Growing Pains in Venezuela: Corruption & Solutions

1. Growing Pains in Venezuela: Corruption & Solutions Robert Walker and Valerie Taylor

2. History: Hugo Chavez • President of Venezuela from 1999-2013 (elected for four terms) • Led Venezuela following the idea of “Chavismo” • His own left-wing political ideology • Created and drafted the 1999 Venezuelan Constitution • The Bolivarian Missions • Refocused foreign policy and international trading • Especially in the oil industry • After first getting sick in June 2011, he passed away in March 2013

3. History: Nicolas Maduro • Current President of Venezuela • Minister of Foreign Affairs 2006-2013 • Vice President of Venezuela 2012-2013 • Presents an ideology similar to communism • Implemented the “Safe Homeland” program • October 2013 -- implemented a law to fight corruption and an economic war • The Vice Ministry of Supreme Happiness • Coordinate all social programs • Called for security to be on high alert in early December after a “blackout” while he was giving a speech

4. 2014 Protests • Began in February by youths on college campuses after an alleged rape of a student • Main opposition to the government and their lack of security • Caused by: • Criminal violence • Inflation rates • Scarcity of basic goods • Government policies, including strict price controls • So far, has resulted in 600+ arrests and 30+ deaths

5. 2014 Protests • Nicolas Maduro’s response: • Blames the protests on the “economic war” against the government • The protestors should be blamed for the majority of the deaths and copious amounts of public damage • Accusing the protestors of attempting a coup with support from the United States • It is unlikely that any change will result from the protests unless more powerful members of society get involved.

7. Inflation • 57.3 % inflation rate • One of the main obstacles facing the government and the people • Due to the failure of Venezuela’s economic model and extreme price fixing by the government • Companies are decreasing supply in an effort to increase prices • Government has taken over some companies to control production • Such as dairy and coffee

10. Price fixing • Aims to make goods more affordable for the poor • Trying to eliminate gap between rich and poor • Critics claim that the government is actually causing more of a problem • prices are so low that companies cannot make a profit and are therefore producing less • Encourages more black market sales

11. Price controls cont… • President Maduro established a new price control law, “The Fair Price Law” • Sets a maximum profit margin of 30% • Firms and corporations must obtain “fair price certificates” • Threatens prison terms for companies who resort to hoarding, “destabilizing the economy,” or food trafficking • Resale of government subsidized goods to neighboring countries

12. Scarcity of basic goods • Currently facing shortages in goods such as milk, meat, and toilet paper • Affecting the rich as well as the poor • Customers wait for very long amounts of time to obtain basic staples • Government required price cuts on items such as juice, toothpaste, diapers, etc. • Many people are shopping at government-subsidized store due to the high inflation of other stores • Coffee shortage

14. Solutions? • Laissez-Faire Economics • Economic transactions are free from government interventions, restrictions, tariffs, and subsidies • Only posses enough regulations to maintain property rights

15. Sources • http://www.cato.org/blog/venezuelas-house-cards • http://www.reuters.com/article/2014/01/24/us-venezuela-economy-idUSBREA0N1GL20140124 • http://www.bbc.com/news/world-latin-america-26335287 • http://www.cnn.com/2014/02/20/world/americas/venezuela-qa/ • http://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?pagewanted=all&_r=0