It wasn’t long ago that Venezuela was one of the most prosperous countries in Latin America, and Caracas one of the most prosperous communities. They have more oil reserves than Saudi Arabia and more poverty than Columbia today.
The deterioration of their oil industry began with the election of Hugo Chavez.
Venezuela’s highest-ever oil production occurred in 1998 at 3.5 million barrels per day (BPD). That also happened to be the year that Hugo Chávez was elected president of Venezuela. During the Venezuelan general strike of 2002–2003, Chávez fired 19,000 employees of the state oil company Petróleos de Venezuela, S.A. (PDVSA) and replaced them with employees loyal to his government…
So there are primarily two related causes that have resulted in the steep decline of Venezuela’s oil production, despite the sharp increase in the country’s proved reserves. The first is the removal of expertise required to develop the country’s heavy oil. This started with the firing of PDVSA employees in 2003 and continued with pushing international expertise out of the country in 2007.
Second, the Chávez government failed to appreciate the level of capital expenditures required to continue developing the country’s oil. This was in no small part due to inexperience among the Chávez loyalists that were now running PDVSA, but it may not have mattered in any case. When oil prices were high, Chávez saw billions of dollars that could be siphoned to fund the country’s social programs, and that’s exactly what he did. But he failed to reinvest adequately in this capital-intensive industry.
Once one of Latin America’s richest countries, it’s now plagued with shortages of everything from toilet paper to antibiotics and food. It’s been a steep downward spiral since the heady days when the late President Hugo Chavez set out to use an oil boom to light a socialist path to prosperity, not just for the poor in Venezuela but across Latin America. Chavez died in 2013, about a year before oil prices fell sharply. His protégé and successor, Nicolas Maduro, 56, has tightened his hold on power as opponents complain of economic mismanagement, corruption and political oppression. His critics inside and outside the country are pushing back, pressing for Maduro’s ouster.
Until recently, it was Latin America’s breadbasket, exporting food. Today, there are shortages of milk, meat, coffee, rice, oil, precooked flour, butter, toilet paper, personal hygiene products and medicines. By January 2017, the shortage of medicines reached 85%, according to the Pharmaceutical Federation of Venezuela (Federación Farmacéutica de Venezuela). Hours-long lines have become common, and those who wait in them are sometimes disappointed. Some Venezuelans have resorted to eating wild fruit and garbage.
And now, the Maduro government has forbidden foreign aid of food, erecting barriers on the main highway from Columbia.
Opposition leader Juan Guaido, who has declared himself interim president, requested the aid, warning many Venezuelans face severe risks without international help.
Don’t make aid a ‘political pawn’
The U.S. State Department, which procured the aid, called on Venezuelan security forces to allow the supplies to enter the country.
A spokesman for U.N. Secretary-General Antonio Guterres said Thursday “humanitarian aid should never be used as a political pawn” and must be carried out in “accordance with the principles of humanity, neutrality, impartiality and independence.”
Russia and China, which are major investors in Venezuela’s oil industry and significant creditors to the indebted government, have stood by Maduro and criticized U.S. interference. The two blocked a push for the United Nations Security Council to back Guaido.
– Turkey has also backed Maduro in contrast with its NATO allies while Iran has accused the United States of seeking “world hegemony.”
Until 1998, through its huge oil reserves, Venezuela was Latin America’s richest and most prosperous country. In 21 years through socialism, it has slid into the abyss.
Let’s hope for the sake of the country that Mr. Guaido can prevail.