Collapse of oil economy
Venezuela is home to the largest proven oil reserves in the world. But in recent years, widespread mismanagement of its oil wealth caused a sharp decline in its petroleum production and exports, deeply damaging the country’s economy as Venezuela descended into political turmoil.
Just a few years after Hugo Chávez took office in 1999, he fired thousands of employees at the state-run oil company, Petróleos de Venezuela, after a controversial strike. That essentially rid the company of its experts in oil production and replaced them with people who were loyal to him.
Then, in the mid-2000s, when oil prices were high, Chávez pumped the country’s oil revenue into social-welfare programs, including setting domestic gasoline prices so low that consumption soared. The plan was unsustainable. When global oil prices tumbled from more than $100 a barrel in 2014 to less than $30 at the beginning of 2016, the country’s economic woes deepened.
“This is when you saw the economic mismanagement of the last several years combined with a really dramatic drop of oil prices just really start to hurt Venezuela’s economy,” said Sarah Ladislaw, director of the energy and national security program at the Center for Strategic and International Studies.
Over the past six years, Venezuela’s gross domestic product has been halved, according to new projections released by the International Monetary Fund in January.
As Venezuela’s economic situation worsened, investors stepped back, concerned that the government wouldn’t be able to repay its debts. “That decline we’ve been watching the last three years was really by virtue of the fact people have not reinvested in new [oil] production in Venezuela in a long time,” Ladislaw said.
Inflation in Venezuela has gone hand in hand with regular people’s inability to purchase basic goods. As prices soared, food and medicine became out of reach for many Venezuelans, who felt they had no option but to flee.
Last year, Maduro implemented a new plan to erase five zeros off the country’s currency — his attempt to confront the rising inflation problem.
“Before Maduro’s announcement on Friday, for instance, a kilo of peaches — or 2.2 pounds — cost about 1.1 million bolívares,” The Post’s Anthony Faiola and Rachelle Krygier wrote in August. “By Tuesday, prices had almost doubled, surging to 2.1 million old bolívares, or 21 new ones.”
Late last year, the International Monetary Fund estimated that the country’s inflation rate would reach 1.37 million percent by the end of 2018. For 2019, the IMF’s prediction suggests inflation could reach 10 million percent.
Not all economists agree on the IMF’s numbers. Steve Hanke, a professor at Johns Hopkins University who measures hyperinflation, which occurs when the monthly inflation rate reaches 50 percent, told The Post’s Matt O’Brien in July that “you cannot forecast the course and duration of hyperinflations,” and said that the IMF’s attempts are “irresponsible.”
In Forbes, Hanke wrote that Venezuela’s annual hyperinflation reached 80,000 percent in 2018, calling it “devastating,” but not as extreme as the IMF’s forecasts.
Venezuela once made significant progress in reducing its infant mortality rate, and pledged to do even more. But research published Thursday in the Lancet Global Health journal estimated that the mortality rate for infants in Venezuela grew from 15 deaths per 1,000 live births in 2008 to 21.1 in 2016. The study’s lead researcher, Jenny García, told The Post that Venezuela “lost 18 years of progress.”
She and her colleagues blame the decline on cuts to health-care funding. And they expect that as new data emerges for 2017 and 2018, the rate will only continue to rise, as Venezuela has struggled with the reemergence of diseases such as diphtheria, which they had once controlled.
The model they used was “conservative,” Garcia said, adding that she is “confident that it’s going to be worse than what we are showing.”
All of these factors contributed to Venezuelans’ decisions to leave the country, causing one of the largest migration crises in the region’s history.
The brunt of the burden fell on nearby countries. Colombia deployed troops to their border after hundreds of thousands of Venezuelans had crossed into the country by early 2018.
Those fleeing included many professionals: teachers and doctors who could no longer afford to eat or feed their families in Venezuela.
Correction: An earlier version of this article said polio had reemerged in Venezuela when in fact the original reports from June 2018 were later proved to be mistaken. The reference has been removed.
Aaron Williams contributed to this report.