The Venezuelan government has declared a 60-day economic emergency as the socialist administration struggles to deal with the economic turmoil engulfing the country. The new decree comes as sliding oil prices, government spending, and currency controls have almost pushed the country to the brink of collapse.
Hours before declaring emergency, President Nicolas Maduro argued that his government policies generated jobs and that capitalist policy would surely have pushed people into unemployment. He also vowed to continue with his present economic model.
Although the decree gives sweeping powers to Maduro to implement policies he believes will quell the crisis, analysts say the way out for the country requires some politically tough decisions.
Not only has Venezuela been hit hard by the continuing low price of oil, its main export, it also has the continent’s highest inflation rate and is suffering from chronic shortages of some basic goods, which forces citizens to stand in lines for hours at groceries stores. A study by Caracas-based polling firm Dataanalisis suggests that Venezuelans spend on average five hours per trip buying groceries and visit up to four different stores to find products.
Declining oil prices and the administration’s populist social welfare programs are the chief culprits of economic problems. Oil is Venezuela’s main source of income and the main financier of its schemes and programs. The structure in place makes it difficult to maintain any semblance of a budget if the country cannot sell oil at around $80 a barrel, which was once the norm but now represents a price the world hasn’t seen — or is expected to see again — for a long time.
With oil trading below $28 a barrel, Venezuela has almost run out of cash. According to the IMF, Venezuela’s economy contracted 10% last year and is on course to slide another 6% this year.
Inflation also skyrocketed 141% over the year ending in September, according to the central bank, with the IMF projecting inflation in Venezuela to increase 204% this year.