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How Oil-Rich Venezuela Ended Up With a Miserable Economy

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IMG_3244For countries that produce oil, each day brings possible signs that prices will rebound. No country needs that more than Venezuela. The petrostate is almost entirely dependent on drilling for oil and selling it – crude accounts for 96 percent of export revenue.

Yet by most accounts Caracas has mismanaged the resource, and today Venezuela stands as one of the world’s most miserable economies. The country sits on the largest proven reserves in the world, yet produces a fraction of what Saudi Arabia and Russia do every day.

“We are condemned,” said Carlos Mendoza Pottella, a petroleum economist at the Central University of Venezuela and advisor to the nation’s central bank. “They say we have oil for 500 years. So we’re doomed to keep suffering from this disease.”

Doomed? disease? Venezuela is Exhibit A in what some call the “resource curse,” or paradox of plenty. One place to start unwinding the paradox is downtown Caracas. On a pedestrian-only shopping street, the middle class still appears to be buying: clothes, shoes, books, phones. There’s a saying here that people have taught me: “It’s cheap, I’ll take two.”

Venezuelans have become spoiled by oil, said historian Miguel Tinker Salas at Pomona College, author of “The Enduring Legacy: Oil, Culture and Society in Venezuela.”

“It is the lubricant that fuels the economy and it pervades every aspect of society,” Tinker Salas said, “creating an artificial sense of expectation and of entitlement.”


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