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Why Venezuela Is on the Verge of Actual Collapse

It looks so peaceful, and yet... (kizeme/Flickr)

It looks so peaceful, and yet... (kizeme/Flickr)

Ah, Venezuela. A sunny and picturesque country at the top of South America with swaths of oil reserves, it should be the poster child for paradise.

But right now, Venezuela has some big, big (big) problems. The paradise is actually a nightmare.

Things are so bad that President Nicolas Maduro has declared a state of emergency, giving him extra power to step in and (try to) fix Venezuela's financial crisis.

At first that was turned down by the legislative branch, but then the Venezuelan Supreme Court broke with its tradition of siding with the government to uphold Maduro's decision. In other words, the courts are saying, "We need all the help we can get."

Why is Venezuela in agony? Here's why.

1. Murder--lots of murder

At a protest in Venezuela. (kirakar/Flickr)

A sign protesting the situation in Venezuela. (kirakar/Flickr)

Venezuela has the second-highest murder rate in the world, right behind Central American country Honduras.

Last year, about 18,000 people were murdered in Venezuela. Which means 58 out of every 100,000 people have died by homicide. (FYI, in the US, only 4 out of every 100,000 people are murdered.)

This is largely due to street gangs, which have settled into poorer neighborhoods. These gangs sell drugs, carry guns, and take control of areas despite government efforts to stop them.

2. Low oil prices--not always a good thing

Oil barrels. (mondaff/Flickr)

Oil barrels. (mondaff/Flickr)

Venezuela gets about 95% of its money from selling oil from its abundant reserves. The country basically depends completely on oil money to continue functioning.

So when oil prices drop, it may be good for gas prices in the US, but it's very bad for the people of Venezuela.

Prices are currently around $50 per barrel. For Venezuela, that's not good--they would need the price to grow to $121 per barrel to balance their budget.

It might not have been so bad if former president Hugo Chávez hadn't chosen his oil company leaders based on their loyalty to him and his party. The employees took money from the company, but didn't re-invest the cash to improve the country's processes, causing oil production to actually fall in the 2000s.

3. Plummeting economy

caracas venezuela

On the streets in Caracas, Venezuela. (Julio César Mesa/Flickr)

Due to the lower oil prices -- again, oil accounts for 95% of Venezuela's income -- the country is losing money.

Inflation is also ridiculously high in Venezuela. Shortages of goods have resulted in sky-high prices and a complicated exchange rate system, which gives preferential rates to those importing essential items, hasn't helped.

The president has accused Venezuelans of smuggling goods to Colombia for profit and shopkeepers of withholding stock to drive up prices.

Experts say the economy will fall 8% this year, with inflation growing to over 700%. The government has very little cash on hand even though it owes tons of money. Yikes.

4. Scarcity of essential goods

Venezuelans protest the lack of necessary products, like toilet paper. (CarlosDiazME/Flickr)

Venezuelans protest the lack of necessary products, like toilet paper. (CarlosDiazME/Flickr)

What would life be like without sugar, flour, and other basic food? How about life without toilet paper?

Unfortunately, many Venezuelans are experiencing this first hand.

Venezuela relies mostly on imports to keep their people fed, and with their economy tanking, the people are getting less and less while the products cost more and more. Venezuelans need to stand in line for hours just to get the staples they need to stay alive.

Some people also started buying and hoarding more than they need, either to keep for emergencies or to resell at a marked-up price. This has caused even more scarcity and inflation.

5. Widespread corruption

Legislative Palace in Maracaibo, Venezuela. (Wilfredor/Flickr)

Legislative Palace in Maracaibo, Venezuela. (Wilfredor/Flickr)

Venezuela officially ranks as the ninth most corrupt country in the world.

The president himself has links to criminals--his nephews attempted to take 800 kilograms of cocaine into the US, and former Venezuelan cabinet ministers say $300 billion was probably embezzled over the past decade.

6. Political unrest

Venezuelan president Nicolás Maduro. (INFORME DIGITAL/Flickr)

Venezuelan president Nicolás Maduro. (INFORME DIGITAL/Flickr)

Venezuela has been run by a socialist party for the past 17 years. Right now, the country has president Nicolás Maduro at its head.

The Venezuelan people are getting frustrated with the country's downward spiral, though, and about 60% want Maduro out. The opposition, which has control of Venezuela's congress, is actively trying to oust the president while all this other crazy stuff is going on.

So what's next? Will Maduro step in and save the economy? Or is a new government the answer? Can the country be saved even amidst violence and corruption? Right now, it's anyone's guess.

Images used under Creative Commons licensing.

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Why Venezuela Is on the Verge of  Actual Collapse

Alison Maney

Alison Maney is a nomadic freelance writer originally from Northern Virginia. An NYU graduate since 2013, she has been spending her time writing for everyone from PR agencies to startup companies to actual real life publications. She wastes her time watching old movies with her dog, Louie.

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