There is a growing consensus among international economists that Venezuela will be Latin America’s most affected country by the combination of the coronavirus pandemic and the collapse of world oil prices. We may soon see millions more Venezuelan migrants to neighboring countries, aggravating what already is one of the world’s biggest refugee crises.
While Colombia, Ecuador, Brazil, Mexico and other oil producers will be affected by the collapse of oil prices, no other country in the region will be as hard hit as Venezuela, which relies on oil sales for 85 percent of its government spending, compared with Colombia’s 8 percent or Ecuador’s 35 percent.
Last year, Venezuela’s oil exports had already fallen to $9 billion, from $73 billion in 2011. Now, they are likely to fall significantly faster, because U.S. sanctions on its oil shipments and a glut in world oil markets will make it impossible for the regime to sell its oil above production prices.
Venezuela’s crumbling oil monopoly, PDVSA, already is offering its oil at a 23 percent discount, in effect, selling it for $14 a barrel, oil experts say.
Complicating things for President Nicolas Maduro’s dictatorship, the government will have no resources to take care of coronavirus victims. So far, the regime claims there are no one in the country has the coronavirus - an assertion that is hard to believe in a region where virtually every other big country has already reported cases.
With Venezuelan hospitals depleted after years of under-investment and chronic shortages of medicines and supplies, as well as a mass migration of doctors, the country is a prime candidate for a serious coronavirus crisis.
Hania Salazar, president of Maracaibo’s nursing school, told the Reuters news agency that hospital workers have been without supplies for years. “Workers bring their own kits with soap and towels,” she said.
Also, Venezuela’s aging population increases the chances of a rapid contagion. Most of the nearly 5 million Venezuelans who have left the country during the past five years are young people, leaving behind older people who are more vulnerable to the virus, health experts say.
To make things worse, the slowdown in the world economy and the depreciation of Latin American currencies will reduce family remittances from Venezuelans living abroad to their relatives back home. Like in Cuba before, Venezuela’s economic collapse in recent years has made growing numbers of people dependent on monthly money transfers from their relatives abroad.
“It’s a perfect storm,” Rice University oil expert Francisco J. Monaldi tweeted this week, referring to simultaneous factors that are hurting Venezuela’s already crippled economy.
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Alejandro Werner, head of the International Monetary Fund’s Latin American department, told me that Venezuela’s economy has already collapsed by more than 60 percent over the past five years — more than any other in the world — and that the IMF’s recent projection of a further 10 percent decline this year may soon have to be revised downward.
“In light of recent events, that 10 percent decline projection for Venezuela looks pretty optimistic,” Werner told me.
Considering most economists’ dire projections about Venezuela, the big question now is whether the coming “perfect storm” on the country will have any political impact.
It could trigger a renewed mass migration of Venezuelans to other countries, surpassing Syria’s refugee crisis, or a new wave of anti-government protests within Venezuela.
Or it could speed up Venezuela’s slide into a failed and lawless state, increasingly dependent on drug trafficking and illegal mining. As a top Brazilian official told me this week, there are growing fears among Latin American democracies that Venezuela will become a “fragmented country,” with some areas controlled by the Maduro dictatorship and others by various narco-trafficking and guerrilla groups.
It’s hard to say which of these will be the most likely scenario. But one thing seems clear: Venezuela’s collapse will accelerate in coming months, and its impact will be felt throughout the region.
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