Video Transcript
Reva Bhalla: Hello my name is Reva Bhalla and today I’m joined by Reggie Thompson, Stratfor’s Latin America analyst, to discuss what is likely to be a very volatile year in Venezuela. So Reggie, obviously everyone knows right oil prices have been slashed by more than half. Venezuela was already having a difficult time funding its imports. Shortages have only grown worse. Give us a sense of just how bad things have gotten over the course of the last six months or so and the trajectory we’re seeing in the year ahead for the economic situation?
Reggie Thompson: So right now what we’re seeing are the affects of the long-term economic policies followed by Chavez and Maduro during the past 15 or so years. So Venezuela has traditionally underpinned its public support, the support it gets from its voters, by high levels of public spending from the oil revenue it receives. And right now we had been seeing for several years declining oil production, right now production is hovering around 2 billion to 2.2 billion barrels per day, and so the reduced income from this over the last decade has caused a cash flow crisis in Venezuela’s public finances. In other words, the inflow of dollars has reduced, the expenses keep going up, and so what we’ve been seeing lately with the past four months with the decline in oil prices, Venezuela is in a serious crisis where it can no longer optimally fund domestic obligations, domestic spending obligations that are funded by this kind of oil income. And so what Venezuela has relied on for quite a while to balance its budget is basically printing more bolivars and so in the long term what we’ve seen this cause is lots of inflation. We’ve also had long-term crises of food scarcities and rising food prices and these have only been exacerbated with the decline in oil prices. So the immediate consequences right now of this are that there is not necessarily enough food. It’s not a matter of there not being enough food in the country, a lot has been smuggled out toward Colombia for example, some has been hoarded to sell for higher prices on the black market, but Venezuela cannot optimally fund imports. So in other words all of these inefficiencies building up over the years have finally caused this crisis that we’ve been seeing being exacerbated in the past few months.
Venezuela’s Volatile Year Ahead
Video Transcript
Reva Bhalla: Hello my name is Reva Bhalla and today I’m joined by Reggie Thompson, Stratfor’s Latin America analyst, to discuss what is likely to be a very volatile year in Venezuela. So Reggie, obviously everyone knows right oil prices have been slashed by more than half. Venezuela was already having a difficult time funding its imports. Shortages have only grown worse. Give us a sense of just how bad things have gotten over the course of the last six months or so and the trajectory we’re seeing in the year ahead for the economic situation?
Reggie Thompson: So right now what we’re seeing are the affects of the long-term economic policies followed by Chavez and Maduro during the past 15 or so years. So Venezuela has traditionally underpinned its public support, the support it gets from its voters, by high levels of public spending from the oil revenue it receives. And right now we had been seeing for several years declining oil production, right now production is hovering around 2 billion to 2.2 billion barrels per day, and so the reduced income from this over the last decade has caused a cash flow crisis in Venezuela’s public finances. In other words, the inflow of dollars has reduced, the expenses keep going up, and so what we’ve been seeing lately with the past four months with the decline in oil prices, Venezuela is in a serious crisis where it can no longer optimally fund domestic obligations, domestic spending obligations that are funded by this kind of oil income. And so what Venezuela has relied on for quite a while to balance its budget is basically printing more bolivars and so in the long term what we’ve seen this cause is lots of inflation. We’ve also had long-term crises of food scarcities and rising food prices and these have only been exacerbated with the decline in oil prices. So the immediate consequences right now of this are that there is not necessarily enough food. It’s not a matter of there not being enough food in the country, a lot has been smuggled out toward Colombia for example, some has been hoarded to sell for higher prices on the black market, but Venezuela cannot optimally fund imports. So in other words all of these inefficiencies building up over the years have finally caused this crisis that we’ve been seeing being exacerbated in the past few months.
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