Last long one for awhile. The conditions there are very sad and have been a long time coming.
Contrary to what many think, Venezuela has the world's largest oil reserves. Decades of poor government have driven a once efficient oil industry backwards as well as pushing a once prosperous country to economic ruin and political chaos.
If Venezuela is to come back from the precipice, it must have a government willing to create a system that encourages productive investment in their enormous oil reserves and the revenue that would come with that investment.
Falling oil production began a long time ago, GDP is contracting by double digits and hyper-inflation is over 80,000%. 90% of the country live in poverty. 10% have already left this misery.
Oil was discovered in 1922, Backed by a then dictator, three foreign companies controlled nearly all oil production - Royal Dutch Shell, Gulf and Standard Oil. After the death of the dictator, laws were passed requiring 50% of oil profits go to the government. In 1958 credible elections were established and held in place until the Hugo Chavez regime killed them.
Venezuela was a founding member of OPEC in 1960. At the same time it created the first state owned oil company. Taxes on oil companies profits were increased to 65%. Simultaneous to this thru the decades was embezzlement of over $100 billion in oil revenues by government officials.
In 1976, all oil industry operations were nationalized. Partnerships with foreign oil companies were authorized as long as the government oil company controlled 60% of the equity. In 1998 a military officer Hugo Chavez was elected president on a socialist platform. His actions began the decline in oil production by essentially removing nearly all experienced oil operating talent from the industry, including Venezuelan talent. He established himself as dictator over the next few years.
His successor, Maduro, has continued the dictatorship. Printing money and controlling its distribution is the reason for out of control inflation. Robust democratic institutions are largely absent now.
Unless the opposition leader elected by its parliament is able to assume control, Venezuela's misery will likely continue. His task will be enormous, starting with bringing back oil production thru recruiting and retaining oil operating talent as well as ensuring the end of rampant corruption that has siphoned off revenues that will be needed to start the country on the road to recovery. There is a hard lesson to be learned when a government assumes near total control of an economy such as happened in Venezuela. Incompetence and corruption usually always follow in a short time. I hope the opposition leader is successful. The recovery from Chavez and Maduro will likely take decades. Just my two cents.
Contrary to what many think, Venezuela has the world's largest oil reserves. Decades of poor government have driven a once efficient oil industry backwards as well as pushing a once prosperous country to economic ruin and political chaos.
If Venezuela is to come back from the precipice, it must have a government willing to create a system that encourages productive investment in their enormous oil reserves and the revenue that would come with that investment.
Falling oil production began a long time ago, GDP is contracting by double digits and hyper-inflation is over 80,000%. 90% of the country live in poverty. 10% have already left this misery.
Oil was discovered in 1922, Backed by a then dictator, three foreign companies controlled nearly all oil production - Royal Dutch Shell, Gulf and Standard Oil. After the death of the dictator, laws were passed requiring 50% of oil profits go to the government. In 1958 credible elections were established and held in place until the Hugo Chavez regime killed them.
Venezuela was a founding member of OPEC in 1960. At the same time it created the first state owned oil company. Taxes on oil companies profits were increased to 65%. Simultaneous to this thru the decades was embezzlement of over $100 billion in oil revenues by government officials.
In 1976, all oil industry operations were nationalized. Partnerships with foreign oil companies were authorized as long as the government oil company controlled 60% of the equity. In 1998 a military officer Hugo Chavez was elected president on a socialist platform. His actions began the decline in oil production by essentially removing nearly all experienced oil operating talent from the industry, including Venezuelan talent. He established himself as dictator over the next few years.
His successor, Maduro, has continued the dictatorship. Printing money and controlling its distribution is the reason for out of control inflation. Robust democratic institutions are largely absent now.
Unless the opposition leader elected by its parliament is able to assume control, Venezuela's misery will likely continue. His task will be enormous, starting with bringing back oil production thru recruiting and retaining oil operating talent as well as ensuring the end of rampant corruption that has siphoned off revenues that will be needed to start the country on the road to recovery. There is a hard lesson to be learned when a government assumes near total control of an economy such as happened in Venezuela. Incompetence and corruption usually always follow in a short time. I hope the opposition leader is successful. The recovery from Chavez and Maduro will likely take decades. Just my two cents.
