by WorldTribune Staff, May 27, 2016
“The problem with socialism is that you eventually run out of other people’s money.” – Margaret Thatcher
As Venezuela sinks further into the economic abyss, the South American country has begun selling off its remaining gold reserves.
The country’s gold reserves have dropped almost a third over the past year. Venezuela sold over 44 tons in February and March, according to the IMF. Gold now makes up almost 70 percent of Venezuela’s total reserves, which fell to a low of $12.1 billion last week.
The IMF forecasts Venezuela’s economy will shrink by 8 percent this year, and 4.5 percent in 2017, after a 5.7 percent contraction in 2015. Inflation is forecast to exceed 1,642 percent next year, fueled by printing money to fund a fiscal deficit estimated at about 17 percent of gross domestic product.
Just three years after the death of socialist leader Hugo Chavez, Venezuela — once a leading oil producer — is on the verge of bankruptcy.
Venezuela’s total oil reserves, at an estimated 296.5 billion barrels, is higher than Saudi Arabia’s. But the country is struggling to get investments and technical expertise to convert its oil reserves into revenue.
Instead of taking any kind of action to improve conditions, President Nicolas Maduro has focused blame on the U.S. for what has become an economic nightmare on his watch and that of his socialist mentor Chavez.
And as its economy spins out of control, multinational companies are finding it nearly impossible to do business in Venezuela. Several firms in recent months have stopped production or ceased operations amid a lack of raw materials and as access to U.S. dollars shrinks.
Coca-Cola’s Venezuelan bottler temporarily stopped production this week. Coca-Cola Femsa SAB said it ran out of sugar supplies at its four bottling plants due to a shortage of raw materials.
Also this week, tire maker Bridgestone Americas said it was selling its business in Venezuela in response to runaway inflation and strict currency controls. Ford Motor Co., Procter & Gamble and oilfield services giants Halliburton Corp. and Schlumberger Corp. have all either slowed or abandoned investments in Venezuela amid the country’s worst downturn in 70 years.
“Production in Venezuela has on almost every front come to a complete stop,” said Dany Bahar, a Venezuela-born economist and fellow at the Brookings Institution in Washington. “All the private companies are struggling to import, and that’s why they’re not able to produce anything.”