Question

During the Chavez years, many foreign multinationals exited Venezuela or reduced their exposure. What do you think the impact of this has been on Venezuela? What needs to be done to reverse the trend?

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Answer 1

• During the Chavez years, large scale nationalisation of private firms were carried out. Hence, importance of government in economic activities witnessed substantial rise.

Following were impacts of Chavez economic policies:

• number of private firms got reduced in Venezuela. According to one estimate there were total 14, 000 private firms in Venezuela in 1999 which were reduced to the 9,000 in 2011.
• Fall in investment by the private firms led to the fall in growth rate of country.
• It is estimated that over $150 billion FDI entered in Latin America in one year, of which only $ 5 billion was garnered by the Venezuela.
• Inflation rate is very high in Venezuela, inflation is hovering more than 20 % per year.

Remedial Actions:

• Government must reduce its role in economic activities where private sector can deliver an efficient outcome.
• Government must assure to MNCs that no further nationalisation shall be carried out, if resorted, then ample compensation shall be given.
• Government must clearly define its rules and regulations.