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Economic crisis in Venezuela worse than in Zimbabwe, Soviet Union: Economists

New Delhi: From once being the richest country in Latin America — owing to its large oil reserves — to the ongoing humanitarian crisis unseen in the country’s modern history, Venezuela’s fall through the years is the single largest economic collapse outside of war in the past 45 years, economists have said.

According to an article written by Anatoly Kurmanaev in the New York Times, the crumbling of Venezuela’s economy has even outpaced Zimbabwe’s collapse under Robert Mugabe, the fall of the Soviet Union, and Cuba’s disastrous unraveling in the 1990s.

“It’s really hard to think of a human tragedy of this scale outside civil war,” said Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund (IMF). “This will be a touchstone of disastrous policies for decades to come.”

Economists say that unlike some other examples of economic devastation like in Libya earlier this decade or Lebanon in the 1970s, it is not the armed conflict that has shattered the country. It has been brought down to its knees, the economists argue, by poor governance, corruption and misguided policies of President Nicolas Maduro.

As the country’s economy plummeted, armed gangs took control of towns, public services collapsed and the purchasing power of most Venezuelans was reduced to a couple of kilograms of flour a month. The crisis has been compounded by the sanctions imposed by the Donald Trump Administration, intended to force Maduro to transfer power to the nation’s opposition leader and National Assembly President Juan Guaido.

In January, Maduro was sworn in for the second term after an election that has since been termed by most of the international communities as “rigged.” The country plunged into political crisis after Guaido proclaimed himself as President amid throngs of cheering supporters who called for Maduro to step down.

The US first extended its support to Guaido, followed by nations like Canada and the UK. However, countries like Russia and China showed support for Maduro and slammed the United States for their interference in the nation.

Maduro has blamed the widespread hunger and lack of medical supplies on the United States and its opposition allies — but most independent economists say the recession began years before the sanctions, which, at most, accelerated the collapse.

“We are fighting a savage battle against international sanctions that have made Venezuela lose at least USD 20 billion in 2018,” Maduro had told supporters in a recent speech. “They are pursuing our bank accounts, our purchases abroad of any products. It’s more than a blockade, it’s persecution.”

Venezuela’s hyperinflation, which is expected to reach 10 million per cent this year according to the IMF, is on track to become the longest period of runaway price rises since that in the Democratic Republic of Congo in the 1990s. “This is essentially a total collapse in consumption,” said Sergi Lanau, deputy chief economist at the Institute of International Finance, a financial trade association.

The political crisis took its worse turn on April 30 when Guaido declared he was “beginning the final phase of Operation Freedom,” in an apparent bid to oust Maduro. His call led to protesters collecting at the La Carlota military airbase, where a confrontation between the opposition leader’s supporters and Maduro’s supporters took place. In the clashes that ensued, at least 71 people were injured.

The New York Times article suggests that Venezuela’s gross domestic product will have shrunk by 62 per cent since the beginning of the recession in 2013, which coincided with Maduro coming to power.

The stats, however dismal, come against the backdrop of the recent mediation in Norway aimed at resolving the ongoing political crisis. On Friday, a high-level meeting between the representatives of the European Union and the political leaders of Venezuela, including Maduro and Guaido, were held. This was followed by a statement from Venezuelan Foreign Minister Jorge Arreaza that Caracas was willing to engage in dialogue with the US on the basis of “mutual respect.”

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