From Richer To Poorer: Venezuela's Economic Tragedy Visualized

Tyler Durden's picture

From the 10 years of military dictatorship between 1948-1958 to the impeachment of Carlos Andrés Pérez for corruption in 1993, The Money Project's Jeff Desjardins notes that Venezuelan politics have often been both rocky and eventful.

But despite these challenges throughout its history, no one has ever denied Venezuela’s economic potential. After the discovery of oil in the early 20th century, the nation quickly built its economy on back of black gold – and even today, Venezuela leads the world in proven oil reserves with 300 billion barrels.

Oil reserves Venezuela

Early on, Venezuela’s oil was a game-changer.

By 1950, as the rest of the world was struggling to recover from World War II, Venezuela had the fourth-richest GDP per capita on Earth. The country was 2x richer than Chile, 4x richer than Japan, and 12x richer than China!

1950 GDP per capita rates

Unfortunately for Venezuela, this wealth wouldn’t last – and an over-reliance on oil would soon decimate the economy in unexpected ways.

The Downfall of Venezuela’s Economy

From 1950 to the early 1980s, the Venezuelan economy experienced steady growth.

By 1982, Venezuela was still the richest major economy in Latin America. The country used its vast oil wealth to pay for social programs, including health care, education, transport, and food subsidies. Workers in Venezuela were among the highest paid in the region.

However, as you’ll see in the following animation, from there things went quickly downhill. In the mid-1980s, an oil glut and a free-falling oil price ended up decimating the Venezuelan economy, which was unable to diversify away from energy.

Venezuela GDP per capita

Today, Venezuela has one of the poorest major economies in Latin America – and as the current crisis rides itself out, the IMF foresees it getting far worse. By 2022, the organization predicts Venezuela’s GDP per capita (PPP) will be just $12,210, which would be a massive economic setback – the Venezuelan economy would be even poorer than it was many years before the Chávez era started.

Flying Too Close to the Sun

Although oil revenues are tempting to rely on to maintain social order, they come with a degree of unpredictability. According to OPEC, Venezuela still relies on oil for 95% of its exports, which means that any fluctuations in oil price can be the difference between immense wealth and near-poverty.

Venezuela inflation vs. oil revenues

The above graphic shows Venezuela’s oil revenues (in 2000 dollars) against the rate of inflation – and it symbolizes the story of Venezuela’s recent economic history as succinctly as possible.

After the oil glut in the 1980s, Venezuela’s oil revenues dropped significantly. It was then that Venezuela had its first bout with inflation, where rates peaked in 1989 (84.5% inflation) and later in 1996 (99.9% inflation). Without sufficient money coming in, the country had to rely on its printing presses in an attempt to maintain living standards.

In 1998, Hugo Chávez was elected with the promise that Venezuela could reduce poverty and step up living standards by leaning even more heavily on its energy wealth. The recovery of oil prices helped this come true in the 2000s, and Chávez later passed away in office in 2013.

A Temporary Fix

Nicolás Maduro, who took over after the death of his predecessor, saw oil prices crash almost immediately, and it was clear that Venezuela’s intense battle with inflation was only just beginning. The national currency, the Venezuelan bolívar, would soon be almost worthless.

Bolivar inflation against USD

The details of today’s crisis and intense hyperinflation are widely shared.

The country has massive shortages of food, electricity, and other essential goods, and violence is escalating in Caracas. More recently, the government is attempting to tighten its grip around power, and mismanagement of the economy has led to people starving on the streets. People are calling the situation a humanitarian crisis, which is extremely disheartening to see in what was once one of the richest countries on the planet.

And while the current condition of Venezuela is a tragedy in itself, the country’s inability to live up to its true economic potential is nearly just as devastating.

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The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

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WolfgangCire's picture

the usa destroyed venezuela. the usa will NOW get whats coming to it.

TeamDepends's picture

Socialism, ya can't live with it.  Because it's like the scorpion in that parable...

Aristofani's picture

The only ones that cant live with socialism are the greedy whores of capital who undermine it any chance they can. These are the sluts that most of the posters at ZH have a kind of schizoid love/hate relationship with due to their pre-pubescent emotional immaturity. Luckily for them, they dont pay for it from the comfort of their fuckin' armchairs and computer keyboards.

I imagine a fair percentage of tRumptards fall into the same category. How are the generals and goldman sachs stooges going for you?

I am Jobe's picture

MurikA will damage itself.
MAGA

divingengineer's picture

Yeah, right.
Chavez and Maduro had nothing to do with it.

Peter41's picture

I was also shocked to see only these dictators mentioned, casually, in passing, without any indication that their corrupt, incompetent and invidious "leadership" was a primary cause if not the only real cause of Venezuela's debacle. There are other countries with oil riches that are not subject to this debacle.

nmewn's picture

It takes the extended family of Chavez/Maduro to wreck a village.

Doom Porn Star's picture

"There are other countries with oil riches that are not subject to this debacle. "

 

You may be speaking too hastily.   The collapse of one petro-state in the present does not indicate in any way that other states following the same or similar economic/political/demographic model are not going to experience that same fate on their own timescales..

I still contend that Venezueala has simply overbred itself into a demographic population disaster.

You cannot raise the average lifespan by 50% and the population by 500% in 70 years and NOT expect resource scarcities to arise.

I am Jobe's picture

Toys R Us hires law firm as it explores possible bankruptcy filing

https://www.cnbc.com/2017/09/06/toys-r-us-weighs-possible-bankruptcy-fil...

my new username's picture

In the 1920s, Argentina was #5. 

Every latin economy is destined to eat itself, because it has a corrupt polity: latins are inherently corrupt, corrupting and corruptible.

 

Aristofani's picture

Please be on the scene of the next USA CIA/zionist false flag attack and experience real corruption.

wisehiney's picture

Don't worry sean penn, oliver stone, jesse jackson, michael moore, danny glover.

And all of their friends who spoke so lovingly and admiringly of venezuela socialists.

Are going to come save the day.

Any time now.

Doom Porn Star's picture

https://en.wikipedia.org/wiki/Demographics_of_Venezuela

 

A classic demographics explosion is what is destroying Veneueala.   Breeding people you cannot support is the single greatest problem, socialist programmes to encourage the unsustainable a distant second at best..

Since 1950 the average life expectancy of a Venezualan has risen nearly 50%.   

The Population in 1950 was 5,482,000 -and in 2015 it was 31,108,000.   At the present growth rate, by 2020, the population of Venezueala will have grown by more than 500% in 70 years.   This is a classic text-book population explosion and directly associated resource scarcity outcome.  

Venezueala has overpopulated itself into a position of insustainability and resource collapse.  Throwing what looked like unexhausatable money from petroleum resouce extraction into socialist programs that 'grew' the popluace and thus seemed to grow the economy were in retrospect disasterous as they fueled an unsustainable population explosion.

I can think of no place on the planet where people require the slightest encouragement to breed.  Any and all inducements to produce children under all but the most unusual and rare circumstances are most likely economically dangerous and anti-social programmes from the perspctive of long term resouce and infrastructure stability..

Nature usually produces plagues to dispense with overbreeding populations.   Sadly, I expect that the manifestation and rapid sexual transmission of diseases such as Zika is the Earth's response.

 

Dr. Bonzo's picture

A classic demographics explosion is what is destroying Veneueala.

 

Nice. Africa, ditto.

1033eruth's picture

The measuring guideline of success should be GDP PER CAPITA, not total GDP and that's a huge difference between nations like Japan that attempt to control immigration so that the breeders do not invade and places like the US and Europe that have been bribed to accept populations from breeder nations.  

Pollygotacracker's picture

Over population and open borders will eventually turn this planet into a living hell hole. 

Aristofani's picture

So were you around in  1973, saying the same propaganda shit against Chile and Allende? Oh that was your uncle who lived in Langley.

No articles on what "fantastic" economies the narco ones like Mexico, Colombia and Honduros + are? Langley the reason again.

No mention of economic sabotage of Venezuela since 1999? Langley.

Yeah keep reading the not of the real world mises institute kindergarten economic dribbling! private school and university education explains that phrenia.

SHITTTTTTTTTTTTTTTTTTTTTTTTTTTT!!!!!!!!!!!!!!!!!!!!!!!!!!!

roddy6667's picture

Venezuela critics always point out the country's "proven oil reserves". They are either being deceptive or they are ignorant. Most of the oil is a type that is expensive to get out of the ground and make into a marketable product. Today's low oil prices do no support using it now. It has no more value than the stone that holds it. Venezuela borrowed a metric shitload of money when the price was bubble high and can't make the payments now.

The Venezuelan people don't understand money. They think they can have everything now. They are like children. Most of the people in South America are the same way, IMHO.

It's not socialism vs. capitalism. Many socialist countries are financially solvent with no civil unrest and capitalism hasn't cured a lot of violent failures in other parts of the world.

raub710's picture

repost...

ahhh another ZH hit on Venezuela... that's funny the Deep State and the globalists forces are doing terrible things all over the world... but in Venezuela NO there's no CIA in any of this... this is all Maduro's fault (by the way i agree his government is bad)...

CNN Reuters AP BBC etc, are very fake news but regarding Venezuela they are THE beacon of truth... hahahahaha give a break...