Thursday, May 04, 2017

Venezuela's Economic Death Spiral

Legitimate political and social concerns aside, Venezuela’s ongoing nationwide protests are hastening its economic breakdown. The economic standstill caused in many areas and the effect on the government’s functioning mean that Venezuela’s critical oil extraction and refinement sector is plummeting. Of course, Venezuela’s economy was already on a steady decline and the oil sector, partly due to low oil prices, was following it.

However, whatever hope (seemingly none) existed for a campaign to repair the Venezuelan government’s most critical sole source of funding is now dead. Because the government is currently in the midst of a political crisis as well as an economic one critical economic problems are becoming even more difficult to address.

A recent political flash point, where Venezuela’s supreme court disbanded congress, may have been the result of the opposition minded congress resisting plans by the Maduro administration to seek an influx of foreign funds to pay off its debts by allowing foreign firms to buy large portions of state industries such as in the oil sector.

Maduro has referred to the protests as part of, or aiding, a fascist coup against his left wing government. With the ongoing failure of the security forces to quell the massive protests, continuing shortages of staple goods like food and toilet paper and general lawlessness in many areas the protests are likely to pressure the government even more. Many have been injured in clashes between protestors and security forces the but Venezuelans may feel the pain of an injured long after those wounds heal. Maduro and his predecessor Hugo Chavez mismanaged Venezuela’s resource extraction intensive economy for more than a decade and the effects are now approaching a point beyond which they are not quickly salvageable.

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