The economy of oil-rich Venezuela appears to be in serious trouble. For Venezuelans who saw the good days during the oil boom, these times are night marish. All over the country, people now queue to buy basic needs. These needs are as basic as sugar, toiletries, baby food, flour, meat and egg. A CNN reporter calls it the most humiliating phase of Venzuelan history.
The welfarist days of late President Hugo Chavez are now a distant beautiful memory to most citizens although signs of impending economic trouble manifested before he died. Venezuela’s fate can replicate in any country which depends almost on a single revenue earner whose value faces a crash. Venezuela depends almost entirely on revenue from crude oil sales which accounts for 95% of its export earnings. The crash in the price of crude has spelled doom for the economy. Even with current rebound in the price of the commodity, the value is still some 60% below what it was in 2014. This week, Brent crude sold for around $45.2 per barrel.
Around the country, consumer prices are up by about 70%. The government of President Nicolas Maduro initially reacted to this by doing some kind of price control–fixing prices for a lot of goods. That move was intended to ensure some stability for the bolivar, the country’s currency.
Maduro’s move however met a tragic irony. The price controls made many commodities to be far cheaper inside the country than they were in neigbouring Colombia. Greedy traders, some of them emergency ones, saw an opportunity. They bought goods which Venezuela had struggled to import with very scarce foreign exchange and shipped them to the border with Colombia to sell at a fortune.
Today, there is scarcity of virtually every product that has a name in Venezuela. Those who queue to purchase can spend up to four hours before buying products which are as common as a pack of biscuits or baby pampers. Naturally, black marketers are now thriving in cities like Caracas for essential daily needs. At the black markets, those who can afford it pay as high as 200% more on each item.
With the bolivar effectively losing up to 60% of its value against the US dollar, hope of an early recovery of the economy looks quite unimaginable. Analysts believe Venezuela needs oil price to urgently rebound in leaps than any other oil producing country in the world.