Name: Kyle Christopher S.

Reyes

Course and Section: LS 201

Subject: INNN17F – International Negotiations

Professor: Mr. Jumel G. Estrañero

University: Lyceum of the Philippines University – Cavite Campus

A FAILED PETROSTATE: THE COLLAPSE OF VENEZUELAN ECONOMY IN THE

21ST CENTURY

Final Exam Output in International Negotiations

Second Semester, Academic Year 2021-2022

 INTRODUCTION

Venezuela, which is known as the country with the largest oil reserves at 303.8
billion barrels of crude oil as of 2022. For a decade, Venezuela is seen in the news as a country
facing an economical-driven crisis. The snowball started when the late former president of
Venezuela, Hugo Chavez, came into power. Chavez has led Venezuela's government and society
through a "Bolivarian revolution" after being elected president in 1998. This revolution unifies a
set of principles that demonstrate a populist and even authoritarian approach to administration, the
integration of the military into domestic politics, and an emphasis on using state resources to
benefit the poor, representing the president's main constituency. Chavez also used his popularity
among the working class to expand the presidency's powers and move the country toward
authoritarianism: he repealed term limits, successfully took control of the Supreme Court, harassed
and closed independent media outlets, and nationalized hundreds of private companies and
foreign-owned assets. A year after Chavez's death, the reforms allowed Nicolas Maduro to
establish a regime that is like Hugo Chavez. Under the authoritarian-like leadership of Nicolas
Maduro, the successor of Chavez, Venezuela remain in a deep hole as the country still faces its
dark days with an imminent economic crash and a humanitarian crisis up ahead. As global oil
prices collapsed in mid-2014, sending Venezuela's economy into free fall. Maduro consolidated
power through political repression, censorship, and electoral manipulation as unrest intensified.
Venezuela's economy has collapsed. The recent trend of hyperinflation, severe food and
medication shortages, and a dire humanitarian catastrophe struck the country, which has worsened
as a result of gasoline shortages, COVID-19, and US sanctions. Maduro has blamed sanctions for
the economic crisis, but many observers believe the fundamental causes are economic
mismanagement, incompetence, and corruption. Venezuela's crisis has been deepened by U.S.
sanctions against the Venezuelan oil industry. To put even more pressure on Maduro's
administration, The United States sanctioned the Venezuelan gold mining industry in March
2019 and the Central Bank of Venezuela in April of the same year, cutting off the institution's
access to US currency and limiting its ability to make international transactions.
 BODY

A petrostate is a state wherein its wealth stems from the sale of oil. These are the most oil
and gas-reliant countries and are predominantly in the Middle East, North and West Africa, and
South America. One country to look at is Venezuela. Venezuela is a perfect example of a petrostate
as it is a country in which its institutions are weak, and the country’s wealth and power are
controlled by the few in authority. Petrostates are at risk nowadays as the global economy begins
to reduce carbon emissions to prevent further damage of the environment, there is a significant
transformation coming as the pace and certainty of the energy transition continues, populations
that rely primarily on fossil-fuel extraction and production will see fewer government revenues
and job losses.

According to a data gathered from OPEC in 2015, Venezuela has the world’s largest proven crude
oil reserves with over 300 billion barrels of oil. Saudi Arabia came in second with 266 billion
barrels, Iran took the third place with 158 billion barrels, and Iraq are all ahead of others with 142
billion barrels of crude oil. Venezuela, however, has been through an extreme crisis of any society
in modern Latin America, and on the record, it has been a tragedy for the country. It is the deepest
crisis of any non-war-torn country in recent times. Between 2013 and 2019, the country's Gross
Domestic Product (GDP) decreased by 62 percent.

As the country faces the worst economic crisis in its history, its oil production also set an all-time
low record of 2.5 million barrels a day after 23 years. In the same period of time, Venezuela went
from being a limited democracy to an authoritarian regime. Venezuela transitioned from
democracy to authoritarianism in the 2010s (Camero 2016; López Maya 2016; Corrales & Penfold
2011; Levitsky & Luxton 2013). Marsteintredet stresses that from 2016, Venezuela became a form
of autocracy. During this time, the majority could no longer exercise its right to elect or recall the
government, as per constitutional norm. Even though oil does not automatically equal cold, hard
cash, the Venezuelan government has spent its money as if it did. The lack of transparency makes
estimating precise spending figures difficult. The late Hugo Chavez put petroleum at the heart of
the economy on his regime, oil accounts for about 90% of Venezuela’s exports and roughly half
of the government's earnings.
During the past decade, Venezuela's economy has suffered more damage than good due to its
reliance on oil revenues rather on policy decisions and transformations established during the
Bolivarian Revolution led by Hugo Chávez and later by Nicolás Maduro. On the other hand,
institutionalist and liberal scholars see the crisis mainly as a result of the deterioration of
governance mechanisms that have undermined checks and balances, the independence of
institutions and ultimately turned the country unto an autocracy (Polga-Hecimovich 2019; López
Maya 2016).

Together with the deterioration of democracy in Venezuela, there was a parallel process of
productive decay in the country’s economy. Venezuela has long been labelled a rentier economy
(Mommer 2002; Baptista 2010; Hellinger 2017). A rentier economy is where individuals and
businesses with large market power can extract rent from everybody else including the
unemployed at an hourly wage. Practices of monopolization can be seen in a rentier economy with
access to any kind of property including physical, financial, and intellectual property. With
authorities having access on such properties, they can milk those and gain loads of profit without
contribution to the society.

With Maduro under control of this authoritarian-like government, he has used security forces,
buoyed by corrupt courts, to quash dissent and other negative media portrayal against his form of
government. Allies were rewarded by his authoritarian-like government by allowing them to earn,
especially in the security forces, from illicit gold mining, drug trafficking, and other sources of
revenue activities that are illegal. These same security forces participated in assault and cases of
detaining people and allegedly abusing them. Including are Maduro’s opponents, including
military officers, opposition politicians, and civic leaders. According to most reports, Maduro's
government has mishandled the country, the economy, and is massively corrupt due to his
unthinkable actions amplifying the effects of lower oil prices and production.

As per the International Monetary Fund, in 2014 and 2020, the country's GDP shrank by 74% and
5%, respectively. However, in 2021, hyperinflation has calmed, and oil prices have risen and
appears to be driving the economy forward into a recovery. Venezuela is facing a serious
humanitarian emergency, as the COVID-19 pandemic began in 2020. Venezuela is one of the most
critical countries to be hit with the outbreaks because of the ongoing humanitarian crisis and
hyperinflation, with millions of people unable to access basic healthcare as shortage of medicine
is present and adequate nutrition as food stocks are affected by panic buying and the recent
hyperinflation. Limited access to safe water in homes and healthcare centers and a vaccination
plan ruined by lack of transparency by the Venezuelan government may have contributed to the
spread of COVID-19.

ANALYSIS

As Venezuela has seen one of the deepest economic downturns in human history,
especially considering that it was a man-made disaster that occurred outside of a combat zone,
more than 6 million refugees, asylum-seekers, and migrants from Venezuela have left the
country seeking food, work, and a better life. Hyperinflation, violence, and food and medicine
shortages coming from recent political turmoil is driving Latin America's largest migration in
recent years. According to the World Food Programme (WFP), one out of every three
Venezuelans is malnourished and requires emergency food assistance. The country continues to
be a hot spot for food insecurity. In response, WFP plans to feed 1.5 million children in schools
by the end of the school year 2022–2023. The WFP's major implementing partner is World
Vision. Since 2014, more than 6 million Venezuelans from all walks of life have left the country.
They've migrated in search of jobs, food, better healthcare, and sense of security. Because
Venezuela's health system has crumbled, diseases that were previously eradicated, such as
measles, diphtheria, and malaria, are now rising and even crossing national borders as
Venezuelans migrate. Having the world's largest oil reserves, the country was previously
considered the richest in Latin America. However, the national economy has collapsed due to a
decade of decreasing oil revenues and poor governance, and the government has been unable to
provide essential social services.
 RECOMMENDATION

• As another threat poses involving the previously eradicated diseases that once
came back to life again, it is important to focus on how the international agencies
would help each other on providing if not sufficient, a decent supply of vaccines
to help combat the probable threat to national security of the country as these
diseases do not respect borders. As more and more Venezuelans plan and
continue to leave the country, time is of the essence.

• During this impasse, we must provide relief to those who are most in need in a
politically neutral manner. This may involve funding and sponsoring current local
and global NGOs on the ground as well as supplying essential medicines through
existing channels. Because the demand is and will be tremendous, the US Gov't,
several international organizations, and allied nations should think creatively
about a range of delivery mechanisms, from cash transfers to airdrops of supplies.
Venezuela is fighting a humanitarian crisis alongside an economic crisis. With
these present, children and the elderly are among the most vulnerable in the crisis.
As food stock continue to decrease, the mentioned groups of people are at risk of
hunger and death.

• Bring up a more focused way on helping Venezuelans. On the humanitarian front,

this involves utilizing best practices in challenged environments of the country to
receive relief in apolitical, discrete ways as much as possible, and being prepared
to commit resources corresponding with the demand, which should be multiples
of already committed aid.
 CONCLUSION AND WAY AHEAD

The crisis in Venezuela is not going to end anytime soon, a good thing is that the
country’s inflation rate slows down to lowest in almost a decade because of Maduro’s easement
of foreign exchange controls to allow a wider circulation of hard currency, leading to more stable
prices in the country. The adoption and transaction use of the US dollar helped curb Venezuela’s
hyperinflation trend. Another thing to consider is that when the government changes from an
authoritarian leadership to a democratic type, Venezuela will have to go through extensive
reforms, which will require a deliberate and unifying support of global players. However, the
international community is still divided on how to handle the situation, obstructing the
effectiveness of efforts to repair Venezuela's economy. The United States has pushed for other
countries to give sanctions to Maduro and his officials and hold him accountable. The Maduro
government is responsible for violations of human rights.
REFERENCES

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(PDF REFERENCES)

https://sgp.fas.org/crs/row/IF10230.pdf

https://www.jstor.org/stable/pdf/26936900.pdf?refreqid=excelsior%3A9839ba83f319ee8e122e3e
cae687f771&ab_segments=&origin=&acceptTC=1
 MESSAGE TO THE PROFESSOR

Good day, sir! We do appreciate the fruitful discussions that you gave us throughout the
semester. We really hope that we will meet again someday soon. Your students wish you
good luck on your future endeavors in life. We might be g on hangouts sir, pm niyo lang
kami! :D

“When one door closes, another door opens, but we so often look so long and so
regretfully upon the closed door, that we do not see the ones which open for us.”
– Alexander Graham Bell