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Venezuela Crisis

Venezuela, a country in South America is a member of OPEC and has the largest oil reserves in the world. Around 50% of its economy depends on the oil industry. These reserves play such a vital role that the country’s president Hugo Chavez was named the fourth most influential person of 2005 in the world by Time magazine just because of the crude. This was shortlived, starting in 2014, the nation began suffering a startling collapse. With Venezuela’s gross domestic product plummeting even more than the US during the Great Depression, many of its inhabitants became unable to afford food, antibiotics, etc.

How did all this start?

In March 2013, longtime Venezuelan leader Hugo Chávez died of cancer. Maduro, his handpicked successor, took over after a narrow election win the following month but his policies led the economy towards failure; the fall in oil prices in the global market and US sanctions deepened its cracks. Venezuela's inflation rate, which has been over 50% since 2014, reached 80,000 percent in 2018 largely due to the rapid depreciation of local currency at the black market. About 3 million Venezuelans fled the country, driven by shortages of everything including food as well as the Maduro regime’s oppressive treatment of dissent.

The way out?

Venezuela will need the help of friends abroad to restore basic functions if Maduro departs. That will best be provided by loans and investment. Some $15 billion to $20 billion a year seems a reasonable starting point. That's the estimate Venezuelan economist Francisco Rodríguez came up with. According to one estimate, the total cost of dealing with the next 1 million Venezuelan refugees may be as much as $5 billion. The UNHCR has raised approximately half the resources it identified as necessary to address this emergency but the most important issue is the widespread red-tapism in the country.


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