Venezuela “Resource Curse”
The British economist Richard M. Auti coined the term “Resource Curse” in 1993. It is fact that “Resource Curse” countries have sufficient natural resources i.e. fossil fuels, minerals but may not compete in terms of socioeconomic development with countries having less natural resources. One such example is Russia, with abundant resources and Europe with lesser resources. Eurasian Times reports in its article Venezuela “Resource Curse” Strengthening Chinese-Russian Economy that the International Monetary Fund regarded fifty-one countries as resource-rich countries. These states received at least 20% of exports or tax revenues from non-renewable resources. Out of these 50 countries, 29 of them are low or middle-income countries. The characteristics of these so-called “resource curse countries” include the extreme dependence of the budget on resource extraction; low saving rates and poor growth rate.
The country like Norway is an exceptional case, which use oil from the North Sea to transform its economy from micro to macro level with strong institutions and a commitment to wisely distribute resources.
Venezuela’s economy emerged as an example of “resource curse” economy. According to the US Energy Information Administration, the country had oil reserves of 300.878 million barrels in 2017. In 2016, the share of crude oil and petroleum products was 80.1% losing 43 million dollars, every day. It was forced to sell 2.277 million barrels because of 10 percent fall in oil prices in 2014. By the end of 2018, daily production went up to 2.346 million barrels per day. The country is not able to negotiate logistically that has resulted in the decline of oil prices. Like any other country, the oil-rich country of Venezuela is suffering from “resource curse” because it is critically dependent on food, medicine, and other imports.
Venezuela’s currency, the bolivar collapsed and became a natural consequence of the fall in export revenues and the collapse of import deliveries. On Jan 1, 2014, one US dollar was exchanged for 64.3 bolivars which went on increasing till 2018, 111 413.2. The Bolivar denominated and became known as the “sovereign bolivar”. The course of the “sovereign” in August was set at 59.21 per dollar and on January 25, 2019, it fell to 2,560.86. The minimum wage in Venezuela is 18,000 bolivars equal to the price of a kilogram of cheese at ten thousand.
The shortage of money, food, and medicine lead to any rebellion creating suitable conditions for the birth of the revolution. The last leaders of Venezuela Hugo Chavez and Nicolas Maduro, were violent opponents of the United States. On 23 January, Juan Guaydo declared himself as an acting President. Guaydo was the speaker of the National Assembly of Venezuela. Both Chavez and Maduro propagated more humanistic policy in their country. Venezuela’s current president, Mr. Maduro supply food to poor people, every month. And also provide them free of cost apartments with furniture. Still, “the majority of people in rich areas are against this government, which now rules the country”, BBC reports highlighted.
The ideology of humanism is not remembered by everyone. Libyan Muammar Gaddafi death confirmed this notion. There is the scenario in which the road between Caracas and Puerto La Cruz which covers a distance of sixty kilometers, often come across people jumping out of the jungle and attacking vehicles to snatch food. Chavez and Maduro are blamed for not creating stable economic conditions in the oil-rich country. The emergence of a serious crisis is resultant of objective conditions.
The Venezuelan protests are similar to that of the Arab Spring protests. This is clearly visible from the current government’s dislike for the democratic set up taking the population to the streets for the rebellion to overthrow the power. The Latin American country is undergoing political transformations because it does give a lot of importance to the army. There are several instances from the past, Juan Vincente Gomez was dictator who made himself president three times and won elections too in 1929, but refused the presidency. In the current scenario, Gomez decided to remain supreme commander and discouraged measures taken by Juan Batisto Perez for socio-economic upliftment of the country in 1931.
The Defence Minister of Venezuela, Vladimir Lopez said that the Bolivarian National Armed Forces (FANB) recognize only Nicolas Maduro as president of Venezuela and reject any parallel format government. Vladimir Lopez seems to have control over the entire army system. The commanders of all eight REDIs (strategic regions of integrated defence, or, more simply, military districts) of Venezuela declared their support for Maduro’s government. The REDI Central troops began patrolling the territory on the night of January 26 with the sole aim of preventing the Protestants.
Venezuela’s Military Attaché in Washington, Col. José Luis Silva said: “I do not recognize Nicholas Maduro as the President of Venezuela.” But Jose is just like other colonel posing the minimum threat to the Maduro’s government which holds the confidence of a significant number of supporters. The Venezuelan media says that Maduro is not only supported by the army but also by the head of the church and the top leadership. The state oil and gas companyPetróleos de Venezuela, Sociedad Anonima (PDVSA) emphasised saying, “This, of course, a lot, but … The army, church and business – as you know, the ladies are capricious and fastidious”.
In 2014, the states started creating a harsh environment for the Venezuelan economy with the adoption of the Venezuelan Law on the Protection of Human Rights and Democracy that impose restrictions on the transfer of goods or technology to Venezuela. “At the beginning of 2018, Americans discussed the issue of imposing sanctions against the Venezuelan oilfield services company and restricting insurance coverage for Venezuelan oil supplies in order to increase pressure on the Venezuelan president”, media reports said. Now, American Finance Ministry announced that their economic relations with Venezuela will be built in the context of Juan Guaydo as interim head of the state which means Maduro must leave and Eliot Abrams appointed as the US special diplomat for Venezuela.
Maduro is getting the support of China and Russia which have their own interest in the region, apart from oil reserves. The Russian Air Force’s two strategic missiles, Tu-160, a heavy military transporter An-124, and a long-haul IL-62 landed in Venezuela which indicates that Venezuela can serve as the base for all types of military aircraft. The Russian military action has intensified the growth of crisis. The war is a struggle for possession over a territory. Hence, China and Russia want control over South American territories as the US is trying to dominate Eurasia.
Yury Borisov, the Russian Deputy Prime Minister for military-industrial complex visited Havana in relation to the signing of contracts for military cooperation of more than 200 million dollars. On the other side, China is building the Nicaraguan Canal from the Pacific to the Atlantic. Presently, there is no advancement in the project but is still part of the Chinese agenda.