Venezuela's poverty, despite having the world's largest oil reserves, stems from a combination of
economic mismanagement, excessive reliance on oil (known as the "resource curse"), corruption, and political instability under the socialist governments of Hugo Chávez and Nicolás Maduro. Key factors contributing to the crisis include:
- Over-reliance on Oil: Oil historically accounted for nearly all of Venezuela's export earnings. When global oil prices collapsed in 2014, the economy free-fell because other industries had been neglected and were unable to compensate.
- Economic Mismanagement: Government policies, such as stringent currency and price controls, nationalization of industries, and expropriation of private property, stifled private enterprise, scared away foreign investment and technical expertise, and created severe shortages of basic goods like food and medicine.
- Decline in Oil Production: Years of underinvestment and a purge of skilled workers from the state-run oil company, PDVSA, led to a steep decline in oil production, from 3.5 million barrels per day in the late 1990s to less than 600,000 barrels per day by 2020.
- Hyperinflation: The government's failure to cut spending in the face of falling oil revenues led to excessive money printing and one of the worst hyperinflation crises in history, which made the national currency nearly worthless and obliterated the purchasing power of citizens.
- Corruption and Political Instability:Widespread corruption, a lack of democratic checks and balances, and human rights violations have been reported. Political opponents have been repressed, and millions of Venezuelans have fled the country, resulting in one of the largest refugee crises in the world.
- International Sanctions: Sanctions imposed by the U.S. and other countries, a response to human rights abuses and anti-democratic governance, have further restricted the government's access to international markets and revenue streams from oil exports.
While some point to external factors like falling oil prices and international sanctions as causes, most observers and economists attribute the primary drivers of the crisis to the authoritarian government's policies and gross economic mismanagement.
