20 tonnes of gold out of the country. The bank of England has blocked Maduro’s officials from withdrawing $1.2bn worth of gold being stored in its vaults.

Thus far Guaido has the support of the US, many European countries and Latin American countries. On the other hand, both China and Russia are standing by Maduro.

Also on this episode of Counting the Cost:

Brazil Vale: It’s being called the most hated company in Brazil. Vale, the world’s number one iron ore producer, is being held to account for its role in a dam collapse, an industrial accident which has devasted a local mining community. It is feared that more than 300 people could have died buried under tonnes of toxic sludge. And there’s growing anger because this is the second time in five years that Vale’s mining waste has devasted the local environment, as Daniel Schweimler reports from Brumadinho.