The Looming Food Crisis And Economic Collapse In Venezuela
Apr 11, 2016 04:30 AM EDT | By Mark Jason Alcala
There is a looming food crisis in Venezuela. Apparently, the country is running out of food to feed its population.
CNN Money points out that the country's economic problems are to be blamed for this food crisis. The government no longer has the capacity to pay for imported basic food items such as milk, flour and eggs. Even McDonalds Venezuela was reported to have run out of fries, albeit temporarily.
The country began rationing supplies years ago. But now the lines are increasingly becoming longer with food lines sometimes lasting for hours under the heat of the sun. These food shortage, rationing and longer food lines are becoming a source of social unrest in the Latin American country.
But how can a country rich in oil become so destitute? It's due to a combination of bad luck and even worse policies according to the Washington Post.
Apparently, the ruling socialist government led by Hugo Chavez decided to spend money on the poor from two-cent gasoline to free housing. Admittedly, that is a good thing for a government to do to its people, but only if it has the money to do so. However, around 2005, Venezuela no longer had the funds for these projects.
It is hard to imagine Venezuela running out of money with all those oils. In fact, the country has the largest proven oil reserves in the world at 297 billion barrels. Yes, the country is that rich that back in 2011, it was announced that its oil reserves surpassed that of previous world leader Saudi Arabia which is only 265 billion barrels.
This just shows how tragic the recent turn of events in the oil-rich nation had become. One would have expected that with all its oil reserves it should be as rich, if not richer, as Saudi Arabia. Yet, the government is so poor that it lacks the money to feed its population.
And the reason is how Chavez ran the state-owned oil company. Professionals who efficiently managed the oil company in the past were slowly replaced by people loyal to the regime. Profits were not reinvested and as a result, oil production fell by 25 percent between 1999 and 2013. No upgrades were done and the infrastructures were not even adequately maintained.
When the oil crash came, things got worse. The dramatic fall of oil price, from $100 per barrel back in 2013 to around $28.36 today, took a heavy toll on the country's economy, CNN Money reported. Alejandro Arreaza, an economist at Barclays, even calls Venezuela the "biggest loser" in the oil crash. The country's 2016 total exports are only valued at $27 billion, down from $75 billion two years ago.
With oil prices not likely going back to its previous levels anytime soon, it would take a miracle for the oil-driven economy to pick up. This means that the country is likely to default on its debt payments this year, an event already anticipated by market watchers.
In the meantime, it is its people bearing the brunt of the economic mismanagement of its leaders. The government began to force farmers to hand over their crops last summer. In addition, farmers and food manufacturers are now forced to sell from 30-100 percent of their production to the government at prices it dictates.
Such socialist measures and forced food production are likely to backfire. People will have a less motivation to produce foods and goods if they can't justly profit from their hard work.
And now it is no longer food that is being rationed. Even electricity is now rationed where people can only get power 4 hours a day, a sign that the situation is getting worse.
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