A complete analysis of the current political conditions of the country and its effect on socio-economic factors and its impact on socio-economic factors along with recommendations for the betterment of the system.

1. HYPERINFLATION AND ECONOMIC COLLAPSE
VENEZUELA IN CRISIS
A PRESENTATION BY TILIKA CHAWDA

2. 1| VENEZUELA IN CRISIS

3. 2| VENEZUELA IN CRISIS

4. What Really Happened.
3| VENEZUELA IN CRISIS

5. 1999 – Election
of Hugo Chavez
as President of
Venezuela
2013 – Chavez
dies from
cancer, Nicolás
Maduro takes
office
2014 – Drop in
Oil prices
leading to
decline in GDP &
standard of
living
2016 – Printing
more money
leads to fall in
value
2018 – Price
control by
government,
demonetization
4| VENEZUELA IN CRISIS
HYPERINFLATION
CRISI
S

6. • An episode of hyperinflation occurs when the monthly inflation rate exceeds 50%/mo. for 30 consecutive
days.
• The hyperinflation episode ends when the monthly inflation rate falls below 50%/mo. mark, unless the
monthly inflation should exceed 50% per month for another 30-day period.
5| VENEZUELA IN CRISIS
WHAT IS HYPERINFLATION

7. WHAT TRIGGERED THE
HYPERINFLATION?
6| VENEZUELA IN CRISIS

8. 1. 3 years of recession, with economy further expected to contract by at least 10%.
2. Fall in global Oil prices from US$111 per barrel in 2014 to US$27 in 2016.
7| VENEZUELA IN CRISIS

9. 3. Running out of cash.
4. Soaring food prices and broken hospitals.
8| VENEZUELA IN CRISIS

10. 9| VENEZUELA IN CRISIS
WHO ARE INVOLVED?

11. HUGO CHAVEZ: FEBRUARY 1999 – MARCH 2013
10| VENEZUELA IN CRISIS

12. NICOLÁS MADURO: MARCH 2013 - PRESENT
11| VENEZUELA IN CRISIS

13. JUAN GUAIDO: PRESIDENT OF THE NATIONAL ASSEMBLY
12| VENEZUELA IN CRISIS

14. THE UNITED STATES OF AMERICA
13| VENEZUELA IN CRISIS

15. IMPACT ON SOCIO-ECONOMIC
FACTORS
14| VENEZUELA IN CRISIS

16. 15| VENEZUELA IN CRISIS

17. 16| VENEZUELA IN CRISIS

18. 17| VENEZUELA IN CRISIS

19. 18| VENEZUELA IN CRISIS

20. 19| VENEZUELA IN CRISIS

21. CONDITION OF THE RESIDENTS OF
VENEZUELA
20| VENEZUELA IN CRISIS

22. • In 2017, 90% of civilians were living in poverty and most surveyed had lost an average of 25 pounds in
body weight.
• Millions of people have left the country, crossing into neighbouring countries in search of food and work.
• 2/3 of the opposing citizens formed a party – Democratic Unity Roundtable (MUD) against Maduro at the
national assembly and put his power at risk.
• People are buying dollars on the black market at a 30 percent higher price.
21| VENEZUELA IN CRISIS

23. 22| VENEZUELA IN CRISIS

24. CONDITION OF BANKING SYSTEM
23| VENEZUELA IN CRISIS

25. • The value of the country’s 31 banks in 2017 was equivalent to that of a single mid-sized bank in the
Dominican Republic, according to bank regulator data.
• Credit is steadily disappearing.
• Venezuelan banks as of January were lending only 28 percent of their deposits, compared with an average
of 100 percent in the region last year, according to data from the Venezuelan government and the Latin
American Federation of Banks, or Felaban.
• The country's inflation rate is currently the world's highest, but the Venezuela’s Central Bank has not
published inflation figures since 2015.
24| VENEZUELA IN CRISIS

26. 25| VENEZUELA IN CRISIS
HOW VENEZUELA IS CONTROLLING THE
SITUATION

27. 26| VENEZUELA IN CRISIS
• Venezuela has slashed off five zeroes from the currency notes, calling the new currency as the “sovereign
bolívar”.
• The currency, would now be backed by Venezuela’s petro, a virtual currency linked to oil reserves that the
government created in February and that experts have called a sham.
• In the new arrangements, one petro will be worth $60 (€53), based on the price of the country's oil. That
will be equal to 3,600 sovereign bolivars.
• The minimum monthly wage in the country will be raised to 0.5 PTR, 1,800 sovereign bolivars or $30 USD,
which is 60 times more than the current 30 million old bolivars (30 sovereign bolivars).
•Venezuela has slashed off five zeroes from the currency notes, calling the new currency as the “sovereign bolívar”.

28. 27| VENEZUELA IN CRISIS

29. 28| VENEZUELA IN CRISIS
INTERNATIONAL RESPONSE

30. THE UNITED STATES OF AMERICA
29| VENEZUELA IN CRISIS
• Sanctions imposed on Venezuelan president and government officials.
• Political pressure even after Maduro cut off diplomatic ties with the US.
• Juan Gaido – US$20,000,000 humanitarian aid.
• Over US$95,000,000 aid provided.
• US$24,000,000 to Colombia to deal with influx of refugees.

31. UK & THE EUROPEAN UNION
30| VENEZUELA IN CRISIS
• Spain, Germany, France, UK, Italy have given Nicolas Maduro an ultimatum to hold legitimate elections
with Juan Guaido (President of National Assembly).
• Condemns formation of “National Constituent Assembly”, and dissolving of the “National Assembly”.
• “ DEMOCRACY ” [new 6 year term announced by Maduro]

32. THE RUSSIAN FEDERATION & PEOPLE’S REPUBLIC OF CHINA
• China has lent Venezuela more than $60 billion since 2001, and is the South American country’s largest creditor.
• The Chinese Foreign Ministry issued a vote of confidence in November 2017, stating that “Venezuela’s government and
people have the ability to properly handle their debt issue.”
• Before oil prices fell in 2014, Venezuela was set to become the largest importer of Russian military equipment by 2025.
• In August 2017, the Russian state oil company Rosneft was reselling approximately 225,000 barrels of PDVSA oil per
day, or 13 percent of total Venezuelan exports. A bilateral agreement struck in November to restructure more than $3
billion of Venezuela’s debt to Russia reaffirmed Moscow’s support.
| VENEZUELA IN CRISIS| VENEZUELA IN CRISIS 31

33. INFLUENCE ON LATIN AMERICA
| VENEZUELA IN CRISIS 32

34. • Peru has seen the biggest influx
percentage-wise since 2015 with the
numbers increasing more than 150-fold.
• Most are leaving on foot, it’s an arduous
journey in a continent that has an area of
17.8 million square kilometers (6.9 million
square miles).
• Many end up sleeping in makeshift camps
or on the streets, living off food donations
and trying to earn scraps cleaning car
windows at traffic lights.
33| VENEZUELA IN CRISIS

35. • Deployed 120 men from the country's national force to the border state of Roraima, where hostility
towards Venezuelan migrants led to violence.
• Decision to prohibit all Venezuelans was overturned by Brazil's supreme court.
• Brazilian government has said it will continue to try to spread migrants throughout the country.
BRAZIL
34| VENEZUELA IN CRISIS

36. 7| VENEZUELA IN CRISIS
• Peru and Ecuador announce new restrictions on migration, as Venezuelans try to flee to neighboring
countries which are later relaxed.
• In Argentina they say that those arriving are young, entrepreneurial and well-qualified.
• Some 60 percent of doctors applying for jobs in Chile are Venezuelan.
• Argentina, Australia, Brazil, Canada, Chile, Colombia, Ecuador, Paraguay and Peru officially recognize Juan
Gaido as Venezuela’s legitimate interim President.
35| VENEZUELA IN CRISIS
NOT ALL BAD NEWS

37. 36| VENEZUELA IN CRISIS
RECOMMENDATIONS

38. WHAT IS DOLLARIZATION AND HOW IT WORKS?
Currency substitution or dollarization is the use of a foreign currency parallel/instead of the domestic
currency.
TYPES:
1. Full dollarization
2. Partial dollarization
37| VENEZUELA IN CRISIS
DOLLARIZATION

39. WHAT IS DOLLARIZATION AND HOW IT WORKS?
• Decreases transaction costs in international trade.
• Lower risk of inflation.
• Currency substitution prevents the Central Bank from having its own monetary policy.
38| VENEZUELA IN CRISIS
ADVANTAGES OF DOLLARIZATION

40. The decision to dollarize the economy slowed hyperinflation, stopped the free fall of Ecuadorian Sucre, and
stabilized the financial market, all of which significantly helped resolve the economic crisis.
DOLLARIZATION IN ECUADOR
39| VENEZUELA IN CRISIS

41. WHAT DOES THE VENEZUELAN PUBLIC THINK OF THE DOLLARIZATION IDEA?
A professional survey of public opinion on the topic was conducted in March 2017 by Datincorp in Caracas.
The results are encouraging:
• Sixty-two (62%) of the public favored dollarization. Since proportion of Venezuelans favoring dollarization
has substantially increased. It’s time for enlightened, practical politicians in Venezuela to embrace the
dollarization idea. The fact of the matter is that the public has already spontaneously dollarized the
economy.
• Considering the current situation, Dollarization will be even more popular.
40| VENEZUELA IN CRISIS

42. 7| VENEZUELA IN CRISIS
THANK YOU
A PRESENTATION BY TILIKA CHAWDA