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The story of Venezuela, a nation once replete with oil wealth, is a striking reflection of the varying paths towards collapse encountered by different Latin American countriesHowever, Venezuela’s journey appears to be the most surreal, descending into an abyss that many thought would be unimaginable.

Between 2014 and 2021, Venezuela suffered from successive years of negative economic growth, with its GDP shrinking by an alarming 75%. This tragic decline only began to reverse in 2022, a timeline intersected notably by the ongoing global wars, revealing how intertwined and fragile the nation’s economy became.

During these turbulent years, Venezuela's foreign reserves plummeted from $20 billion to below $1 billion, while its national debt ballooned to over $150 billion

Such economic mismanagement thrust the country into a harrowing crisis where the inflation rate skyrocketed at a dizzying rateIn 2018 alone, inflation soared to an astonishing 1,300,000%, with food prices inflating by over 5 million percent, rendering the national currency virtually worthless.

To put these figures into perspective, at the beginning of 2018, the minimum wage in Venezuela stood at 325,000 bolivars, while the cost of a cup of coffee was 250,000 bolivars, cooking oil cost 1.8 million bolivars, and a bag of flour exceeded 3 million bolivarsIn essence, working tirelessly for an entire month would not even afford basic sustenance for an individual.

Statistics reveal that of Venezuela's 28 million people, over 70% live in extreme povertyThe relentless nature of this humanitarian crisis forced a staggering 7 million Venezuelans to seek refuge abroad, a figure that constitutes nearly two-fifths of the total population.

It's crucial to remember that Venezuela possesses the largest oil reserves in the world

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Historically, since the 1920s, it was a major player in the Latin American economic landscapeAt its peak around 2014, the country boasted a per capita GDP of $15,692, significantly outpacing that of many countries, including China.

However, within a mere decade, Venezuela transitioned from an economic powerhouse to a resource-dependent beggar state, trapped in a uniquely Latin American cycle of despair and loss of control over its financial fate.

The critical question arises: how did Venezuela, once the wealthiest nation in Latin America, devolve into this tragic state of dependency on its diminishing natural resources? The crux of the problem appears to be Venezuela’s entanglement with the “resource curse,” a phenomenon often afflicting resource-rich but economically weak nations.

For decades, despite its oil production, Venezuela failed to reap the benefits often associated with its vast natural resources

Oil was discovered in the Maracaibo Basin as early as 1922 by Royal Dutch Shell, marking the beginning of a new eraWith the backing of the dictator Juan Vicente Gómez, Western oil corporations flocked to Venezuela, developing hundreds of oil fields and escalating production from 1 million barrels to a staggering 137 million barrels per day.

By 1929, Venezuela’s oil output ranked just behind that of the United States, with oil revenues contributing over 90% to government revenue after Gómez's death in 1935. Yet, despite its wealth, the Venezuelan government wielded little influence over oil productionThree companies—Royal Dutch Shell, Gulf Oil, and Standard Oil—commanded around 98% of the market, leaving the government as a mere observer of its resource wealth.

In 1943, a new oil law was enacted, increasing the profit-sharing ratio from 16.67% to a fairer arrangement

By 1960, Venezuela joined OPEC, becoming one of the founding members, and had finally begun to assert some control over its own oil resources by raising taxes on oil company profits to 65%.

In merely seven years, the country's fiscal revenue increased nearly six-fold, leading Venezuela into a period of unprecedented economic growthThe Fourth Middle East War in 1973 sparked an oil embargo by OPEC, which resulted in the international oil price quadruplingVenezuela's revenues surged by $10 billion, making it not just the wealthiest in Latin America, but also a model of economic management for the region.

However, this sudden wealth did little to foster a diversified economyInstead, it bred rampant corruption and managerial chaos, with estimates suggesting that between 1972 and 1997, approximately $100 billion was lost to graft and embezzlement

Presidents changed frequently, yet the nation remained deeply reliant on oil, suffering from political instability and an over-monopolized economyConsequently, the economy became akin to a patient on life support—alive but utterly dependent on the fluctuating fortunes of the oil market.

As the 1980s rolled around, global oil prices crashed from $40 to approximately $10 per barrel due to oversupply, and Venezuela, its economy intricately tied to oil exports, suffered tremendouslyFiscal revenues plummeted by two-thirds, the economy contracted by one-fifth, inflation soared over 80%, and foreign reserves dwindled from $25 billion in 1980 to a mere $7 billion in 1988, a staggering 72% decrease.

This economic upheaval led to two decades of chaos, both politically and economically, until the ascent of Hugo Chávez heralded a new chapter in Venezuela's tumultuous history.

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Chávez’s life epitomizes a journey endowed with remarkable fortune and an exceptional trajectory

During his 14 years in power, the United States was embroiled in wars in Afghanistan and Iraq, coinciding with a dramatic rise in oil prices, which surged from $60 to an unprecedented $147 per barrel.

Venezuela, holding the world’s largest oil reserves, experienced an economic renaissanceFrom 2000 to 2014, the country recorded an impressive annual average growth rate of 5.1%, making it the fastest-growing economy in Latin AmericaFiscal income burgeoned from $22.9 billion to $581.8 billion, a staggering almost 25-fold increase, and the per capita GDP soared from $3,417 to $18,100—more than five times its original value.

Yet, despite this windfall, the Venezuelan economy remained almost entirely reliant on oil, a reality that continued to tether its health to fluctuating global oil pricesThroughout Chávez's 14-year reign, the structural demands for diversifying the economy remained unmet, as his focus shifted primarily towards anti-American rhetoric and the eradication of domestic capitalist elements.

In a twist of political ambition, Chávez initiated the Bolívar Revolution in 1999, promising to forge a socialist state by harnessing oil wealth to alleviate poverty and inequality

This revolutionary movement, while transformative for Venezuela, also triggered a wave of influence across Latin America, with effects that are still debated and analyzed today.

Starting in 2007, Chávez enforced mandatory purchases of foreign assets, first targeting the oil sector and later expanding to telecommunications, banking, and manufacturing, effectively nationalizing significant portions of the economyFor those companies unwilling to comply, Chávez deployed military escorts to facilitate their exit, compensating them at rates often far below market value.

Although his administration secured considerable control over the oil industry, this tactic crippled the national investment climateBetween 2007 and 2017, Venezuela garnered a reputation as having the world’s worst business environment, with state assets increasing from 10% to 40%, yet foreign investments plummeting by over 70% from $9.2 billion to less than $3 billion, as the largest investors shifted from the U.S

to China.

To navigate through this disordered economic landscape, Chávez employed contradictory policiesWhile announcing free healthcare, housing, and education, and distributing wealth through various welfare programs, the underlying issues of economic stagnation and investor discontent remained largely unaddressedThe economy operated on a model of dependency on the state’s support.

Paradoxically, Chávez himself had once aspired to live the American Dream, dreaming of becoming a baseball player in the United StatesYet, influenced deeply by Fidel Castro and Che Guevara during his military education, he dedicated his life to eroding capitalism—effectively becoming a lifelong adversary of American imperialism.

Upon his death on March 5, 2013, Chávez’s departure marked the end of an era for Venezuela, one that many argue could have either bolstered or further devastated the nation depending on his successors’ actions

As oil prices began to tumble post-2014, the once thriving Venezuelan economy started a rapid downward spiral, falling free into a state of disarray.

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Following Chávez's death, global oil prices plunged, leading Venezuela's economy to freefallBy mid-2014, the GDP barely grew by 0.4%, while inflation soared to an alarming 68.5%. Import and export volumes shrank by 8%, with fiscal revenue decreasing by 25%. Basic consumer goods began to vanish from stores, creating a local crisis of availability.

The inability to fulfill previous high welfare promises ignited public anger, as citizens shifted from anti-American sentiments to outright opposition to their own government, exacerbating the societal unrest and deepening the economic decline.

In response to the escalating crisis, Nicolás Maduro, Chávez's successor, resorted to drastic measures including printing excessive amounts of money

This reckless strategy undermined any potential recovery and placed the economy in jeopardy.

Consequently, hyperinflation reached its peak, with rates hitting 1,300,000% in 2018—a figure rivaling historical instances of hyperinflation seen in post-World War I Germany, 1948 China, and Zimbabwe.

This unnerving inflation created a reality where basic necessities became unattainableFaced with rampant price hikes, Maduro eventually attempted to mitigate the crisis through massive wage increases, skyrocketing the minimum wage from 325,000 bolivars to 18 million within a year—a staggering 60-fold increase.

However, this approach led to further complicationsEven with soaring wages, it failed to keep pace with rampant inflationSubsequently, in an atmosphere characterized by economic decline and mandated wage increases, numerous small and medium enterprises collapsed

By 2021, unemployment escalated to unprecedented levels, with rates climbing higher than 40% in many regions.

Ordinary workforces found themselves stripped of jobs, compounded by the fact that many industries did not survive the fiscal onslaught, bringing society to a near standstill.

Moreover, the government attempted to enforce price controls on commodities, operating under the belief that private businesses were exploiting the crisis and driving up costsSuch policies obliterated any remaining motivation for trade, resulting in further shortages of essential goods as citizens hoarded cash without the means to spend it effectively.

Maduro’s economic strategies faltered repeatedly, edging closer to total collapseYet, instead of delegating responsibilities to specialists, Maduro intensified efforts to stabilize the economy by introducing a national cryptocurrency linked to oil prices and issuing a new version of the bolívar.

These currencies faced immediate challenges, with little sign of recovery

The oil-backed cryptocurrency failed to create the anticipated economic boom and was officially deemed ineffective in 2019, demonstrating the sustained deterioration of Venezuela’s economic landscape.

Despite a freshly minted currency, inflation saw no reversal; by 2021, the bolívar's value eroded drastically—the exchange rate skyrocketed to 55 billion new bolívars for a single dollar, a staggering devaluation rendering it ineffectual.

Maduro's failure to revitalize the economy resulted in an environment where inflation remained an unmanageable beastWith no structural changes to remedy the diminishing oil prices, the Venezuelan populace faced further despair.

While global energy prices saw a resurgence due to ongoing conflicts, allowing Maduro a fleeting reprieve, the structural foundations of the economy appeared irreparably damaged, teetering on the brink of collapse.

Reflecting on the chaotic journeys of Chávez and Maduro reveals the stark twist of fate that marks Latin America, where resource abundance can both bless and curse