Venezuela's Economy

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Venezuela’s economy has been experiencing its worst economic crisis in its history. Venezuela is known to have one of the largest oil reserves in the world. Its economy largely depends on its petroleum sector. They are one of the twelve members of OPEC, ranked fifth largest member of oil production. Oil accounts 95 percent of the government’s revenue, 50 percent of the country’s GDP, and 11 percent GDP. The price of oil has dropped drastically to 20.81 dollars per barrel. Venezuela is suffering from a decline in GDP, while inflation is expected to exceed 1,000%. With Venezuela’s biggest revenue source dropping drastically; they are left with a substantial amount of debt. The country is suffering with a widespread shortage of consumer goods …show more content…
The Solow Model is the theory of economic growth. Growth exerted from factors such as more capital, labor, and technological ideas. As mentioned earlier, Venezuela’s economy is largely based on their large oil reserve, which accounts for 95 percent of its total exports. During Venezuela’s oil boom in the 1950’s, they experienced steady growth and attracted many immigrants helping their labor force to increase. Venezuela’s heavy reliance on oil as their main export commodity backlashed, due to the drastic drop in oil prices. The price oil per barrel has dropped more than 50 percent, causing a great strain in their economic growth. Venezuela’s oil price is losing its value due to other countries not reducing the production of oil, such as Saudi Arabia. Venezuela is now suffering the worst inflation of Latin America. Inflation has increased to more than 1,000%. Inflation is mainly caused because of the influx of dollars received for oil. This negatively affected Venezuela due to the sharp inflow of foreign currency. The inflow caused Venezuela’s other commodities to be less competitive in exports. Foreign currency also raises the levels of prices causing inflation to occur. Venezuelan’s are suffering from a shortage of consumer goods. They are suffering because inflation is very high, causing the price of imports …show more content…
Under president Maduro, the Venezuelan government solution is to increase state control over the economy and nationalize city stores. He is arresting members of the private sectors who voice their opinions against these decisions taken by Maduro. The Venezuelan government owes a tremendous amount of debt. While imports are extremely expensive due to the inflation rate, Venezuela barters its oil for food and medical supplies. Government corruption takes place by not distributing the goods to its citizens. The government buys food and medicine and tries to smuggle it and sell it on the black market. Most food and medicine imported is being left to rot. The governments increasing state control takes a negative effect on the skilled labor force. Many skilled laborers would look to go and find better opportunities in other countries due to the
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