Venezuela’s Economy in Dire Straits

Credit: Nease

Socialist Hugo Chavez is leading his country into the abyss.  Venezuela’s economy is in shambles and experiencing a dramatic free fall.  Even food is imported into the country and the crime rate is one of the highest in Latin America.  Communism is not working, but Chavez is determined to continue socializing the Venezuelan’s economy following the tips from his Communist friend, Fidel Castro.  Bolivia, Ecuador, and Nicaragua are following Hugo Chavez’s irrational ideology and leading their countries towards an economic pandemonium.

The latest measure taken by Hugo Chavez to calm the stormy waters is to devaluate the bolívar from 4.3 to 6.3 to the U.S. dollar.  President Hugo Chavez ordered the move from his sick-bed in Cuba, Finance Minister Jorge Giordani said yesterday.

Venezuela relies heavily on crude oil exports to keep its economy afloat, and the devaluation will help the South American country to balance its books. The country is the fourth-largest foreign oil supplier to the United States. Chavez is in Cuba recovering from a complex surgery to treat an unspecified cancer.

The devaluation, which lowered the currency’s value against the dollar by nearly a third, was aimed at solidifying government finances and easing a tight market for dollars that has choked back imports and led to shortages of basic goods.

Pressure to devalue had built for months, as the black market exchange rate rose to more than four times the official rate. The imbalance was clear in the prices of many goods. A Big Mac at McDonald’s costs 70 bolívares, or $16.27, at the official pre-devaluation rate.

But the devaluation will also make imported goods more expensive, which will probably make inflation worse. Inflation for the 12 months ended on January 31, 2013 was 22.2 percent, one of the highest rates in Latin America.

Surging inflation could cause political problems for the government. But the exchange rate had reduced the dollars available to importers, leading to shortages of goods like sugar, chicken and toilet paper. Many analysts believe that voters blame the government more for shortages than for inflation.

Sooner or later Venezuela will learn the hard way, that Communism is not the answer to solve its problems.  Just ask Cuba and Russia if they were satisfied with their Communist dream.  The whole house of cards crumbled down in Russia and Eastern Europe when Communism collapsed in 1989.  China had to adopt Capitalism to avoid political and economic mayhem—“one country two systems” proposed Deng Xiaoping.  I hope Hugo Chavez looks towards the East for political and economic advice before it’s too late.  Good Day.

4 thoughts on “Venezuela’s Economy in Dire Straits”

  1. Morning,
    Venezuela was cursed with oil. When they got OPEC started and the price of crude skyrocketed in the 1970’s, they put everything into oil production and anything that served oil production. As one of my Venezuelan friends phrased it, todo plantado en petróleo. Then, when the bottom dropped out, the economy started to fall apart. March 1983, the Bolivar was 4.23 to the dollar. That was the REAL Bolivar, not the made up one from Chavez. By Feb 1985, the rate had dropped to 15 to a dollar US.

    The administration then and those following failed to stop the slide and Chavez was the result. The slide continues. Another Venezuelan friend now living in the USA, sees a striking resemblance between the history of Venezuela and the future of the USA. We are both hoping he is wrong.

    Chavez’s popularity results from handing 60 percent of the national budget over to social programs, health care, food subsidies, etc. As long as the oil continues to flow, the very poor will continue to support him.

  2. Morning Jim and Nena:

    It’s sad to see that such a rich country like Venezuela is sliding back into poverty. I agree with you that Chavez is part of the problem, but so are the corrupt and greedy political parties before him, that sucked every bit of wealth from the country’s coffers. Rafaél Caldera, Carlos Andrés Pérez and Marcos Pérez Jiménez come to my mind.

    I’ve been following the rapidly deterioration of the American economy as well. China will soon take over and become the first economy in the world, and India is also leaping forward in strides, In the meantime, the American people are fighting amongst themselves, (e.g., blue states against red states, Democrats versus Republicans, liberals versus conservatives, and so on and so forth).

    Yep, my friend, the world seems to be upside down. Black is white and white is black and no gray zones in between.

    Warm Regards,


  3. Hello Henry:

    I’m afraid you are right about that. Congress is absolutely dysfunctional. Perennial quarreling between the GOP and the Dems is destroying the country. Printing money ad infinitum, at the end of the day, will also catapult us to the abyss. Sad.



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