Venezuela is known for the greatest oil reserves in the world. The country had such huge trade benefits from the export of oil. In fact, during the late 1990s, Chávez; president of Venezuela established a number of social programmes in Venezuela known as the “Misiones” with the money coming from oil. These programmes were established in order to tackle poverty and inequality. The plan was whole to improve the economic and social picture of Venezuela. One might say that Venezuela failed to figure out what actually was needed.
CAUSES OF VENEZUELAN CRISIS
The crisis grabbed its roots when in 2000 oil prices showed a bouncing behaviour. Just like the case in the 1970s to 80s, oil prices started declining and the revenue coming from the exports went down significantly. Meanwhile, the government was spending more on the missions; more than what their revenues were. Venezuela decided to sell oil to its allies in low rates which contributed to the current crisis. Gradually, the money available to the Venezuelan government started drying up because it was carelessly spent away. Another reason is the lack of technological advancement to refine the oil in order to sell it.
Another worst respond to fulfil the need of revenue was printing more money. This decreased the purchasing power of the nation. The initial change was seen in 2008 when standard bolívar was replaced with bolívar Fuerte (strong), the latter being worth 1,000 units of the old currency.