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Oil rich Venezuela: Strangled by hyperinflation
Latin American country, Venezuela has the largest oil deposits in the world. Even larger than Saudi Arabia! However, it has been known more as the country whose ladies had won the most international beauty contests in the world. 22 Miss Universes, Miss Worlds and Miss Earths! Grooming for these contests was a national industry. Less attention was paid to deploying the huge oil revenues wisely.

Things have come to such a pass, that according to the International Monetary Fund, the country is staring at an annual inflation rate of 1 million %, in the near future. Unimaginable, but this once relatively stable country is strangled by hyperinflation, due to 'corruption, social unrest, self-serving politics, capital controls, price-fixing, and a global commodity bust'. 

In 2016, the price one paid for a dozen eggs in Venezuela, would have bought 101 dozen eggs in USA! For buying just one banana, one will have to carry a bagful of Bolivar notes. (See inset)

By July 2018, Venezuela had registered over 33 thousand % inflation rate, being among the highest in the world. In periods of hyperinflation, people tend to discard the local currency held, and hoard goods and stable hard currencies.

Some factors leading to hyperinflation can be the printing of notes to bridge large government deficits and the inability of the government to collect more taxes, fall in export prices, while not harnessing government spending.

In Venezuela of today, there is a general shortage of essential goods and food riots have taken place.

An Argentinean, who had witnessed a not so acute hyperinflation in his country earlier, describes the public psychology thus:

'It's impossible to know the price of any product. You simply get used to spend your money as soon as you get it, because saving it is foolishness. Your money loses value every minute, so you better get rid of it RIGHT NOW by buying something useful. Tomorrow will be more expensive.You don't buy anything that is not of first necessity. You concentrate on what you need most to live day by day.

Only in case you have a lot of cash, you may buy something important like a property or a car. As soon as possible! Money disintegrates in your hand. But you would end up being a victim of speculators, because nobody wants to sell anything valuable during hyper-inflation. The few ones that do, are speculators that will charge you by the nose, and will exchange this crappy currency by hard dollars or Euros immediately, at the current exchange rate. But anything is better than seeing your money losing value minute by minute.

You wonder why you worked so hard. You question the meaning of life and universe, and you dream about getting an AK47 and start shooting everyone around. But in the end, you suck it up, as everyone else'.

Till 1998, Venezuela was one of the soundest economies in the world. However, under Hugo Chavez a long drawn out strike at one of the state-run oil enterprises, crippled the economy severely. After the strike, Chavez instituted a series of measures like import controls, nationalisation of industry, subsidies for food and daily consumer needs. Contrary to his expectations, all these measures resulted in spiralling inflation.

The country had been basking in the glory of oil export revenues, which constituted 96% of the total exports. No attention had been paid to diversify industry and sources of revenue. Food is largely imported.

Venezuela has had foreign policies which have soured relationships with countries that matter, except Iran. Access to foreign debt markets are denied, while people on the streets starve! 

Right from 1989, raising domestic fuel prices never worked, as it had resulted in mass riots and extreme repression. This in turn resulted in a failed coup!

'The reality is that Venezuela is more or less out of options. Prices are estimated to be rising at a rate of 3 per cent every day.Three-quarters of Venezuelans have lost an average of 11kg of bodyweight. Doctors report children dying of malnutrition. Malaria cases have spiked due to a collapse in treatment. Emigration has surged. So has crime.

This is what happens when an economy and a society disintegrates. Normally a country in such a state would turn to the IMF for a bailout. But Venezuela broke off relations with the multilateral lender of last resort in 2007, making any rescue very difficult.'

Thanks to the authoritarian regime and rigged elections, Venezuela has become an international outcaste. Donald Trump has talked of military options, while Brazil, Chile and Canada have refused to recognise the present Maduro regime. International debt markets are closed to country.

Printing more money and more repression are the order of the day.

Is there any light at the end of the tunnel, for the suffering and starving Venezuelan? No one has the answer, right now! 

(With inputs from IMF's reports and Forbes.)

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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