At the beginning of the last century, Venezuela was considered the country’s main economy. South America. At least part of the story is that the country discovered huge oil reserves in 1922. Currently, the country has the largest reserves of any country, 303 billion barrels. Although this sounds good on paper, it doesn’t change the fact that the economy is the poorest in South America. The mystery is this: how could the situation deteriorate while all this oil wealth is waiting to be monetized?
The first big step in the wrong direction came in 1976, when the Venezuelan government decided to nationalize all foreign oil companies in the country. In turn, the newly acquired oil activities were largely placed under the responsibility of the already state-owned oil company Petróleos de Venezuela, SA (PDVSA).
Yet what is perhaps surprising is that the economy did not initially collapse. “What kept that going was they were still producing oil,” Robert Wright, a visiting professor of history at the University of Austin, told FOX Business. “Even for a socialist, it takes time to mess up.”
AFTER MADURO, VENEZUELA FACED DIFFICULT CHOICES TO REBUILD ITS OUTLINED ECONOMY
President Nicolás Maduro speaks during a meeting with ministers in Caracas, Venezuela, December 17, 2016. (Miraflores Palace/handout via Reuters / Reuters)
Becoming a full-fledged socialistThe next change came with the election of Hugo Chavezin 1998. A year later, he introduced the “Bolivar Plan,” which contained goals involving “an anti-poverty program including road construction, housing construction and mass vaccination,” according to the Council on Foreign Relations. The government’s desires may seem compassionate, but in reality, Chavez was on the verge of becoming a full socialist.
Friends’ cornerIn 2002, the Chávez government fired PDVSA’s top executives along with 18,000 other workers, many of whom were highly skilled in oil extraction. And a significant share of those laid off have emigrated to other countries. The question now was who would be hired to run the oil sector? It turned out that many appointments at PDVSA were assigned to political friends rather than qualified oil extraction experts.
Oil pumps operate near Lake Maracaibo in Venezuela, July 12, 2024. Decades of mismanagement, underinvestment and sanctions have contributed to the decline of Venezuela’s once-dominant oil industry. (/Getty Images)
Without skilled workers in the oil industry, the state-owned enterprise declined; first slowly, then very quickly. “They didn’t run it like a business, and they didn’t reinvest in the business to sustain it,” Steven Blitz, chief global macro strategist at GlobalData TSLombard, told FOX Business. Recently, production was 1.1 million barrels per day, up from 3.7 million in 1970, according to Statbase.org data.
Hyperinflation is crushing the countryNicolas Maduro took over the presidency of Venezuela in 2013 and made the situation worse.
MOM OF US OIL GIANTS AFTER TRUMP SAYS THEY WILL SPEND BILLIONS IN VENEZUELA
Cuban President Fidel Castro, left, talks with President Hugo Chavez during their meeting in Campo Carabobo, Venezuela, October 29, 2000. (Adalberto Roque/AFP via /Getty Images)
To appease the people, the government provided services to the country. But there was a flaw. “They paid for it by printing money, which of course led to hyperinflation,” Wright said. It started in 2016 and peaked at 375,000% in 2019, according to data from Trading Economics.
There were other problems. “The government took control of the oil industry, thinking it was going to become a cash cow,” Blitz said. “Eventually, revenues fell.” And at that point, the country had nothing else to fall back on; no big banks, no other major sectors other than independent independents. Wright says: “They never developed the economy. »
An oil pump and tank with the logo of the national oil company PDVSA in Lagunillas, Venezuela, January 29, 2019. (Isaac Urrutia / Reuters Photos)
Over the past decade, Venezuela has been subjected to multiple US sanctions. These sanctions are varied but primarily aim to embarrass the country’s leaders by imposing a multitude of prohibitions, including prohibiting citizens from entering into financing agreements with the Venezuelan government.
During the Maduro years (from 2013 to early 2026), the number of Venezuelans living in other countries sautéed. In 2015, there were just 700,000, but that figure rose to around 7.9 million last year, according to the International Organization for Migration. It is likely that at least some of those who fled were highly skilled workers, those the country currently needs.
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“The people who ruled Venezuela had a singular point of view,” Blitz says. “They thought the party would never end.” But it is indeed the case, and many now hope that a new era – ushered in with Maduro’s ouster – is about to begin.