In November 2009, oil-rich, and apparently cash-flush Venezuela, under the then-president Hugo Chavez’s Bolivarian Alternative for the Americas, gave Guyana a grant of US$2 million for the construction of a shelter for the homeless. Guyana had identified land at Onverwagt, West Coast Berbice and the facility was duly built; its construction lasting way beyond the 2010 completion date. Its doors were formally opened sometime in 2013.
Just over a year prior to the US$2 million gift being handed over, there had been a diplomatic blip when officials from the Venezuelan embassy ventured to Buxton to donate food items to the value of US$500 to farmers whose land had become inaccessible during a local joint services’ criminal-hunting exercise. The donation had been made in response to a request to the embassy for assistance by the Buxton/Foulis Neighbourhood Democratic Council through the African Cultural Development Association. However, the then government had objected saying that Venezuelan envoys had ignored the protocols governing such interventions and the embassy had issued an apology, along with an undertaking that there would be no recurrence.
Today, just 10 years later, Venezuela is still oil rich, in fact according to reports, it has crude oil reserves of over 300 billion barrels, but it is cash poor. So much so that the US$2,000,500 it had given Guyana for the shelter and the food items would greatly benefit at least some of its citizens.
The fact is that having oil does not magically translate into having money; as the oil must first be sold.
Back in 2008, oil from the Organization of the Petroleum Exporting Countries (OPEC) of which Venezuela is a founding member, was being sold on the world market at around US$145 per barrel. Venezuela’s reserves then would have been worth in the vicinity of US$435 billion. In 2009 prices dropped drastically to as low as around US$37 per barrel at one point. Venezuela seemingly did not panic, even though oil is basically its only industry, and with good reason as oil prices climbed again until they were around US$115 a barrel in 2014. However, there was another slump that same year and in the 5 years since, despite OPEC’s best efforts, including reducing production, prices have remained around US$50 per barrel.
There are two main reasons why a decrease in oil prices pushed Venezuela to its current state of instability. The first, as mentioned above, was its lack of a diversified economy. Placing all of its eggs in an oil barrel, Venezuela had ignored its agricultural industry and had nothing to fall back on when petroleum prices crashed. The second was political interference in the oil industry. Concessions previously granted to foreign companies were nationalised in the 1970s, with the Venezuelan government taking over all their assets sans compensation and subsequently forming a state-owned petroleum company, Petróleos de Venezuela SA (PDVSA). However, this was seemingly ill-thought out as there appeared to be either a lack of expertise at PDVSA or too much government interference, which led to Venezuela basically being unable to export oil. Part of the problem lay in the fact that Venezuela’s oil tankers had ceased to be upgraded to the point where they were no longer able to meet environmental standards. International maritime law meant that they could not sail. The country then racked up billions of dollars in debt, borrowing from its allies Russia and China, to obtain new tankers as well as purchase the necessary additives to refine its oil.
But with oil prices still very low, it was spending more than it was making, which any first-year economics student will tell you is a recipe for disaster. This coupled with its President Nicolas Maduro’s dictatorial governing style set the stage for the current Venezuelan crisis. Citizens have been leaving Venezuela for at least 4 years now, because of shortages of food and other essentials. Hyperinflation drove the country’s currency into the ground to the point where citizens were paying 2.5 million Venezuelan Bolivars for one kilogramme of rice, if they could find it to buy. Just for context, if the Venezuelan Bolivar could still be converted to US currency today 2.5 million would be worth US$759.
Meanwhile, the exodus from Venezuela ballooned. It is estimated by the UN Refugee Agency that refugees and migrants from Venezuela number over 3 million and that 2.4 million of them are in countries in South and Latin America and the Caribbean. Many of them are virtually penniless, as even if they were flush with their country’s currency it would be worthless and they would be forced to beg or steal as the case may be, if there were no proper humanitarian systems in place to make their transition to a tenuous new life easier.
At present, the 28 million-odd people, including babies, children, the elderly and the sick, still in Venezuela need aid. The UN had approved the release of some US$9.2 million in emergency relief funds since late last year and last month the United States said it would send US$20 million, but only if certain political conditions were met. Unfortunately, even the 2 sums combined would not be nearly enough, even if by some miracle they reached the crisis-hit country, where to compound the situation an opposition leader has declared himself president with a sitting president still in place.
Venezuela’s turned tables is a crucial lesson in how not to govern, yet, shades of misgovernance are still evident in too many countries today, ours included. It stands to reason then that power must necessarily be doled out in small doses, not everyone can withstand its headiness.
