The political and economic system in Venezuela during the reign of Hugo Chavez

The political and economic system in Venezuela during the reign of Hugo Chavez

The government of the late Venezuelan president proposed and implemented numerous political and economic policies. President Chavez applied a rough form of socialism by redirecting all the resources to the poor. During his reign, the Venezuelan economy was dominated by the petroleum sector. The petroleum sector accounts for approximately a third of the Venezuelan GDP. The president enacted populist economic principles as part of the famous Bolivarian Revolution. During his reign, the government was semi-authoritarian. His administration consolidated power over the economy to manage the vast economic resources in the country. In the country, the president used the funds earned from the sales of oil to implement his populist policies. The oil funds were used to create the Bolivarian Missions through which the government provided public services. These policies succeeded in improving the social, economic, and cultural environments in the country. These policies incorporated the equitable distribution of wealth, land reforms, and public involvement in the nation-building process. During this reign, the economy exhibited a continuous positive trend until the collapse of oil prices in 2013. During this reign, inflation dropped to the lowest levels recorded in the state since the late 1960s. However

Political system

During his time, the government was semi-authoritarian. The united socialist party was the dominant party during this reign. The party was created by merging smaller parties in the country. Hugo Chavez occupies a central position is the political landscape of the country due to his political reforms.

How unilateral changes to contracts with foreign countries are likely to affect future investments in the country .

During his administration, Chavez pushed many international companies out of the country. In this period, the president expanded the grip of state-owned companies. For instance, in 2005, Chavez announced that the country would raise its loyalties on petroleum sales. In that year, the government increased the taxes from one percent to thirty percent. In 2006, the tax rate increased to 50 percent. This made it difficult for foreign companies to venture into the domestic market. The policy, however, threatens future economic agreements. Since the country depends mainly on the petroleum sector, a lack of diversification is likely to create numerous problems in the future. Restoration of the unilateral pacts that president Chavez is expected to be problematic in the future. Petroleum funds fund most of the social projects in the country. In case the oil prices fall in the future, these projects are likely to collapse.

How high levels of corruption will affect future growth rates

The cases of fraud in the country continue to increase each day. A report conducted in 2011 ranked the state among the most corrupt countries. The report revealed that government officials demanded bribes before issuing business permits. In such situations, firms find it challenging to invest in the country. Before investing in a country, firms often reassess the resources available as well as the political and economic environment.  Investors consider Venezuela as a partly free market, which is not worth investing in. When investments decrease, the country is likely to experience a decline in the rate of economic growth.  Mismanagement of public funds also threatens the growth of the economy as the funds allocated for development are squandered.

The impact of the mass exit of multinational companies during the reign of president Chavez

Multinationals companies offer numerous benefits to their host countries. These include the creation of job opportunities, the provision of high-quality products, and technological advancements. In 2005, Venezuelan increased operational taxes for foreign contributed, which led to a mass exit of multinational corporations. The move had negative impacts both on the government and the citizens. For instance, the departure of the multinational companies decreased the number of job opportunities in the country. It also resulted in customer exploitation as local companies enjoyed a market monopoly. In the absence of competition, consumers are exploited by monopolistic companies since the consumers are unable to access a wide range of products. The move also destroyed diplomatic ties that existed between the country and the international market.

To reverse these effects, the current government should consider initiating diplomatic talks with its neighbors. Through this, the government should lift the trade barriers initiated by the preceding administration. Lifting the restrictions will allow foreign companies to invest in the country

How to reverse the adverse economic conditions experienced by the country in 2016

In 2016, the once-prosperous economy stumbled, and the country recorded an inflation rate of 720 percent, thus making its currency worthless.  Even though the economy is slowly recovering, the country is still experiencing periods of economic crisis. Factors contributing to the financial crisis in Venezuela include political corruption, shortage of food, unemployment, poor governance, and human rights violation. The country must initiate peace negotiations to restore political stability in the country. The state should also diversify its economic operations. One of the factors that have primarily disadvantaged the country is its overdependence on the petroleum sector. Overreliance on the oil sector leaves the country in a vulnerable position once the oil prices decrease. The state should also discard its authoritarian system of administration. The adoption of better modes of leadership often cultivates the spirit of national building, .which is likely to help in the restoration of the economy.