This question come from Venezuela Under Hugo Chavez and Beyond Closing Case During the latter part...

This question come from Venezuela Under Hugo Chavez and Beyond Closing Case

During the latter part of Chavez’s rule, Venezuela benefited from high oil prices. Since 2014, However, oil prices have fallen substantially. What has the affect of this has been on government finances and the Venezuelan economy?

Expert Solution

High oil prices helped the Chavez government to gain higher income through the export of oil and it helped in reducing the unemployment, decreasing the poverty and funding the other social programs. Here, Chavez also made an error of not consolidating upon these export values and took erroneous decisions such as replacing experts by his own people that siphoned the funds for their own benefits. When the oil price came down, then earning of the government from the export of oil, also came. Further, the volume of exports also came down. It reduced the major source of income and government has to restrict its finances. For this purpose, many people were laid off that pushed the unemployment to a new high. Poverty level was also at the highest level. Besides, the poor value of domestic currency laid to the inflation in the economy and there was a lack of availability of the necessary goods. It created social anarchy in the country, and pushed the economy on the verge of total collapse.

Rahul Sunny answered 2 years ago

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