Maduro’s mismanagement of the economy, rather than economic sanctions, has caused Latin America’s largest migration–about 4 million Venezuelans–in recent years driven by hyperinflation, violence, and food and medicine shortages. The dramatic fall in the oil price in 2014 simply exposed the damage inflicted on the oil industries by Chavez and Maduro over the course of nearly 20 years. The problem was due to a lack of revenues to keep the basics running, problems that are compounded by corruption and a lack of security in the country.
Oil comprises 95% of Venezuela's exports and 25% of its GDP. In January 2019 during the Venezuelan presidential crisis, the United States imposed sanctions on the Venezuelan oil company PDVSA. As a result, by cutting off the biggest source of cash for Maduro’s government through oil exports to the US, sales plummeted by 40% in just one week, paralyzing the administration’s finances to weaken its overall power. This caused a significant problem for the government and its economy as quickly these sanctions caused the oil industry to weaken more than in previous years.
As a result, these economic sanctions caused Maduro to be pressured to change his economic policy. Maduro has allowed Venezuelan state oil company PDVSA to let some joint venture partners take over the day-to-day operation of oil fields. Maduro, in turn, began privatizing the sector in order to allow joint-ventures to directly promote profit and production in the oil industry. As a result, there was increased production in oil and a period of economic growth began. With the privatization of oil in Venezuela, oil production averaged 926,000 barrels from 761,000 in a month–a 22% increase. In fact, in the first 11 days of November 2019, Venezuela exported, with the help of Russian oil company Rosnet, just about 11 million barrels of oil—more than twice as much in the same period of October. There were also positive effects in helping alleviate the economic humanitarian crisis in Venezuela. Under Maduro’s regime and mismanagement, more than 300,000 people are at risk due to a lack of medical care and resources. However, after the policy change in the oil industry, positive results are already being seen as inflation is now on a downward trend with 23.5% in September 2019, as compared to 65.2% percent in August 2019.
Therefore, economic sanctions, so far, have been a key strategy in pressuring Maduro to change his policies, and in turn, improve the situation in Venezuela. His power and presence in Venezuela are not going away anytime soon as he is embarking on a term that extends until 2025. He was re-elected for a second term in the summer of 2019 (even though there were reports and rumors of his interference in the results). Therefore, economic sanctions have been probably one of the only strategies that have pressured Maduro to change. If sanctions aren’t put in place, his mismanagement of the economy will continue. He only changed his policies once harsher sanctions were placed on the oil industry in January of 2019.
Ultimately, while Venezuela's economic and humanitarian crisis still remains a significant issue, economic sanctions on the country are an important strategy to note in pressuring the country (and most notably, its aggressive leader) to change.
Sources:
https://www.nytimes.com/2019/01/10/world/americas/venezuela-maduro-inauguration.html
https://www.worldvision.org/disaster-relief-news-stories/venezuela-crisis-facts
https://www.investopedia.com/ask/answers/032515/how-does-price-oil-affect-venezuelas-economy.asp
https://www.lexology.com/library/detail.aspx?g=a0f80ec4-9022-4575-8360-ed9ecdb7f47c
www.nytimes.com/2019/02/08/world/americas/venezuela-sanctions-maduro.html?auth=login-google.
https://www.reuters.com/article/us-venezuela-oil-ramirez-exclusive/exclusive-weakened-by-sanctions-venezuelas-pdvsa-cedes-oilfield-operations-to-foreign-firms-idUSKBN1Z221R
https://www.reuters.com/article/us-venezuela-economy/maduro-says-thank-god-for-dollarization-in-venezuela-idUSKBN1XR0RV
This has been an ongoing issue going on, yet it is rarely talked about in mainstream media. I think that it is important to talk about since the US has many ties to the crisis. Seeing that the pressures have caused Maduro to change, it is optimistic to see some change in the right direction. I agree with the use of economic sanctions to pressure Maduro, but I do not think this is the most effective way for the country to change.
ReplyDeleteI found this article very informative. My mom grew up in Venezuela, and she is unable to return because of the civil unrest and violence due to famine and police brutality. I also think that the US can be doing more to help the Venezuelan people without supporting their government.
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