Images of Venezuelans searching for water, open shops, and refuge in the pitch black stands in stark contrast of the reality of the country’s natural wealth. Venezuelans have been enduring waves of blackouts and water shortages even though they sit on top of the world’s largest known oil reserves.
The story of Venezuela’s economic rise and fall is one that is all too familiar for petro states. The country discovered oil in the 1920s, which drastically changed their economic structure—shifting them from agriculture production, known for coffee exports, to being almost entirely dependent on oil.
Economic dependency on oil is tricky business. At its peaks, it brings an onslaught of wealth, as it did in Venezuela with its initial discovery in the 1920s, and again at different spikes in the oil market. In 2008, oil prices hit a peak, and OPEC, of which Venezuela was a founding member, estimated that the country made $60 billion from oil that year. In contrast, following a drop in oil prices, and crippling inflation, Venezuela has an estimated GDP of $80 billion in 2019.
“There was a lot of money that came in when the price of oil was around $110 per barrel,” said Eric Farnsworth, the Vice President of the Council of the Americas. “Venezuela is an oil-based economy, so once the price of oil went to that historic level, the money was literally sloshing into Venezuela,” he said, adding “all of that money, which should have been put away for a rainy day for Venezuela’s development, simply disappeared.”
Farnsworth and other experts believe that chronic mismanagement and the ebbs and flows of the oil market have plagued Venezuela’s economy for decades.
“Venezuela used to not just be able to feed itself from an agriculture and food perspective, but they also used to export agricultural products to other countries, and now everything that Venezuela needs to consume is being imported,” Farnsworth said, adding “it completely changed the dynamics of the entire economy.”
The economy Farnsworth is referencing is one that now boasts the highest inflation rate in the world, with the IMF projecting that it will reach 10 million percent in 2019. Millions of people have left the country, causing a regional migration crisis, as food and everyday products become unattainable back home.
United Nations numbers show that 11 percent of Venezuela’s population was undernourished between 2015 and 2017—up significantly from around five percent between 2008 and 2013. Recent figures also show that nine out of 10 Venezuelans cannot afford their daily food, and infant mortality rates have increased in recent years as well.