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The Collapse of The once Most Affluent Nation in Latin America: Disaster in Venezuela

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Formerly The Richest Country in Latin America

In 2011 US. Senator Bernie Sanders declared: “These days, the American dream is more apt to be realized in South America, in places such( …)Venezuela(…), where incomes are actually more equal today than they are in the land of Horatio Alger,” ( However, looking at Venezuela just a few years later only on word can sum up the situation:turmoil.Despite receiving trillions of dollars in oil revenue over recent decades,Latin Ame4rica is in full economic collapse. It can be traced down to redistributionist programs that Sanders has said is the model for the U.S. economy. When looking at picture days of current day Venezuela one will find empty grocery store shelves, hospitals have no access to vital medicines, and riots. The streets are filled with a mixture of street gangs, drug cartels, leftist guerrillas and right-wing paramilitaries attempying to gain power. (

This disaster was completely avoidable.Venezuela holds 18% of the world’s proven oil reserve which is the equivalent of 300 billion barrels. Venezuela was pretty peaceful until the late 1980s, when oil prices plummeted. As seen throughout history when there is turmoil an authoritarian figure with a strong message is ready to rise to power. In the case of Venezuela this was Hugo Chavez. In 1992 Hugo Chavez attempted a coup, however ended up serving two years in prison for his actions. However this wasn’t the end,Chavez rebounded to win the presidency in 1998. His rhetoric didn’t start out as socialist, his message was populist and made little mention of socialism. His main message was focused on Venezuela’s income inequality. This in turn won favor with the poor population. (

However in 2002 after a coup attempted to overthrow Chavez, he took a radical turn. He started launching daily broadsides against rich Venezuelans and America. This was the rise of Venezuelan socialism.Looking at the situation through the lense international relations the implication of socialism was in an odd way The government relied on Venezuela’s oil industry just like when it was capitalist. In 2008 oil raised to a high $140 a barrel in 2008. This wealth funded new programs. The government began to build a million new homes and multiple hospitals. Laptops and washing machines were handed out .The prices in food were manipulated by the government as well. However, it was unprofitable for Venezuelan companies to make. In effect Chavez used oil money to import them. Chavez easily won election after election. He continued to expropriate hundreds of private companies. When the Bolivar began to lose value he put up restrictions who could buy dollars and fixed the rate. Anyone international buying of the currency was not allowed. (

However as the popular praise goes: what goes up must come down. All these things seemed positive and dreamlike on the surface, however this very actions sowed the seeds of the current crisis. Due to Chavez’s restriction, businessmen has to go to the black market to purchase currency and in effect the exchange rates soared.Before it was 10 bolivars to the dollar, the bolivar began to trade on the street at more than 1,000. The collapse of the currency was also caused by lower oil prices.Venezuela can no longer rely on its oil exports as the main funder of their economy. In turn they could not import enough goods to sell at the fixed prices this lead to food shortages. “The crisis has hurt international companies as well, which have seen some $10 billion in profits wiped away over the past 18 months. Many are giving up on the country. In May Coca-Cola suspended its bottling operation in Venezuela because of a lack of sweetener, and in July McDonald’s temporarily stopped selling Big Macs because of a lack of bread,”(Ioan Grillo) (

I feel the biggest underlying issue in this case is the fact that Venezuela heavily relied on oil.Even before the rise of Chavez oil was a main percent of the country’s GDP. It’s never good to put your eggs all in one basket. Socialist or not oil prices are prone to rise and drop drastically. Basing your entire economy on one good will lead to drastic shifts in economic prosperity. This also lead to the harsh divide in income inequality because almost all the money to be earned was in oil. If you weren’t a top dog in oil, then you were set up to fail. In other countries will a more diverse economy, there are plenty of things to rise in. People in America have become rich from anything like investment banking to trash hauling. The main thing Venezuela needs in the situation is a free market economy and to stop relying so heavily on oil. With a free market economy this will give the incentive for people to start more businesses knowing in the end they will prosper Also Western Democracies would be more willing to participate in trade and they wouldn’t have to worry about the threat of sanctions . This will diversify the economy and help rebuild Venezuela to its former glory or even better. I know every situation isn’t black and white and the solution is much more complex than I can present in a four page essay, however I feel I have addressed the main problems and the most viable solution I can present.

For my source comparison I looked at at an article on CNN titled, Venezuela Crisis: How Paradise Got Lost. In this article the authors first starts off by summarizing the situation. He talks about how Venezuela raised to socialism and its eventual collapse. Then the article goes on the discuss the election and how President Nicolas Maduro plans to write a new constitution. The article has a hopeful tone that the new constitution will help fix Venezuela, however there is much opposition to this opinion. ( The next article I looked at a BBC article titled Venezuela Crisis: What is Behind this Turmoil? This article had a more pessimistic tone it talked about how Venezuela has gotten itself into the mess that it is and adds on that it the way it is currently going there is little to no hope of it getting better.( CNN may be a little hesitant to shine too much light on the current crisis because they have a liberal bias, therfore they have supported candiates in the past like Bernie Sanders. As noted earlier in this essay he highly praised Venezuela in 2011. BBC is a British based news source so they are offering a perspective from another country. BBC is known to a slight left leaning bias, but not as much as CNN. Those factor contribute into it not trying to sugar coat the modern day reality in Venezuela.

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The Collapse of the once Most Affluent Nation in Latin America: Disaster in Venezuela. (2018, November 05). GradesFixer. Retrieved August 7, 2022, from
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