Why is Venezuela, with the Largest Oil Reserve, Poor?

The story of Venezuela is living proof that oil can be both a blessing and a curse. The country, which has benefited from oil reserves for more than a century, was once It was the richest country in Latin America.

However, despite having the largest oil reserves in the world today, With inflation rates up to 100,000% is struggling and a large portion of its citizens live in poverty.

Before getting into the subject, let’s take a look at the oil reserves of the countries and the Venezuelan inflation rate, as you will be able to understand the subject more clearly.

Oil reserves:

Venezuela inflation rates by year:

Venezuela’s oil adventure began in 1908, when Juan Vicente Gómez became president.

The country has moved rapidly towards discovering and exploiting its oil reserves. In 1922, Shell discovered a large oil field in the Maracaibo Basin. With his discovery, Venezuela came to the world stage in oil production.

Since then, oil has become a dominant factor in the country’s economy. However, this rapid growth is neglect of other sectors and caused the country to become overly dependent on oil revenues.

“Dutch Disease” This situation, known as Venezuela’s economic diversity and undermined its long-term sustainability.

The country became one of the richest countries in Latin America, but this wealth was distributed unfairly.

of the country in its political and economic structure It caused deep cracks. The waste of oil revenues through corruption and mismanagement has squandered the country’s development opportunities.

As prices rose during the oil crisis of the 1970s, Venezuela earned huge incomes in a short time However, these revenues were directed to consumption and imports, not to sustainable development projects.

Venezuela’s heavy dependence on oil revenues has suppressed the development of other sectors of the economy.

It lost its competitiveness in non-oil sectors and became more dependent on imports. This left the country extremely vulnerable to fluctuations in oil prices.

Additionally, years of mismanagement corruption and political instability It prevented the efficient use of oil revenues and caused the economic crisis to deepen.

With Hugo Chávez coming to power in 1999, Venezuela entered a new era in which socialist policies were implemented.

Chávez directs oil revenues to social programs aimed to fight poverty but these policies neglected other areas of the economy and reduced investment.

The economic situation worsened further under Nicolás Maduro, who came to power after Chávez’s death. Falling oil prices, excessive government borrowing and persistent corruption in administration; It plunged the country into hyperinflation and a severe shortage of goods and services.

So, do you think there is hope for Venezuela?

You can take a look at our other content that may interest you below: