Venezuela crisis?

Introduction:
            A woman was shot dead and dozens injured in the Venezuelan capital Caracas, in clashes between opposition supporters and pro-government forces. Tear gas and water cannon were fired by the military amid rival demonstrations. Opposition leader Juan Guaidó called for a series of strikes to force President Nicolás Maduro to relinquish power. He urged public employees to act, saying the stoppages would lead to a general strike. Guaidó in January declared himself Venezuela’s interim leader, and he has been recognised by more than 50 countries including the US, UK and most Latin America nations. But Maduro – who is backed by Russia, China and the leaders of Venezuela’s military – has refused to cede power. Meanwhile, Secretary of State Mike Pompeo said that U.S. military action “is possible” in Venezuela to bolster Guaido’s bid to oust President Maduro. “The president has been crystal clear and incredibly consistent – military action is possible. If that’s what’s required, that’s what the United States will do,” Pompeo told a news channel in the US

What is the Venezuela crisis?
Hyperinflation is the biggest problem faced by Venezuela. The inflation rate there is expected to reach a stunning this year, putting it on par with the crises of Zimbabwe in the 2000s and Germany in the 1920s, according to the International Monetary Fund. The government claims that the country is the victim of an “economic war” and that the major issues are due to opposition “plots” and American sanctions.
What caused this increase?
The plummeting oil prices since 2014 is one of the main reasons why Venezuela’s currency has weakened sharply. The country, which has rich oil reserves largely depended on it for its revenue. But when the oil price dropped drastically in 2014, Venezuela which received 96 per cent of its revenue from the oil exports, suffered a shortage of foreign currency. This made import of basic essentials like food and medicines difficult.

Brief Background on Present Venezuela Crisis:
Venezuela’s former President Hugo Chavez came to power in 1998. He promised to fight poverty and inequality through socialism and nationalised huge amounts of private assets, including oil companies.
Petróleos de Venezuela, which is a state-run firm that controls entire oil production in Venezuela.
This state-run oil firm was tasked with the job of exporting oil to spend the revenues on social welfare.  
Social welfare schemes were expanded as the Venezuela’s economy is primarily dependent on oil exports. As a result, Venezuela’s poverty rate fell from 50% in 1998 to 30% in 2012.
As oil prices tumbled from around $ 115 per barrel in 2014 to as low as $ 27 per barrel in 2016, then slowly, crisis has been evolved since of no other major commodity to export in place of oil, resulted in dollar flow got stopped.
Then, Government borrowed freshly to continue Social welfare schemes. It created Bolivars (Venezuela currency) from the Central Bank.
The central bank stopped publishing inflation data in December 2015, and gross domestic product hasn’t been updated in more than a year.
Venezuela’s money supply grew from 10.6 bn bolivars in 1998 to 290 bn bolivars in 2010 and later reached 7,513 bn bolivars by 2016
It resulted in rapid domestic price inflation and drop in the bolivars value and crippled the economy

Why is the presidency disputed?
Nicolás Maduro was first elected in April 2013 after the death of his socialist mentor and predecessor in office, Hugo Chávez. At the time, he won by a thin margin of 1.6 percentage points.
During his first term in office, the economy went into freefall and many Venezuelans blame him and his socialist government for the country’s decline.
Mr Maduro was re-elected to a second six-year term in highly controversial elections in May 2018, which most opposition parties boycotted.
Many opposition candidates had been barred from running while others had been jailed or had fled the country for fear of being imprisoned and the opposition parties argued that the poll would be neither free nor fair.
Mr Maduro’s re-election was not recognised by Venezuela’s opposition-controlled National Assembly.
Why is it all coming to a head now?
After being re-elected, Mr Maduro announced he would serve out his remaining first term and only then be sworn in for a second term.
The opposition argues Nicolás Maduro is clinging on to power through fraudulent elections
It was following his swearing-in ceremony that the opposition to his government was given a fresh boost. The National Assembly argues that because the election was not fair, Mr Maduro is a “usurper” and the presidency is vacant.
This is a line that is being pushed in particular by the new president of the National Assembly, 35-year-old Juan Guaidó.
What has the reaction been?
More than 50 countries have recognised Mr Guaidó as the legitimate president, among them the US and many nations in Latin America.
But Russia and China among others have stood by President Maduro.

Impacts:

• Situation is extremely fluid
• Increase in the prices of imported goods.
• Hyperinflation is 60,000 percent
• The prices of goods double every few days.
• The economy is shambles today and people face shortages of food, medicine and other commodities.
• 3 million people have left Venezuela and there are millions on the streets who are protesting.
• Venezuela is a classic example of a failed petrostate.
• It is suffering from Dutch disease phenomenon.
• Venezuela’s imports are down from a year ago. Venezuela’s minimum wage is now about the equivalent of $1 a month, making basics unaffordable for many. With a shortage of the import goods, the black market has got a free hand in the country. Prices have been doubling every 26 days on average.
• A survey found that almost 90% of Venezuelans live in poverty and more than 60% surveyed said that they had woken up hungry because they did not have enough money to buy food, reported Reuters. Apart from food, the country is also facing medicine shortage. The economic crisis has also hit the public health system, making medicine and equipment inaccessible to its people.
• As the country slips into poverty, many are turning towards crime to make money. A recent Gallup study placed Venezuela at the bottom of its 2018 Law and Order index, with 42 per cent of surveyed Venezuelans reporting they had been robbed the previous year and one-quarter saying they had been assaulted.
• Mass migration: Angered by the economic crisis in the country, many Venezuelans have started leaving the country. The pace of departures has accelerated in recent days, sparking a warning from the UN. The majority have crossed into neighbouring Colombia and then to Ecuador, Peru and Chile. Others have gone south to Brazil.

Way Forward:

• Foreign actors and major players would have to step in and play a major role.
• The international community cannot remain a bystander- this is because Venezuela is too large an oil economy.
• The International community should focus in building Venezuela’s institutions- for example, the judiciary in Venezuela is in a state of shambles; its parliamentary institutions are suffering.
• Humanitarian assistance.