World Economy

Venezuela in Life-or-Death Situation

Venezuelan inflation could rise to nearly 500% this year while in the 12 months through December 2017, prices could rise 2,200%
Thousands of Venezuelans cross into Colombia to shop for scarce food and medicine.Thousands of Venezuelans cross into Colombia to shop for scarce food and medicine.

Venezuela is courting a deeper economic collapse and hyperinflation that could spark an exodus of its people into neighboring countries, the International Monetary Fund said.

The IMF expects Venezuelan inflation to rise nearly 500% this year and accelerate into next year as the government prints money to pay its debts. In the 12 months through December 2017, prices could rise 2,200%, it said, VoA reported.

“If current policies continue, Venezuela faces severe risks, including of an even larger collapse in economic activity accompanied by hyperinflation,” the international lender said in a report released at its annual meeting in Washington Friday.

Inflation in Venezuela is evident in the streets as consumers struggle with wads of near-worthless bolivars.

Acute shortages of food and medicine could turn into a humanitarian crisis, the IMF said.

“That could, in turn, trigger a wave of migration to neighboring countries,” according to the report.

The IMF called on Venezuela’s socialist government to stop paying its bills by printing money and to eliminate price controls. It also called on Caracas to overhaul exchange-rate policies.

“A well-planned economic program is urgently needed to restore macroeconomic stability,” according to the report.

  Lack of Medicine

A report published by the Associated Press last Tuesday shows that Venezuela, the South American country of nearly 31 million, is running low on 85% of medicines.

An AP reporter told the story of 3-year-old Ashley Pacheco, whose scraped knee turned into a dangerous staph infection. Her family rushed her from hospital to hospital, but none of them had the supplies and medicine needed to treat Pacheco.

To save his daughter’s leg from amputation, Pacheco’s father, Maykol, went from pharmacy to pharmacy, begging for an antibiotic she needed.

Eventually, Pacheco got the medicine she needed—but her two-month-long hospital stay was marked by a collapsed lung and an infection that spread to her heart that could cause lasting damage.

While Pacheco was in the hospital, other children died from malnutrition or preventable illnesses, like infections that could have been treated with antibiotics.

A medicine shortage that turns minor injuries deadly is only the latest turn in Venezuela’s ongoing economic crisis.

For decades, jobs at Venezuela’s state-run oil giant PDVSA were coveted for above average salaries, generous benefits and cheap credit that brought home ownership and vacationing abroad within reach for many workers.

Now, in Venezuela’s asphyxiating economy, even PDVSA employees are struggling to pay for everything from food and bus rides to school fees as triple-digit inflation eats away incomes.

They are pawning goods, maxing out credit cards, taking side jobs, and even selling PDVSA uniforms to buy food, according to Reuters’ interviews with two dozen workers, family members, and union leaders.

  Oil Crisis

In the early 2000s, Venezuela’s economy was actually on the upswing. In 2013, Bloomberg reported that the country cut poverty rates and “quality of life improved at the third-fastest pace worldwide” under the tenure of President Hugo Chavez—thanks in large part to the money flowing in from nationalized oil fields.

But after the global oil price collapse in late 2014, the Venezuelan economy, whose greatest export is petroleum, began printing more money. Bloomberg reported that Venezuela was “scrambling to print new bills fast enough to keep up with the torrid pace of price increases.”

By the time global oil prices started to stabilize, it was too late for Venezuela.

In June, Amnesty International slammed the government for inaction:

“Stubborn politics are seriously affecting millions of lives,” said Erika Guevara-Rosas, Amnesty’s Americas Director, in a statement, citing “the lethal combination of severe food and medicine shortages coupled with sky-high crime rates, persistent human rights violations and ill-conceived policies that focus on trying to keep people quiet.”

Guevara-Rosas continued: “Unless all those in power make a drastic U-turn in the way they are handling this dramatic crisis, what is already an extremely serious situation will turn into an unthinkable nightmare.”

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