For the wealth of Saudi Arabia, the people of the earth know. There is a joke: with a piece of cloth on my head, I am the richest in the world. However, it is not the country with the largest oil reserves in the world, but Venezuela, which currently has nearly 300 billion barrels of oil known to be recoverable. However, compared with Saudi Arabia, Venezuela has long faced multiple sanctions and political, economic and social crises, which have led to a serious lag in its national income and social development. Why is there such a huge gap between the rich and the poor, which is also a major oil country?
First, political instability
Venezuela's political environment has been unstable for a long time, with frequent government corruption and violent conflicts. In January 2019, opposition leader Guaidó declared himself interim president of Venezuela, sparking a political crisis and social unrest. According to the International Monetary Fund (IMF), Venezuela's gross domestic product (GDP) fell by 35% between 2014 and 2018, and inflation reached more than 2 million percent.
Second, the oil industry is overly dependent
Venezuela has the world's largest oil reserves, but its economy is heavily dependent on the oil industry, with oil exports accounting for more than 90% of its national revenue. This has led to an over-concentration of the economy in the oil industry and slow development in other sectors. In 2019, Venezuela produced just 710,000 b/d, less than half of 2008. At the same time, the Venezuelan government has invested heavily in the oil industry and neglected other industries, resulting in other industries not being able to develop effectively.
Third, an unstable policy environment
The Venezuelan government has frequently carried out policies such as nationalization and nationalization, and has a negative attitude towards foreign investment, which has aggravated the instability of economic development. According to the United Nations, Venezuela's OFDI was zero in 2019, while there was also a lack of investment from abroad. As a result, the Venezuelan economy faces funding shortages and underdevelopment.
Waste of resources and improper management
The Venezuelan government has misdeveloped and managed petroleum resources, and there are wasteful and improper management of resource exploitation, processing and transportation, resulting in inefficient resource development. According to OPEC (Organization of the Petroleum Exporting Countries), Venezuela's oil production fell from 3.19 million b/d in 2008 to 340,000 b/d in 2020. The Venezuelan government has long neglected the environmental protection of the oil industry, resulting in serious environmental pollution and one of the many challenges it faces.
V. U.S. Sanctions
Since 2015, the United States has imposed several rounds of economic sanctions on Venezuela, restricting the trade and financial activities that the Venezuelan government and state-owned enterprises can conduct. These sanctions have had a severe impact on the Venezuelan economy, exacerbating economic hardship and inflation.
To sum up, the main reason for such a staggering wealth gap in Venezuela is the combined effects of political instability, overdependence on the oil industry, unstable policy environment, waste of resources and mismanagement. These factors have led to a long-term sluggish Venezuelan economy, lagging social development and a decline in the living standards of the people.
It is worth mentioning that the fluctuation of international oil prices in recent years has also aggravated the difficulties of the Venezuelan economy. Venezuela's oil revenues are heavily affected by fluctuations in oil prices, especially after 2014, when the fall in oil prices led to a sharp decline in Venezuelan fiscal revenues. At the same time, the Venezuelan government has adopted a series of improper economic policies, such as printing money, which has led to high inflation.
Overall, the difficulties facing Venezuela's economy and society are complex, and perhaps only Mexico can experience: too far from heaven and too close to the United States.