Price Controls, Trade Restrictions, and Global Competition

Venezuela’s economy has been hit hard in recent years by the sharp decline in global oil prices. According to OPEC, oil accounts for about 95 percent of all of Venezuela’s export earnings and about a quarter of its total gross domestic product. Declining oil revenue has sparked an economic crisis in the country, leading to anti-government protests. In an effort to stem discontent, the government has imposed currency controls and limited the prices of key consumer goods—all in an effort to stabilize the economy and limit inflation estimated at about 60 percent.

But broad economic policies are felt on the ground as shortages of key commodities and long lines for basic supermarket goods. The unintended consequence of price controls combined with high inflation has led to shortages and hoarding. Meanwhile, the government of Venezuela asserts that the country’s economic collapse has been driven by US efforts to destabilize the regime, once seen as an alternative to American influence in the region.

What do you think? What was the primary cause of the crisis? What balance of international and domestic factors explain the crisis? How might Venezuela address its ongoing economic crisis? And how might it be resolved?

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