Juan Forero writes, Oil-rich Venezuela gripped by economic crisis
No matter that Venezuela is one of the world’s great oil powers — among the top five providers of crude to the United States. Economists say Venezuela is gripped by an economic crisis that has no easy or fast solution, even if sluggish oil production were ramped up and profligate state spending were cut.
“The government is paralyzed, unable to handle the situation — and there are no fiscal plans to deal with the crisis,” said José Guerra, a former Central Bank economist who directs the economics department at Central University in Caracas, the capital. “Our situation is unbelievable, because we have one of the biggest reserves of oil in the world, thermal-electrical and hydroelectric sources.”
It’s only a question of how far a slide, not if,
Last year, the economy slid 3.3 percent. Some economists, including Guerra, predict a 5 percent contraction this year. The International Monetary Fund says the economy will probably shrink 2 percent.
Venezuela’s performance stands in stark contrast to the rest of Latin America, where some central banks worry about overheating economies in 2010. In Peru, Chile and Brazil, all of which embrace globalization, growth could indeed go well beyond 4 percent, the IMF says. Venezuela, economists say, stands out — its economic policies marked by the nationalization of industries and stringent currency controls
Exactly the prescription for ruin.
Forero touches on the decline of the oil production and the crippling blackouts. Go read the rest of the article.