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Venezuela, the Black Market & Price Inflation

Protest_in_VenezuelaThis year saw Venezuela being filled with protests, owing to violence, inflation, and a lack of basic amenities in the national landscape. The some approximate 6000 protests that happened for the last six months means that many student arrests, political demonstrations,  hunger strikes, followed, all in the name of doing something about the inflation and a change in government administration attitude. Most of the protestors are wealthy, live in urban areas, and have been termed by Nicolas Maduro as “fascists”, influenced by the United States. Maduro, for his part has received plenty of criticism in his handling of affairs, with reports of politically charged arrests and increased violence used against protestors by pro-government forces, which the President has defended even going so far as setting up commissions to investigate the matter further.

The protests started with the Bolivarian movement, initiated by Hugo Chávez. Under Chávez, there was mass corruption in the country, and violence almost became a daily life substitute for peaceful habitation, despite the numerous social reforms enacted during his tenure, directed to target this diaspora. After his death in 2013, and the former vice-president, Maduro, taking the helm of the throne, problems regarding the economy, crime and corruption, has continued, giving way to protests.

Corruption in Venezuela is rife so the government needs to do more in the areas of government administration, crime and violence, particularly about the increased use of guns in cities, transparency over legislations, and a more efficient judicial authority. The higher inflation rates have left food supermarket in want of more foods and basic amenities to serve their customers, a sponging-off effect for foreign exchange reserves, spurned out “under-the-table” negotiations inbetween the government and traders for store goods, and smuggling of products into neighbouring Colombia, which are then sold-off for a high price.

800px-MetrodeCaracas

There have been some cutting remarks regarding the overjoyous eating habits of Venezuelans which has resulted in an increased product demand than can be kept up. Similarly, foreign businesses have lost faith in the national currency and its ability to keep itself floating above all of the economic woes, leading to the shutting down for many businesses, from American Airlines to Ford. What is interesting is that despite the protests acting in favour of voicing the troubles Venezuela is facing, it has failed to win any substantial support from the working class at all. The working class in the country have been suffering the most with a government still somewhat inept at handling matters, and this inability to gain support has defaulted the legitimacy of the protests for many.

However, the protests do raise important points and bring the world’s attention to Venezuela and it’s many troubles. Gun-crime because of illegally traded firearms, which has a shockingly large presence in Caracas, primarily, means that there seems to be no end in sight for crime percentages. Maduro’s government is currently working on a policy of exchanging weapons for work for gang members – mending roads, working on farms could sway criminal gangs in rural areas to agree to disarmament. Because looting is heavy in the country, this response can help to stabilize people’s worries about funding and lack of legal buisness opportunities, and so far this has received a positive response from many former hardened criminals. The project was launched in Barlovento in September 2013 and so far there has been a 60percent reduction in crime – thankfully, no gang has turned this lucrative offer for “the good life” down.

Hugo_Chávez_(02-04-2010)Perhaps the key to reducing trade corruption, on the other hand,  is to liberalise businesses and carry out more fiscal reforms, and increase labour mobility nationally so that the working class are able to secure jobs. Price inflation is a major issue, and if businesses took part in trade more openly and free from any kind of threat of intimidation from any sources, then there will be a greater prospect of goods being available in stores. One of the positive economic contributors over the years, has been oil so Maduro needs to direct productivity here in the form of better living conditions, working conditions for the labour, by reducing political interference in the administration hierarchy and working more for the people and address their needs.

Maduro, as Chavez’s chosen successor, lacks the fiery personality his predecessor had gained fame for. Socialism has certainly gained Venezuela many allies, over the years, from China to Cuba, but Caracas is still suffering. Imports of automobiles needs to be less restrictive because Cuba has recently relaxed policy regarding the area a great deal, and the recently introduced regulation regarding the prices of cars is most certainly a good sign of things to come in terms of government administration.

Venezuela is a largely state-controlled country, and foreign investment isn’t exactly encouraged here so a black market for dollars has flourished. The problem is predominantly about restricting local businesses less, which often need foreign currency to function. It is not possible to stabilise an economy without the support of any business at all – foreign or local. Socialism aims to teach you to do more for the working class of your country, so the rather than having such a state autonomy over foreign businesses, it’s better to implement it on local businesses, with appropriate supervision instead because shortages, meanwhile, have already been  attributed to insufficient domestic production.

Innocent working class people suffer regularly because of the black market, as their salaries see a reduction in buying power, in turn, and the import-dominated economy, driven by businesses, is getting hurt by all this black market activity.  Minimum wage standards haven’t been enough to keep the price influx at bay and the dire problem with the black market, apart from the illegal factor here, is that it affects the economy and creates a class divide. Affluent people, who have the ability to earn in dollars, or have dollar-reach, have more buying power, simply because of the black market. The exchange rate at the black market is ten times higher than the government set rate, and many people in the country  depend on the black market entirely to fund their lifestyles of purchasing used cars and new property.



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