If 19th century hero Simón Bolívar were alive today, what would he think of the great nation bearing his name on their currency? Venezuela is a place of vast natural resources, complete with diamonds, gold and natural gas to name a few. It makes up a reasonable portion of the world’s contribution of Bauxite, Aluminium and Nickel and has access to significant fossil fuels. It has great swathes of arable land, so why then is it the malnourished, heaving nation it is today?
Economically, supply for various goods and services come nowhere close to meeting demand. A 2016 Human Rights Watch assessment described the supply of food and medicine to be in “severe shortage,” the Government response to which has been “woefully inadequate.” The Guardian reported inflation approaching 1000% last year, with their highest value note, 100 Bolivar, worth less than a napkin. There are many more problems faced by the country, but the grim culmination provides insight into how other economies can conduct themselves more successfully.
- Engage in partnerships with foreign investors to meet labour deficiencies
Although Venezuela has arable land in spades and substantial mineral wealth, it lacks the labour to work them. Its mining industry is underdeveloped, with nationalisation initiatives making foreign investment a frightening prospect. In a country such as this with a rapidly declining GDP, scaring away foreign investors for the sake of greater control over natural resources is entirely unsound. What good is control when nothing comes of it anyway?
- Don’t be afraid of a highly leveraged economy where necessity calls for it
Long term loans are sometimes necessary for eventual financial success. In November, Moscow restructured $3 billion in debt, with repayments after six years. This allows the Maduro Government to import wheat and meet supply deficiencies threatening lives and livelihoods throughout the country. Admittedly, no country wants significant debt hanging over them, but it’s a necessity most of all in Venezuela’s case. It’s a lesson in discarding one’s pride in favour of one’s people.
- Peg your currency
Hyperinflation like that experienced by Venezuela could lead one to believe it is beyond saving through mere policy changes. Fortunately, this isn’t the case. When Argentina pegged its currency to the US dollar in 1991, it gave itself insurance against the rampant velocity of money and became a success story in overcoming the odds. When people know their cash won’t be worthless in a matter of days, prompting them to spend it as quickly as possible, they’re less inclined to contribute to the perpetual cycle of hot-potato spending and premiums that encompass hyperinflation.
Venezuela has far to go in establishing itself as the wealthy nation it once was forty years ago. Bolívar would certainly be concerned for his countrymen and women, but just as he never gave into Spain, this is not cause to give in to economic turmoil. Argentina got past their struggles. Hong Kong weathered the Asian currency crisis of 97. May they some day recover too, but until then, may they serve to teach other nations who could one day descend a similar path.