Caracas, May 18: Venezuela’s fall due to poor governance, corruption and the misguided policies of President Nicolas Maduro and his predecessor Hugo Chavez is the single largest economic collapse outside of war in 45 years, outpacing Zimbabwe’s crumbling under Robert Mugabe, Cubas disastrous unraveling in the 1990s and the fall of the Soviet Union, economists say.
“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.”
To find similar levels of economic devastation, economists at the IMF pointed to nations that were ripped apart by war, like Libya earlier this decade or Lebanon in the 1970s, the New York Times reported on Friday.
But Venezuela, at one point Latin America’s wealthiest country, has not been shattered by armed conflict. Instead, economists say, the poor governance, corruption and misguided policies of Maduro and Chavez have increased inflation, shuttered businesses and brought the country to its knees.
And in recent months, the Donald Trump administration has tried to cripple it further by imposing stiff sanctions.
As Venezuela’s economy plummeted, armed gangs took control of entire towns, public services collapsed and the purchasing power of most Venezuelans has been reduced to a couple of kg of flour a month.
In markets, butchers hit by regular blackouts struggle to sell decomposing stock by sunset. Former labourers scavenge through garbage dumps for leftovers and recyclable plastic.
Dejected retailers make dozens of trips to the bank in hopes of depositing several pounds’ worth of bills made worthless by hyperinflation, the report said.
The crisis has escalated due to American sanctions intended to force Maduro to cede power to the nation’s opposition leader, Juan Guaido. The US sanctions on Venezuela’s state oil company have made it difficult for the government to sell its main commodity, oil.
Together with the American ban on trading Venezuelan bonds, the Trump administration has made it harder for Venezuela to import any goods, including food and medication.
Maduro blames the widespread hunger and lack of medical supplies on the US and its opposition allies – but most independent economists say the recession began years before the sanctions, which at most accelerated the collapse.
Venezuela has the world’s largest proven oil reserves. But its oil output, once Latin America’s largest, has fallen faster in the past year than Iraq’s after the American invasion in 2003, according to data from the Organization of Petroleum Exporting Countries.
It has lost a tenth of its population in the past two years as people fled, setting off Latin America’s biggest ever refugee crisis.
The country’s hyperinflation — 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.
“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 institute estimates that the drop in Venezuela’s economic output under Maduro has undergone “the steepest decline by any country not at war since at least 1975”.
By year’s end, Venezuela’s gross domestic product will shrink by 62 per cent since the beginning of the recession in 2013, which coincided with Maduro coming to power, according to the institute’s estimates.