Venezuela's Discussion

Telma Posse Alonso

Venezuela Debate

February 8, 2015

 “It could be too late to avoid catastrophe in Venezuela”

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ARTICLE # 1 DISCUSSION

1.Why was the Government of Venezuela able to increase public spending so much? Explain factors before and after 2015

Venezuela is one of the countries that more natural resources has. With Emirates Arabs, are the countries with the highest quantities of raw oil and for this product, Venezuela had and could have now an advantages over many countries like Spain, which does not have this resource. Venezuela’s primer minister allowed himself to spend as if the average price of a barrel of oil “was $197 in 2012, when in fact it was only $111”.Discussing the past, amid the breakdown of oil costs in the 1980s the economy gotten, the fiscal sign initiated a dynamic downgrading, and expansion soar to achieve crests of 84% in 1989 and 99% in 1996. With high oil costs and rising government consumptions, Venezuela's economy development was 9% in 2007. Promote yet, value controls, confiscation of various farmlands and a wide range of commercial enterprises and other government strategies including a close aggregate stop on any entrance, have brought about serious deficiencies in Venezuela and lead Hugo Chavez to a false "miserable circumstance" where the spending was not an issue. At this moment it is distinctive, remote speculators, residential organizations left the nation since its political dependability, financial strategies influencing them providing for the nation a negative GDP. For balancing it, the government could increase even more the spending but no international fund is willing to give them money and increasing taxes is not a good idea where the society has a high unemployment and the percentage of enterprises in the market had decreased a lot. Therefore, the situation in Venezuela has changed a lot, giving an image of a unsustainable country that is crying for a SOS in big letters because its government's’ hand and its economic future.

2. Why has the bolivar lost so much value?

Absolutely yes, right now, its value has an exchange rate of 150 times USD currency. It leads to the worst change in the history between both countries. Bolivar is becoming a weak value due to inflation, and more concrete a hyperinflationary situation. It is happening because a shortage of primary products are in scarcity and the quantities’ limitation conduct to a huge increase of prices. The relation between hyperinflation and lost of the currency’s value is due to an increase of money’s quantity to buy the same product or service you bought time ago with less money.