There was a time when Venezuela was one of the richest countries in the world – wealthier even than Canada.
The year was 1950. And oil-rich Venezuela was thriving, while much of the rest of the world was struggling to recover from the ravages of the Second World War. Only the United States, Switzerland and New Zealand had a higher per capita GDP. Canada ranked sixth.
With its relative stability and prosperity, Venezuela was a magnet for immigrants.
Today it is an economic basket case. The country still has plenty of oil, sitting atop the world’s largest reserves. But it is now a poor country, and its oil production is plunging.
In the nearly five years since Nicolas Maduro became president, its economy has shrunk in half. And economists warn that it is on course to decline by another 25 per cent this year, dragged down by recently imposed U.S. trade sanctions. Hunger, power blackouts, empty store shelves, rampant crime and hyperinflation have become part of everyday life.
As many as 3.3 million Venezuelans – more than 10 per cent of the population – have fled to neighbouring countries, as well as to the U.S. and Spain. Among the refugees are some of the most desperate, but also many of the country’s best and brightest workers.
“Venezuela’s economic collapse is almost unprecedented in recent history,” according to a report this month by the Washington-based Institute for International Finance (IIF). Only Russia’s implosion after the breakup of the Soviet Union comes close.
The central question now is how to make Venezuela whole again, when the Maduro regime inevitably cedes power, presumably to opposition leader Juan Guaido.
Unfortunately, Mr. Maduro’s exit – a change advocated by Canada, the U.S. and dozens of other countries – won’t miraculously fix this badly broken country. It will take years and tens of billions of dollars in emergency loans and longer-term financial support from the international community, including the International Monetary Fund.
“The depth of the recession raises the risk of an incomplete recovery in the event of policy change,” the IIF warned.