Venezuela their concern about Government manipulating statistics,

Venezuela is facing a deep crisis, particularly after2013, which does not only concern the economical aspect, indeed it is enhancedby a fragile and delicate political situation. Currently at the 179thout of 180 countries in the index ofeconomic freedom, Venezuela has failed to provide an exhaustive report ofhis economic condition to the IMF in November 2017, which gave 6 further monthsto the country to fill the lack of many statistics.

This fact has beeninterpreted by credit-agencies as a possible sign of an upcoming default.Indeed, the Government debt to GDP in 2016 stands at 28.2%, which might notappear that high if we don’t consider the liquidity crunch the country isfacing and the many attempts to extend and postpone the external debt paymentsof such quantities of bonds, increasing the fear of a default in the majorityof bondholders.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Also analysts have expressed their concern aboutGovernment manipulating statistics, since they did not report adequate datassince late-2014.  On  November 2017, Venezuela has been declared ondefault by rating agencies such as Standard& Poor’s for failing to pay US$200 Milions, but it only lasted a fewhours until those debt payments have been discussed with bondholders, withoutany severe consequence. Maduro and the Government stated it was part of a plan,organized by the United States, who are protagonist, according to hisaccusation,  of an “economic war” againstVenezuela, by damaging and interfering the relashionships with suchbondholders. The economy of Venezuelais largely based on the petroleum sector and manufacturing.

Revenues frompetroleum exports accounts for more than 50% of the country’s GDP and roughly95% of total exports. This country is the sixth largest member of OPEC (Organization of the PetroleumExporting Countries) by oil production as well as a founder state of it. Fromthe early 2000s until late-2014, Venezuela has benefited from historically highoil prices, and its PDVSA (Petroleos de Venezuela, S.A.), the state-owned oil andnatural gas company, has prospered. Nevertheless, the collapse in international oil prices in2014, along with inadequate macro and microeconomic policies, havesignificantly affected Venezuela’s economic and social performance. Throughoutthe years the mismanagement of PDVSA as well as Government interference causeda significative drop in oil production, which in 2017 has decreased for the 30%from 2250 BBL/D/1K in january to 1600 BBL/D/1K in December. The country’sreliance on the hydrocarbon sector has sharply increased.

Also, during theeconomic boom Venezuela did not accumulate savings to mitigate a reversal interms of trade or to cushion the necessary macroeconomic adjustment.   In the short and medium term, Venezuela faces majorfinancing needs, with an external financing needs estimated at between US$25billion and US$35 billion. Access to external financing is restricted and thepublic deficit has been largely monetized. This source of financing, pricecontrols, limitations on access to foreign currency, and the collapse of theprivate sector in the provision of basic goods, have cumulatively led to theworld’s highest inflation rate.

 Venezuela is currently facing a rare phenomenon called”Hyperinflation”, defined as when inflation rate overcomes 50% a month. Precisedata is hard to come by, but some estimates put this country inflation rate atmore than 4000 percent compared to the previous year, while an optimalinflation rate is supposed to stand at 2%. This means the local currency iscurrently worthless, and the lack of trust in the currency leads to anincreasing use of foreign ones, enhancing the inflation rate growth in a deadlyspyral. As always happens during hyperiflations, once customers realized what washappening, they started stockpiling in order to avoid higher prices later,causing a tremendous increase in the demand, which led to severe shortages ofgoods, particularly food.

The Government announced the launch of its owncrypto-currency in December, with the purpose of advancing in issues of monetary sovereignty, of making financialtransactions without using its inflated currency and of circumventing the heavyUS-led financial sanctions   Food shortages: Shortages are occurring in regulated products, such as milk,meat, coffee, rice, oil, precooked flour, butter and other basic necessitieslike toilet paper, personal hygiene products and medicines. As a result of theshortages, Venezuelans must search for food, occasionally resorting to eatingwild fruit or garbage, waiting in lines for hours and sometimes settlingwithout having certain products.Under the economic policy of the Nicolas Maduro government, suchshortages occurred due to the Venezuelan government’s policy of withholdingUnited States dollars from importers with price controls. There are manypotential causes of such shortages, Government policies since Chavez’sadministration were characterized by overspending and import reliance, as wellas currency and price controls, which led to the formation of a black market, furthermorethe price cuts that businessmen were forced to make, drove to an impossibilityof affording the production of such goods.

The distribution of the fewavailable goods has been entirely committed to the defense minister, whoalready had the military command. Investigations have reported that themilitary instead of fighting the hunger, is making money from it, by increasingprices and creating further shortages: once again, the high level of corruptionstrongly damages the local population. In an interview with President Maduro byThe Guardian it was noted that aroundthe 40% of thesubsidized basic goods in short supply were being smuggled into Colombia andsold for far higher prices. Amnesty International and many NGOs have offered aid toVenezuela, although Government has refused such assistance.

   Political Situation The currentsituation in Venezuela politics is higly unstable and unclear. After the latestregional elections, decisively won by Maduro and the ruling party, theopposition have denounced vote rigging, Maduro reacted by threatening to repeatthe elections in the few states where the opposition won if the governorselected continue to refuse to be sworn in by the National Assembly recentlycreated by Maduro himself. After threeattempts of reconciliation between the ruling party and the opposition, the situationdropped when in the last days of December 2017 Maduro declared the ban of allthe main opposition parties from 2018 presidential elections, announcementwhich generated an increase in the turmoils that were already affecting thewhole country.

x

Hi!
I'm Gerard!

Would you like to get a custom essay? How about receiving a customized one?

Check it out