Venezuela Crisis in a Nutshell

In this short explainer on the crisis enveloping Venezuela, I have tried to be brief and to the point.

Nicolas Maduro                   Juan Guaido

Who’s Who in Venezuela

President: Nicolas Maduro, a hardcore socialist, anti-U.S., leader of United Socialist Party of Venezuela.   

Who supports Nicolas Maduro:

    (a) Within Venezuela: Supreme Court of Venezuela, Defence Forces of Venezuela, PDVSA (state-owned oil company); 

(b) Outside Venezuela: China, Russia, Turkey, Iran, Bolivia, Cuba, Nicaragua  (last three are in the Americas).

Who does Maduro blame for the current crisis: United States of America.

Challenger: Juan Guaido, self-declared Interim President since January 2019 and leader of Popular Will, a centrist party.

Who supports Juan Guaido:

(a) Within Venezuela: Low-ranking military officials and huge popular support.
(b) Outside Venezuela: U.S., UK, Argentina, Brazil, Chile, Colombia, Ecuador, Peru, Panama, Costa Rica, Guatemala, and Honduras.

Role of Oil in Venezuelan Economy

• Oil reserves in Venezuela are said to be among the top 3 in the world.
• Oil accounts for 98% of export earnings. 
• Oil accounts for 50% of GDP
• High global oil supply, falling crude prices, and poor extraction technology have led to a big decline in oil production – all of which have drastically reduced the government’s export earnings, thereby widening revenue deficit. 
•  In 2018, GDP shrunk by double digits for the third consecutive year. 
• Government does not have foreign exchange reserves to pay for imports and loans. 
  
• Venezuela has been in default since 2017 – meaning, it has not paid back foreign loans and not paid for imports. 
  
• U.S. and other countries have a long-running embargo against Venezuela; this has shrunk market for Venezuelan products and reduced avenues for borrowings.
  

Major Problems

• Great political and economic instability 
• Mostly, a result of catastrophic humanitarian emergency. 
• Severe shortage of food, medicine, & other essentials – mostly because of hoarding, embargo, and hyperinflation. 
• Hyperinflation, meaning very, very high rate of inflation, is leading to doubling of prices of essential goods every 19 days on average. Current inflation is around 85,000%. Thousands of health professionals have left the country, leading to medical emergency. 
• Lack of access to food and healthcare have pushed 90% of people below the poverty line.  
• On average, a Venezuelan has lost around 12 kg of body weight since 2017. 
• It is believed that some 3 million have already fled Venezuela; the number is likely to rise to 5 million by the end of 2019.
  

In a nutshell, years of economic mismanagement, misdirected welfare policies (subsidizing almost everything through high revenue earned by oil exports), huge debt, massive shortage of essential stuff, hyperinflation, political instability – have all led to the current catastrophic humanitarian crisis in Venezuela.