Latin Analysis: Yet Another Economic Emergency In Maduro’s Venezuela
Reuters
Around eight million Venezuelans have fled their country since 2014, when the country was plunged into a deep economic crisis that they have since struggled to recover from. This represents one of the greatest humanitarian crises plaguing Latin America in decades, having a widespread, profound impact on Venezuela and the wider region. Out of those who have chosen to stay in their home country, or those who are not able to leave, over 20 million live in multidimensional poverty. The post-pandemic era saw an uptick in Venezuela’s economic activity, but it appears that these positive trends have not been long-lasting. Rather, recent international dynamics, along with the historical neglect of the economy, have returned the economy to this all-too-familiar financial peril.
Thus, current president Nicolás Maduro was forced to announce a “state of economic emergency” in April, yet another attempt bringing the rapidly declining financial situation to attention. Although the President brought in this measure to supposedly “preserve the country’s economic balance in the face of tariffs and the cancellation of licenses” by the Trump administration in the United States, it remains uncertain that this will work. Rather, many analysts are worried this will put further strain on Venezuela’s relationship with its allies, international actors, and business stakeholders. Additionally, the tax increases that have come about as a result of this measure appear to be doing more harm than good in stabilizing the financial situation for the Venezuelan population.
“We’ve endured blockades and challenges, achieving 15 consecutive quarters of growth. This decree consolidates Venezuela’s wealth and unites us against economic warfare,”
- Jesús Faría, head of the Venezuelan Permanent Commission on Economy, Finance, and National Development
At the heart of this most recent economic decline for Venezuela lies the ‘drying up’ of key oil revenues. Home to the world’s largest oil reserves, Venezuela is classified as a petrostate, which can be defined as a country “where the government is highly dependent on fossil fuel income, power is concentrated, and corruption is widespread”. A major aspect of Venezuela’s economic decline, despite the abundance of natural resources that it has at its disposal, has been the reliance on oil to bolster the economy that successive governments have fostered. For example, in 2024, it was estimated that oil made up 80 per cent of the Venezuelan exports, as well as 70 per cent of government revenue. Thus, when oil prices are high, Venezuela’s economic situation is relatively positive. However, historically, when oil prices have fallen, the economy has gone into freefall.
Considering this, it is not surprising that recent sanctions against the Venezuelan government relating to oil have had a profoundly negative impact on the country’s financial prosperity. A key part of this has been the decision taken by the Trump administration in the United States to revoke the licenses of key partners and customers of the Venezuelan state-owned oil company PDVSA to pump and export Venezuelan oil to the United States. This agreement, which was granted by Trump’s predecessor, President Joe Biden, in 2022 after “Maduro agreed to work with Venezuela’s political opposition towards a democratic election”, is thought to have accounted for 25 per cent of Venezuela’s oil exports over the period, around $4 billion. However, following the presidential elections held in Venezuela last July- which handed President Maduro another six-year term despite credible allegations of electoral fraud and oppression of opposition candidates- US President Trump decided to end this agreement, strangling the Venezuelan economy. The United States did not only put sanctions on Venezuelan oil companies, but indeed also imposed “secondary tariffs on Venezuela’s oil buyers.” This move is expected to reduce their oil income by 30 per cent.
In the wake of this, perceived by the Maduro administration as an ‘economic war’, the President declared this state of economic emergency. This decision by the regime, although presented to the electorate as a stabilizing move, appears to be putting even more pressure on normal people. Under these new rules, the government has been able to hike taxes, which had already risen by 20 per cent between January-March 2025 compared to the same period last year. However, instead of plugging a black hole in the country’s finances, this policy has stunted growth and investment, as well as employment. According to a survey carried out by Conindustria in May, “77% of businesspeople viewed taxation as their top operational hurdle,” while two-thirds demonstrated a notable resistance to improve productivity rates.
Although Maduro’s administration prefers to lay the blame for their economic hardship at the United States’ door, it is clear that Venezuela’s domestic government have made yet another series of reckless choices regarding the economy that have largely contributed to the current crisis. President Maduro’s attempts at exchange rate manipulation since 2021, using cash reserves to artificially lower the exchange rate, led to many people using foreign currency when carrying out transactions. Initially, this was very successful in improving life in the short-term for the population; they were no longer having to carry around bricks of currency to pay for goods, helping to stop the vicious cycle of hyperinflation which reached 130,000 per cent in 2018. However, warnings from economists quickly slammed this policy as unsustainable, and when foreign currency shortages began to arise, demand could not be met. Therefore, many people started to buy off the black market, triggering various problems for the economy, and causing the exchange rate to become less favorable for Venezuelan consumers.
Despite US sanctions undoubtably contributing to Venezuela’s current turmoil, it seems that the government has a lot to answer for. As a result of Maduro’s iron grip on power and the events of last years presidential election, Venezuela’s historically vulnerable economy was once again thrust into crisis. The relative prosperity of the post-pandemic years was short-lived, and many commentators remain unconvinced that this declaration of an economic emergency’ will change the situation. Currently, all it appears to have achieved is allowing the government to increase taxes, which rather than providing a well-needed cash injection into the economy, is stifling growth and businesses. Once again, the Venezuelan people are paying the price for the actions of authoritarian leaders. Should this situation continue, it is likely that even more Venezuelans will be forced to leave their homeland in search of a brighter future.
