Not that long ago, Venezuela was the richest country in South America. The country was one of the world’s leading exporters of oil, its reserves of gold were more than eight times higher than the average for the region, it manufactured and exported many industrial products, grew a huge surplus of food, and travelers from around the world came to enjoy the country’s beauty and do business there. Experts believe that it has more oil than Saudi Arabia. Is it really possible that when we look at Venezuela today we’re looking at the same country?
Shockingly, the answer is yes. The Venezuelan economy has been devastated by price controls, property is often seized without compensating the owners, the value of the currency has plunged, and the inflation rate is now 720 percent, the highest in the world. The International Monetary Fund forecasts that for the full year 2017 it will be 1,640 percent. Torino Capital, a local investment bank, estimates that the economy has shrunk 27 percent since 2013, an absolutely terrible decline. As one might expect, crime has been skyrocketing.
Even worse, as a result of the policies that led to these problems, many millions of Venezuelans are literally starving. According to The Wall Street Journal, “Hordes of people, many with children in tow, rummage through the garbage, an uncommon sight a year ago. People in the countryside pick farms clean at night, stealing everything from fruits hanging on trees to pumpkins on the ground, adding to the misery of farmers hurt by shortages of seed and fertilizer. Looters target food stores. Families put padlocks on their refrigerators” to safeguard the little food they have.
The hunger is so widespread and intense that out of desperation people are grabbing animals they find on the streets and eating them
The National Poll of Living Conditions, an annual study taken by social scientists, found that last year three-quarters of Venezuelans lost on average 19 pounds. The hunger is so widespread and intense that out of desperation people are grabbing animals they find on the streets and eating them; they are even eating animals in zoos. People say in black humor that they’re on the Maduro Diet, a reference to the country’s President Nicolas Maduro.
Meanwhile, parents of some infants have found an extreme but temporary solution for getting food for their children: They are hospitalizing them so that they are given small, simple meals. Susana Raffalli, a specialist in food emergencies, explained the situation this way: “What’s serious is not that we got to the crisis threshold, but rather the velocity at which we got there.”
In addition, “The country’s growing malnutrition is made worse by a breakdown in health care, the spread of mosquito-borne illnesses, and what the Pharmaceutical Federation of Venezuela has called a severe shortage of medicines,” reports The Wall Street Journal.
Mad As Anything
To make matters worse, there is now rioting in many areas of the country. In fact, protests against the Maduro government are growing and dozens have already been killed. Even in cities and towns that were considered leftist strongholds there is open disillusionment and opposition to Maduro.
Because of so much upheaval in the Venezuelan economy, questions that once were unthinkable are now being pondered. One of these is whether the country will default on its debt. In 2009, their foreign exchange reserves were $40 billion, but since then have dwindled to $10 billion, and the country has been forced to sell some of its gold to pay debt.
Another question is whether the near-daily protests since March will peter out or escalate into a full-blown revolution. So far, the protests are showing no signs of slowing, and in fact are getting support from a powerful and unexpected source: the military. In parts of Venezuela the military has begun to defect, and some units have actually begun marching along with the protestors.
The events now unfolding in the one-time South American economic powerhouse offer important lessons that should not be ignored. Here are a few of them:
*Severe shortages of basic supplies, including food, can develop very quickly;
*When people become desperately hungry they are prone to do extreme things;
*The more intense the economic crash the more crime increases.
Zero Hedge sums up Venezuela’s situation this way: “It is only a matter of time until Venezuela can no longer finance its imports, and social and political chaos of unprecedented proportions will afflict the country. The fallout will also affect Venezuela’s neighboring countries.”
One would like to think that the U.S. has learned so much about economics that a Venezuela-type meltdown of the economy can never happen here. But many people in Venezuela also thought it could never happen there, and today they regret not having prepared for the worst. Would it not be wise to learn from their mistake?
Gerald Harris is a financial and feature writer. Gerald can be reached at email@example.com