Venezuela

Venezuela has been in the news over the past few years because their economy has collapsed. Venezuela has the worlds largest oil reserves and the question arises, what happened. Oil was discovered in Venezuela in the 1920's and foreign companies mostly from the USA invested in and developed the oil industry. The economy grew during the ensuing years and in 1943 the government announced it would take one half of the oil income from the oil companies. This money was used to promote various social programs especially education. In 1960 OPEC was founded and Venezuela was one of the original members. In 1973 OPEC began setting oil prices and Venezuela continued to prosper. In 1976 Venezuela nationalized the oil industry and replaced many of the foreign managers with native people. They used much of the revenue to buy up other foreign owned companies and continued increasing social benefits to the people. In the mid 1980's the price of oil declined and in 1989 Carlos Perez was elected president and he tried austerity to stabilize the economy but the people objected to cutting their benefits and riots erupted. Hugo Chavez acting as a man of the people (a populist) took control of the government. He promised more benefits and installed a new constitution. In 2004, Chávez and his government returned to furthering their programs promoting welfare and the redistribution of wealth across the Venezuelan people, particularly focused on the poorer areas of the country. As the price of oil continued to rise the country prospered but in 2016 the price began a steep decline. This along with mismanagement of oil industry along with the many other companies that had been taken over by the government caused the economy to go into a recession. The government began printing money to pay for all of the social programs to prevent riots and this brought on inflation which led to hyperinflation. This led to food shortages and many people began to flee the country. It took only 20 years from Venezuela to go from being the richest country in South America to today where 80% of the people live in extreme poverty, the highest figure ever recorded.