Venezuela's struggling economy was crushed by COVID-19 : The Indicator from Planet Money Venezuela's economy was already struggling, for a variety of reasons. The coronavirus pandemic couldn't have struck at a worse time. Now the country's economy is on life support.

Coronavirus Comes To Venezuela

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This is THE INDICATOR FROM PLANET MONEY. Stacey and Cardiff here.

For the last several years, the country of Venezuela has been in a terribly deep economic crisis.


Which is really shocking in a lot of ways because 10 years ago, Venezuela's economy was thriving. The country has giant oil reserves. And back when the price of oil was rising, Venezuela had money to spare. But then bad leadership and mismanagement plunged the country into economic crisis. And while many countries in the world were seeing really strong economic growth over the past few years, Venezuela found itself in increasing economic trouble.

GARCIA: People could not access food, and millions of Venezuelans were starving. Unemployment skyrocketed along with poverty rates. Giant blackouts hit the country. And a lot of people suddenly had no running water.

VANEK SMITH: And then there was the inflation. Some days, the bolivar's value would drop 10% in one day. The country was in crisis. And then coronavirus hit. The last few months have seen the situation in Venezuela go from terrible to worse. Oil has long been the biggest part of Venezuela's economy. It has some of the biggest oil reserves on the planet. But the last oil rig stopped drilling last week, and the current president, Nicolas Maduro, is fast consolidating power, which means political change in the country seems unlikely.

GARCIA: Economist Gabriela Sade grew up in Venezuela. And we've had her on the show several times before to talk about her country. So today on the show, the Venezuelan economy. We check in with Gabriela about what's happening in Venezuela and how things have changed because of COVID-19.


VANEK SMITH: Gabriela Sade, welcome back to the show - always great to have you. So if you don't mind going back in time a bit - before coronavirus hit, what was going on in the Venezuelan economy?

GABRIELA SADE: The main universities of Venezuela published a household survey that they carry out every year, and the findings are absolutely heartbreaking. They found out that Venezuela has 79% extreme poverty.

VANEK SMITH: So 80% of the population of the whole country is living in extreme poverty?

SADE: Yes, from March 2020, so right before the pandemic hit the country; you see people, you know, asking you for money for food, and you see entire families trying to look for food in the garbage. You have that situation plus the economic contraction and mass migration, so it's just, you know, the perfect storm. And now you have a pandemic.

VANEK SMITH: What is going on in Venezuela with COVID-19?

SADE: I remember when the pandemic started, we were joking, and we were like, no, it's impossible, you know? We have so many problems. COVID cannot reach the country. But now we have over 13,000 cases, which doesn't sound like a lot, but, you know, the number is increasing at a rate of 30% weekly. We don't know if we don't have enough cases because of our testing capacity or because the virus hasn't spread that much.

VANEK SMITH: Oh, so you really don't know if Venezuela really has 13,000 cases or if it has, like, 300,000 cases...

SADE: Exactly.

VANEK SMITH: ...Because people aren't getting tested, and the government might not tell the truth even if they did.

SADE: Yes. You have part of the country in lockdown - people that can actually be under a lockdown because they have a house. They have food. They have a car. But the majority of people - well, first, they rely on informal jobs. They rely on, you know, daily incomes to survive. Just yesterday, I was talking to this person that runs a community kitchen, and she tells me that they cannot close because that's the meal that everyone in their community has. They have implemented, you know, hygiene protocols. But still, it's impossible to keep the lockdown, so you have other people going out for work. But the state has put in place many restrictions that are sometimes enforced by gangs.

VANEK SMITH: Like what?

SADE: OK. So there are neighborhoods in Venezuela that, because of the lack of state's presence, are ruled by gangs. And if they see you, you know, leaving your house or breaking the lockdown, they will punish you. So you see an excess of state force in some respects.

VANEK SMITH: What is the economic situation?

SADE: I would say it's a tale of many stories because you have Venezuelans within the country, but you also have Venezuelans that have left the country to neighboring countries, to Colombia, Peru.

VANEK SMITH: A lot of Venezuelans have left.

SADE: Exactly; 15% of the population, 5.1 million. So it is estimated that 35% of the population relies on money that is sent back home.

VANEK SMITH: Remittances.

SADE: Exactly, for 3.5 billion. That's what Ecoanalitica...


SADE: ...A consulting firm, calculated. Yeah, so that's the highest source of foreign currency after oil revenues.

VANEK SMITH: So it's like the biggest part of the country's whole gross domestic product is, No. 1, oil and, No. 2, remittances, like, money from Venezuelans who've left.

SADE: Yes, these migrants that are living in Colombia, Peru, Ecuador, Brazil. But the thing is that these migrants - they have informal jobs. These are the people that you see on a bus with a Venezuelan flag, singing to make some money, people that are working as waiters and waitresses. And overnight, they lost their jobs. And you have all these families that were relying on remittances. And it is suspected that remittances are going to be reduced by, like, 40%.

I actually - I always have people that reach out to me so I can help them send money back home because there is no official channel to do this because if you do this through the official channel, you will basically - they use an official rate that is not accurate, so you will lose a lot of money. So what people do is they rely on other people, like me, for example, to send money back home.

VANEK SMITH: What about getting food? I mean, that was always, like, a big deal - getting enough food.

SADE: When the pandemic started, there was a gasoline shortage, and that disrupted the supply chain. And people were very, very worried. But that has been normalized a little bit. And it's something you can't find a lot, but you can right now. It's just prices are very - they have skyrocketed.

VANEK SMITH: Up until pretty recently, you were working in Caracas with a group of economists who were, like, your co-workers and friends. How are they doing?

SADE: One of my co-workers - she just gave birth. And it's been very tough for her because - well, especially because of the water shortages.

VANEK SMITH: There are water shortages?

SADE: Yes. Yes. Actually, that's one of the main reasons why people are also breaking the quarantine; because they need to just, you know, hunt for water. It's really bad. It's affecting everyone.

A friend of mine told me that her neighbors basically started to offer, like, pizza, water, drinks, cooked food to other neighbors for a lower price than you would find in a restaurant for takeout. And so they started, like, that little network, and they have survived with that. You basically cannot count on the government to do things, so what we do is we organize ourselves. You have these community kitchen that are privately run. You have all these people that organize to send money to these migrants and to these families. You have people donating gloves and masks to Venezuelan hospitals that are also in a terrible, terrible situation. So it's basically in the hands of those 5 million Venezuelans that are out of the country to help however we can.

VANEK SMITH: Economist Gabriela Sade, thank you.

SADE: Thank you so much.


VANEK SMITH: This episode of THE INDICATOR was produced by Darian Woods, fact-checked by Brittany Cronin. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.


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