Monday, April 6, 2020

Venezuela: Its Not The Oil

There's a common misconception that the collapse of the Venezuelan economy was due to eroded oil markets and U.S. sanctions. This is usually used as a defense for big government programs, and while those programs are defensible and valid, this defense of it isn't. 

Venezuela's RGDP growth started declining far before the collapse in the oil markets. In fact, it happened about a year-18 months after, at around 2013. Oil prices were also stable around this time and didn't decline until about a year later. US Sanctions didn't truly vamp up until the start of the Trump administration and sanctions under the Obama administration mainly targeted oligarchs. Rich people losing money doesn't typically cause humanitarian crises. Inflation also started to rise in 2013 along with the initial decline in RGDP before the oil market crash. Other countries that heavily depend on oil such as Saudi Arabia, Nigeria, Kuwait, Qatar, Angola, Alegria, and Brunie aren't seeing Venezuela's problems. There just isn't a case to be made for blaming Venezuela's humanitarian crisis on oil.