Why Venezuela Is Poor Despite Having The World's Largest Oil Reserves

Venezuela holds the largest proven lipid reserves successful the world, estimated astatine astir 303 cardinal barrels, yet it consistently earns a fraction of what different large exporters bash from crude exports and suffers 1 of the astir terrible economical crises successful Latin America.

Venezuelan President Nicolas Maduro's seizure is the latest successful a bid of setbacks for the Latin American nation.

At look value, Venezuela should beryllium immensely wealthy. Its lipid reserves outstrip those of Saudi Arabia and the United States combined. But the country's lipid exports generated lone astir $4 cardinal successful gross successful 2023, a tiny stock compared with Saudi Arabia's astir $181 billion, according to an Al Jazeera report. This mismatch betwixt reserves and export income is simply a cardinal portion of Venezuela's "cash poor" condition.

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Several structural factors assistance explicate this gap:

• Venezuelan lipid is overwhelmingly extra-heavy crude, chiefly from the Orinoco Belt, which is much costly to extract and refine and sells astatine a discount.

• The authorities lipid company, PDVSA, has suffered from years of underinvestment, mismanagement, and aging infrastructure.

• Government subsidies person kept gasoline highly inexpensive domestically, reducing export incentives and fiscal revenue.

Experts constituent to decades of argumentation missteps that undermined the lipid assemblage and the broader economy.

Under Presidents Hugo Chávez and Maduro, lipid gross was diverted to money societal programs, subsidies, and governmental spending alternatively than being reinvested successful technology, maintenance, and diversification, according to a DW report.

Chávez's predominant reshaping of PDVSA and purges of method unit weakened organization capacity.

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By the precocious 20th century, Venezuela had go dangerously babelike connected crude exports for authorities revenue, overseas exchange, and societal spending. Oil accounted for much than 90% of export net astatine its peak, according to World Bank data. This utmost attraction exposed the system to lipid terms volatility portion discouraging concern successful agriculture and manufacturing — a textbook illustration of the assets curse, a conception wide documented successful economical literature.