Venezuela is in the middle of a massive debt crisis that has led to violent protests and food shortages around the country.
However, a recent decision by the government to pay into their debts, rather than investing in local companies, will likely plunge the country into even more chaos.
Here’s how it works: Venezuela has received sizable loans from a number of different sectors. Now this is all fairly standard, especially compared with other nations throughout South America. Venezuela is different, though, in that it basically took all of that money, and spent it on foreign assets overseas. That’s right, condos in Miami, penthouses in New York. In fact, Venezuela made such an abysmal use of that loaned money by simply handing it over to the elites, that if all those assets overseas were liquidated and that money was brought back to Venezuela, they’d have enough to cover the debt and still enjoy a surplus.
But of course the country won’t do that. Instead, they are taking the incredibly small amount of capital left in the country and using it to pay off bondholders in their oil company. This way they retain access to the debt markets they’ve borrowed from. With an incredible 2.8 billion going to interest alone, President Maduro wants to secure that above all else, his oil shipments will not be seized by bondholders.
Meanwhile, the ordinary Venezuelan is being left behind. Venezuela imports almost all of their goods. The rapid inflation of the economy and the lack of investment in local markets have left people standing in line for clean drinking water for hours and scrounging for basic necessities like toilet paper. To gain access to lifesaving medications, people are crossing borders and making harrowing journeys to neighboring states.
In January, a number of airlines including Air Canada, United Airlines, American Airlines, and Air Europa suspended flights into Venezuela due their restrictive access to the US dollar. Soon after, more airlines followed suit when it became clear that the 3.3 billion dollars Venezuela owed foreign airlines would not be repaid.
In February, doctors at one of the main hospitals in the capital Caracas had to stop performing surgeries simply because they lacked the proper supplies. A later survey of the situation brought to light that 9 out of 10 hospitals severely lacked any supplies. In fact, for some, the amount of supplies they had dwindled down to a mere 7%. Although the country’s government hasn’t kept proper medical records since 2010, doctors claim that patient deaths have skyrocketed from easily treatable diseases.
For those simply trying to buy normal goods such as diapers and foodstuffs, they also have to pay out. Because of the black market emerging in the country, everyday items, such as flour and maize, are easily found being sold at 300% above their normal price.
In this state of impending disaster, international tensions have also risen. In February, during some of the country’s worst protests, the government turned and blamed the United States for instigating the chaos. Maduro topped off these accusations by giving three United States diplomats just 48 hours to leave the country. President Obama replied to this rift with stern words for the President of Venezuela.
“Venezuela, rather than trying to distract from its own failings by making up false accusations against diplomats from the United States, the government ought to focus on addressing the legitimate grievances of the Venezuelan people.”
It is these sorts of political rifts that could cause even more economic damage in the small embroiled nation. Sanctions could completely collapse any measure of normalcy left in the capital. Any financial action on the part of the United States, in order to destabilize Venezuela, could lead to governmental collapse as well.
Yet all that aside, the pressing issues right now hinge on the starving and embittered residents stuck in this mismanaged nation, who cannot afford medications, diapers, water or even seek medical treatment should a health complication arise. The government has clearly abandoned its people, while shoveling international funds into their own pockets. This newest measure by the government only ensures that for the average Venezuelan, access to the basic necessities in life will continue to deteriorate.