Venezuela: Between the Oil Recovery and the Prolonged Social Crisis

The Bolivarian Republic of Venezuela, with its Capital in Caracas, has faced a deep economic and political crisis since 2013, when Nicolás Maduro assumed the presidency. His government has been marked due to political tensions, such as his swearing-in after disputed elections and an attempted murder in 2018 during a military parade, which were attributed to the extreme right and to the outgoing president of Colombia, Juan Manuel Santos. 

¿Economic crisis and petroleum dependency?

One of the main factors from the Venezuela crisis has been the excessive dependency on petroleum. Despite the idea that the country is rich, because of its oil reserves, this sector has less than 150,000 people, whereas it has to support 32 million. This situation has generated political debates of how to distribute the petroleum rent equitably. In addition to this problem, a paternalistic state is added. Which has created a dependent society and a relation of clienteles among the government and citizens. Besides, militaries have played an important role in the political power determining the permanence of Chavismo.  

In this order of ideas, does there exist a collapse of the oil sector? oil, once the spine of the Venezuelan economy, has suffered a drastic reduction in its manufacturing. In September 2021 the OPEP informed that, Venezuela produced only 527,000 oil barrels per day, a dip of 82.9% in contrast with 2013 levels. Despite having been one of the biggest worldwide petrol producers between 2007 and 2011, the dreadful government choices led to a collapse in the industry, limiting the manufacture and aggravating the economic crisis.  

The impact of the crisis has been devastating, affecting the entire population, especially the most vulnerable. In 2018, hyperinflation reached 90%, badly affecting the quality of life of Venezuelans people, weakening the health system and state institutions. This situation has generated a wave of migration that has affected several countries in the region, aggravated by the sanctions imposed by the United States in response to human rights violations and undemocratic practices by the Maduro government. These problems have led to a massive migration of Venezuelans, particularly to Colombia. According to the International Organization for Migration, in 2023 there were more than 7.7 million refugees and Venezuelan emigrants, with 2.8 million in Colombia. Although this migration has generated pressure on public services and the Colombian economy, it has also enriched cultural diversity and created new economic opportunities. 

Despite the crisis, the Venezuelan economy has shown signs of recovery. In the second quarter of 2024, PIB grew by 8.8%, driven by the oil sector, which increased by 11.08% in that period. Although oil production exceeded 800,000 barrels per day, it is still facing challenges due to U.S. sanctions and lack of domestic financing. The credit restrictions and change rate controls have limited economic recovery capacity despite the deceleration of inflation, which remains at 43.6% per year. 

This demonstrates that the economic situation of Venezuela is the result of a combination of factors: an excessive dependence on oil, paternalistic political states and an institutional weakening. The crisis continues to profoundly affect society, causing massive migration and pressure on neighboring countries, such as Colombia. The long-term solution seems to depend on structural changes in domestic policy and in the relationship with the international community.