Committee Economic and Social Council

Issue Addressing the Socio-economic crisis in Venezuela

Name Charles Conroy Tan

Position Head Chair

Introduction
Venezuela is located in Northern South America, bordering Colombia and Guyana. Its
capital, Caracas, is located in the northwest portion of the country, with a population of
around 3 million.

Tragically, Venezuela is suffering the worst economic crisis in its history. The country’s
inflation rate as of April 2019 stood at a staggering 282,972.80%, the highest in the
world. This has caused the prices of basic commodities such as food and medicine to
skyrocket. Therefore, constant food shortages, unemployment, violence, and lack of
access to basic necessities are widespread throughout the nation. In fact, according to
the Food and Agriculture Organization (FAO), there were 3.7 million undernourished
citizens in Venezuela between 2015 and 2017.

To escape the economic hardship in the country, more than 4 million Venezuelans or
have fled the country to seek asylum in neighboring countries. According to data
provided by the UN Higher Commission for Refugees (UNHCR) and the International
Organization for Migration, about 5,500 citizens left Venezuela on a daily basis in 2018.
Definition of Key Terms

Term Definition (source)

Asylum-seeker According to the UNHCR, an asylum-seeker

is “someone whose request for sanctuary has
yet to be processed.” They differ from
refugees because their request for asylum, or
the right to remain in another country, has not
yet been granted.

Dictatorship A dictatorship is a form of government

wherein a single individual makes all rules
and decision without input from others.
Nicolas Maduro’s presidency is often
criticized to be a dictatorship due to alleged
assassination plots, extreme censorship or
media, and torture of political prisoners.

Emigration Emigration is the act of leaving one’s own

country to settle permanently in another. The
UNHCR estimates that more than 4 million
Venezuelans have emigrated to neighboring
South American countries.
 Exportation Exportation is the commercial activity of
shipping and selling goods to a foreign
country. Venezuela is highly reliant on
petroleum and oil for export revenue; this lack
of diversity poses a problem to its economy.

Gross Domestic Product (GDP) The Gross Domestic Product (GDP) is the
total value of goods and services produced
and provided within an economy in one year.
As of August 2019, Venezuela’s GDP growth
rate is reported to be around -19%.

Immigration Immigration is the action of living permanently

in a foreign country. Numerous South
American countries such as Colombia, Brazil,
and Peru have faced a massive surge of
Venezuelan immigrants seeking asylum.

Importation Importation is the commercial activity of

buying and bringing in goods from a foreign
country. Venezuela’s high dependence on
imports, paired with poor domestic production
of goods has led to various shortages within
the country.
 Inflation Inflation is a sustained increase in the general
price levels of goods and services in an
economy over a certain period of time. High
rates of inflation in Venezuela has resulted in
many repercussions to its economy, such as
business uncertainty, wage cuts, and, of
course, price hikes for food and basic utilities
such as water and electricity.

Nationalization Nationalization is the transfer of a major

branch of industry or commerce from private
to state ownership or control. Former
President Hugo Chavez nationalized many
industries in Venezuela, such as the banking
and petroleum sectors, to improve the
standard of living of its citizens.

Socialism Socialism is a system of government which

advocates for state ownership and regulation
of the means of production, distribution, and
exchange of goods and services within an
economy. Both Chavez and Maduro were
candidates of the United Socialist Party in
Venezuela, and their socialist policies are
largely criticized for the food shortages and
exodus that plague the country today.
Background Information
The economic crisis in Venezuela is largely attributed to the collapse of oil prices since
the country’s economy is largely reliant on its massive oil reserves. After Hugo Chavez
was elected president in 1999, he commenced the Bolivarian Revolution which aimed to
implement socialist policies in order to aid the poor by redistributing the country’s oil
wealth. In the short run, these policies led to improved healthcare, education and
training, and food accessibility; however, this created a growing dependence on oil to
fuel the nation’s economy.

When Chavez was re-elected in 2006, he sought to nationalise valuable state assets
such as the electricity, oil, and banking sectors. He implemented certain questionable
economic policies which proved to be detrimental to the nation’s manufacturing sector,
particularly the food production industry. Examples of such include the overvaluation of
exchange rates, overregulation of the private sector, and strict price controls.
Consequently, Venezuela’s agricultural gross domestic product (GDP) shrank by an
average of 4.7% annually.

As the global price of oil soared in the 2000s, Venezuela became increasingly reliant on
the export revenues from the sale of oil; in fact, in 2012, oil accounted for 95% of the
country’s exports. However, in 2013, Chavez’ health declined and he died of cancer in
the same year. He was succeeded by Nicolas Maduro, who rose to power as oil prices
plummeted around the world. Consequently, the Venezuelan government was suddenly
experiencing an economic crisis and a growing national debt as it struggled to continue
subsidizing the import of food, medicine, and other basic necessities which the nation
relied on. This resulted in Venezuela’s government debt to skyrocket and equate to as
much as 72.3% of its national GDP in 2013. Today, Venezuela’s total stock of foreign
debt stands at about US$160 billion, and it continues to rise.

Maduro is accused to have taken very little effective action towards resolving this
economic crisis; instead, he is worsening the situation by choosing to print more money
as a response to the lack of public finances, fueling inflation. Furthermore, the president
is said to have depleted Venezuela’s gold reserves in order to pay off foreign debt and
import basic necessities such as food. Maduro also allegedly uses violent and unjust
tactics such as arbitrary detentions, torture, and the ban of foreign humanitarian aid in
order to deter protestors and political opponents. According to the UN, 5,287
Venezuelans were killed during security operations in 2018 alone. Moreover, Maduro
also appears to turn a blind eye to the black markets, police brutality, gang violence,
and outbreaks of disease that plague the country’s starving population.

Major Countries and Organisations Involved

Brazil
Brazil is one of South America’s biggest democracies and economies, and there is no
border which separates it from Venezuela. Consequently, 800 Venezuelans arrive daily
at border tent cities such as Pacaraima to seek refuge. As of June 2019, nearly 100,000
Venezuelans have sought asylum in Brazil. Despite previous disparaging comments
towards refugees from Brazilian president Jair Bolsonaro, Brazil remains welcoming to
Venezuelan immigrants as of today. It not only provides shelter to documented
immigrants, but it also relocates them to jobs around the country. Brazil is also open to
aid from various international organizations such as the United Nations International
Children’s Emergency Fund (UNICEF) and the United States Agency for International
Development (USAID).

Colombia
Colombia has been the most active South American country towards the emigration
crisis in Venezuela. As of August 2019, it has hosted a staggering 1.4 million
Venezuelan immigrants. This mass immigration has resulted in a strain on Colombian
social services and government finances; the World Bank estimates that Colombia will
need to invest more than US$900 million to meet the welfare needs of all Venezuelan
migrants. As a result, recent polls reveal that a majority of Colombians are in favour of
tightening entry requirements and welfare benefits towards Venezuelan
asylum-seekers.

Cuba
Since the beginning of the 21st century, Cuba and Venezuela have maintained close
economic and political ties with one another. Former Venezuelan president Hugo
Chavez deeply admired Fidel Castro’s socialist economic policies, particularly those
regarding currency manipulation and the nationalisation of key industries. This proved to
be catastrophic to Venezuela in the long run, as it led to the insufficient domestic
production of essential goods and thus an overreliance on foreign imports. Cuba
constantly supplies Venezuela with specialist military advisors, doctors, and teachers in
exchange for a steady flow of Venezuelan oil. Therefore, the collapse of Venezuela’s
state-owned oil industry has caused Cuba to lose nearly two-thirds of its source of
power and production.

People’s Republic of China (PRC)

Since the early 2000s, China has been one of the world’s top importers and consumers
of oil to support its massive industrialization efforts. China and Venezuela have
engaged in a “loans-for-oil” trade partnership between 2004 and 2016; thus, within this
period, China has lent nearly US$50 billion worth of loans to Venezuela in exchange for
its oil exports. However, in 2016, the Chinese government implemented a new foreign
policy which requires Venezuela to repay its US$19.3 billion debt with interest in order
to receive additional loans from China. Despite this, Venezuela continues to request
and pressure China to issue more loans to help revitalize the former’s failing economy.

The United States of America (USA)

The United States (US) has been one of Venezuela’s most important trading partners in
terms of oil exports and imports of essential goods. Today, amid the rising tensions and
the economic crisis in Venezuela, both nations still maintain their economic ties with one
another. However, the US Department of State has prohibited the sale of any American
military equipment or services to Venezuela due to its lack of cooperation against
counter-terrorism.

Tensions between the US and Venezuela have risen since Chavez’ rise to power in
1999; this is largely due to the US’ alleged interference in Venezuela’s internal political
affairs. This tension was sparked when Chavez accused the Bush administration of
supporting a failed coup attempt against his socialist government.

Tensions rose even further during the Obama administration which declared Venezuela
as a national security threat and imposed sanctions against seven Venezuelan officials
for alleged corruption and violation of human rights. Maduro dismissed these sanctions
as mere attempts to destabilize and dissolve his socialist government.

Since Donald Trump’s election in 2016, his administration has imposed sanctions on an
additional 82 Venezuelan officials, which includes President Maduro himself. President
Trump also imposed further sanctions in 2019 by freezing all property and interests of
the Maduro administration in the US and prohibiting any US citizen from engaging in
transactions with the said government.

Timeline of Events

Date of Event Description of Event

February 1999 Hugo Chavez is inaugurated as President of
Venezuela, which was suffering from
widespread unemployment, a high rate of
inflation, and a massive debt crisis. Chavez
vowed to support the poor masses in the
country.

1999-2013 The Bolivarian Revolution took place in these

years, wherein Chavez’ socialist
administration implemented economic
policies such as the nationalization of key
industries and the establishment of social
welfare programs.

March 2013 President Hugo Chavez dies due to cancer at

58 years old.

April 2013 Nicolas Maduro is elected as president of

Venezuela. This date also marks the downfall
of the country’s economy.

February 2014 A series of student-led demonstrations due to

food shortages and rising inflation rates
results in 43 deaths and 5285 injuries.
March 2015 US President Barack Obama issues an
executive order to freeze the property and
assets of 7 Venezuelan authorities, labelling
them as national security threats to the US.

July 2015 The Venezuelan government launches

“Operation Liberation and Protection of the
People (OLP)” which resulted in a large
number of extrajudicial killings, forced
evictions, and mass arbitrary arrests and
detentions by armed law enforcement.

July 2017 The US issues 82 additional targeted

sanctions against Venezuelan officials,
including President Maduro, due to corruption
and their repression of democracy and
human rights.

May 2018 Nicolas Maduro is re-elected for another

six-year term as President of Venezuela. Due
to the shockingly low voter turnout and
several irregularities, numerous countries and
organizations, including the US and the
European Union (EU), rejected the election’s
 results. However, other allies of Venezuela,
such as China and Cuba, have recognized
the results as legitimate.

January 10, 2019 Nicolas Maduro is inaugurated for his second

term as president. However, the National
Assembly recognized Juan Guaido to be the
succeeding and acting president of
Venezuela, citing its Constitution. This
sparked the “Venezuelan presidential crisis”
in which the nation and the world remain
divided in support for either candidate.

Past Solutions
Cryptocurrency
On February 2018, the Venezuela launched the ​petromoneda​ (or simply, the Petro), a
new virtual currency backed by its mineral and crude oil reserves. Its purpose was to
supplement the failing ​bolivar fuerte​ currency to provide a stable currency for the
exchange of goods and services. Unfortunately, the petro has received mostly negative
responses from various stakeholders. Firstly, many cryptocurrency rating organizations
such as ICOindex and Cryptorated have described the petro as a “scam”. Secondly,
several economists have stated that the petro is likely to lead to further hyperinflation
due to the strict government controls. Last but not least, the US has also claimed that
the new digital currency was designed in order to obfuscate US sanctions and access
international finances.

Attempted humanitarian aid

The Venezuelan government led by Nicolas Maduro is largely in denial of the
humanitarian and economic crisis that the country is facing; thus, very little effort has
been made to obtain foreign aid. In fact, Constituent Assembly president Delcy
Rodriguez even described calls for international assistance to be “treasonous”. On
several occasions, trucks and shipments of aid from neighboring countries such as
Brazil, Colombia, and Puerto Rico have been met with heavy opposition from
Venezuelan authorities.

Possible Solutions
UN-supervised elections
Delegates can recommend hosting UN-supervised presidential elections wherein
democracy and transparency within electoral procedures are practiced in full. This
ensures that the opposition is given a fair and equal chance at winning against Maduro.

Open borders and dialogue

Delegates, specifically those who represent allies of Venezuela such as Brazil and
Cuba, can encourage the entry of foreign aid into Venezuela and promote negotiations
between Maduro’s administration and international bodies who are interested in aiding
the country.

Government transparency
Since the beginning of the crisis, the Venezuelan government has been inconsistent in
publishing data regarding the state of its economy and the health of its citizens.
Delegates can urge transparency from the Venezuelan government by publishing
statistics on health indicators such as infant mortality rate, or economic indicators such
as inflation rates.

Delegates can also promote the creation of independent bodies to evaluate civil
servants to ensure that civil servants objectively perform their duties without any
negative predisposition towards any individuals or groups, especially those with different
political views.

Resources for further Reading

● Charter of the United Nations (1945)
● Urgent Debate Required on the Situation of Human Rights in Venezuela (2017)
● Venezuela (Bolivarian Republic of): Human rights and unilateral coercive
measures (2018)
 ● The situation in the Bolivarian Republic of Venezuela (2019)

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