Venezuela is predicted to be the world’s first oil-producing country to suffer total destruction. Having the largest oil reserves in the world doesn’t make Venezuela survive this time. It seems that political factor and bad economic maneuvers are the triggers of this collapse. The following election held in the country led to this failure.
President Nicolas Maduro drove to form a new legislative body called the National Constituent Institute (ANC). A wave of protests was unstoppable, killing at least 115 people. The ANC is recognized as super body institution which has the authorities to reorder the constitution. This maneuver is a form of bad political judgment as it’s seen to strengthen Maduro’s power. This step isn’t only resulting protests from inside, but also critics from various countries.
The United States and other countries have threaten to impose sanctions on Venezuela targeting the state-owned oil and petroleum sectors, Petróleos de Venezuela, S.A (PDVSA). Trump has issued warnings to the election related to Maduro and considering to target the Venezuela’s oil sectors by banning imports from Venezuela into US or banning the use of US$ dollar currency on any PDVSA transactions. If those three warnings come true, PDVSA will be greatly depressed as Venezuela’s current reserves have fallen to under US$ 10 billion.
Years ago, Venezuela’s economy has experienced great development once, thanked to the oil industry. 95 percent of Venezuela’s exports belong to oil industry contribution. However the oil sectors have been increasingly unproductive and unprofitable due to lack of investment maneuvers. It’s compounded by extreme decline in oil prices in the end of 2014. It made the Venezuela’s economy dramatically suffering.
Venezuela’s unemployment rate is predicted to break 25 percent this year 2017 and deteriorate to 28 percent by 2018. In fact, the unemployment rate in the country reached 7.4 percent in 2015.
Venezuela’s economy slumped 18 percent by 2016, marking the third year of recession. In the same year China stopped loan fund to Venezuela. Venezuela’s exchange rate is also tumbling and weakened that can led to pay off failure. No doubt, the country’s economic growth will remain deficit this year and next years. The International Monetary Fund (IMF) also predicts Venezuela’s inflation to reach 720 percent by 2017. The figure is cut in half from the previous projection, but is expected to reach 1,200 percent by 2018.
Venezuelans have lived under conditions of food and drugs shortage. The great inflation makes food prices and other basic needs continue to increase and erodes the value of Bolivar currency as well as salary rates.