CRISIS IN VENEZUELA

VENEZUELA BEFORE THE CRISIS Hugo Chavez took power in 1999 -Massive reduction in poverty -More children in school -Greater access to clean water Largest oil reserves in the world -Chavez social programs possible by oil revenue -Barrel of oil cost around $100 in mid 2000’s -State owned petroleum company thrived

WHAT WENT WRONG WITH VENEZUELA'S ECONOMY Drop in oil prices -Oil prices used to be $100 a barrel, reached a low of $30 -Now oil prices are well under $50 a barrel No dollars for imports -Falling oil prices means less foreign currency being available for their government, can no longer import items -Created critical shortages of goods produced outside Venezuela

WHAT WENT WRONG WITH VENEZUELA'S ECONOMY Price control -Prices of key items were slashed so that everyone could afford them -Makes items affordable to customers but many items fall below the cost of production so domestic producers stopped production -Makes imports more essential Inflation -World’s highest inflation rate -Being crippled by price increases in the real world, away from the government stores where prices are kept low

DECLINE IN OIL Oil is extremely critical to Venezuela's economy -Oil accounts for 96% of their exports -Produced only 2.15 million barrels of crude oil per day in June Reason of the decline -Failed to invest into its oil industry -Power outages -Inflation -Cash shortage Crude oil production in August

THE CRISIS AT HAND The Country owes billions to many different people from countries to companies that invest in Venezuela. Suffering from massive food shortages & lack of medicine. The Government is prioritizing paying the debt back before taking care of the shortages.

FOOD SHORTAGES Venezuela is running out of food because of the decline in exports, causing many citizens to go starving -Bread shipments fell 94% in first 6 months of 2016 compared to last year -Meat exports declined 63% -Fruit such as bananas and strawberries fell 99% -Fish dropped 87% -Sugar fell 34% -Medicine shortages

HOSPITAL SHORTAGES The New York Times visited 6 psychiatric wards. All were short on medication, food, and basic personal care supplies such as soap, shampoo, toothpaste, and toilet paper. Water only runs a few hours a day One patient, was attacked by a bunkmate and got their nose bitten off, they needed surgery but due to shortages they were only able to provide a bandage.

RUNNING OUT OF CASH Country’s central bank has only $11.9 billion in reserves compared to $30 billion in 2011 -Starting in October, they owe $4.7 billion in a series of payments -At this rate experts agree Venezuela does not have enough cash to make all of its payments for the next two years -As of May 7.4 billion of the reserve is in gold and has already shipped some of its gold to Switzerland to repay its debt

WHAT THE PEOPLE OF VENEZUELA ARE DOING People are crossing the border to Columbia to buy basics that are in short supply such as toilet paper. Many people who were laid off, are protesting. While some are also on strike for weeks. Some people in America are hosting a place for people to stay and visit to buy basics for friends and family.

SOLUTIONS? China to the rescue -China is in talks to give a one year grace period on paying its debt and only make interest payment -Since 2007, China has loaned $65 billion and has been repaying slowly by oil shipments -This will allow Venezuela to sell more oil and bring in more money Other solutions -Work on fixing exchange rate that has only aggravated the crisis -Accept aid -Political change

DISCUSSION QUESTIONS Should Venezuela continue to prioritize paying their debts off with other countries instead of focusing more on food and medicine shortages? How would this crisis affect Venezuela’s economy and their relations with other countries as well as their currency if they are using a lot of their gold reserves up?

SOURCES http://money.cnn.com/2016/09/28/news/economy/venezuela-bring-food-home/ http://www.cnn.com/2016/08/02/americas/venezuela-what-went-wrong/index.html?iid=EL http://money.cnn.com/2016/07/12/investing/venezuela-crisis-oil-production-plunges/index.html?iid=EL http://knowledge.wharton.upenn.edu/article/how-venezuela-could-come-back-from-the-brink-of-collapse/ http://www.nytimes.com/2016/10/02/world/americas/inside-a-dysfunctional-psychiatric-hospital.html?rref=collection%2Ftimestopic%2FVenezuela