Policies that Will Solve the Venezuelan Economic Crisis

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Policies that will solve the Venezuelan Economic Crisis
Introduction
The Venezuelan economy is based on the export and production of oil. The dependence of Venezuela on oil alone was nationalized in 1975, creating a state company. It is estimated that 95% of Venezuelan revenues comes from oil. The Maduro leadership took over an economic crisis created by Hugo Chavez’s government. Chavez’s policies involved industries that used the state revenue to pay for social welfare, hence failed to save for difficult days (Council on Foreign Relations). On the other hand, this discouraged private investors that could have diversified the nation’s income. The result was an economic crisis that has made the living conditions for the Venezuelans deplorable and effective measures need to be developed to improve the situation.
Markets and States - Robert Bates
There are various policies initiated by the author to curb the problem. Notably, the author advises the Venezuelan government to diversify on its income earners. To be able to generate income on a higher level, the Venezuelan government needs to diversify its policies to either engage in manufacturing, industrial sectors, or cash crops for exports (Bates 11). Furthermore, offering state capitalism will help divert capital into the agricultural industry that can well be compared to the Nigerian economy. The government could invest in potential industrial projects that are financed by private individuals (Bates 20). Furthermore, the Venezuelan government can use this form of policies to stabilize the economy as this type of cooperation assists in receiving bulk finances from the marketing board. These funds can be diverted to promote various industrial projects in the country that in turn can create employment (Bates 21). Venezuela is considered to be one of the leading oil exporters in the world. Although it is in an economic crisis, Venezuela should raise its fuel prices to devalue its currency. The move, in turn, would boost various measures to enable the failing economy. The Bank of America estimates that there exists a public sector gap that included various payment involving the debt of about $24 billion. It is estimated that the Venezuelan government may have an estimated $60 billion worth of assets that it can sell in the market (Bates 20). The move will help the country close the gaps in the economy and provide a foundation for growth in the future.
The proposed policies may not be outright effective as the Venezuelan economy is estimated to have economic imbalances that need adjustment. Bates highlights that the first task would be to offer and environment that is conducive for work for the Venezuelans. An effective workforce will mean setting up a system that will ensure that the policies will work. The administrative power of the Venezuelan government is key to ensure policies work. The Venezuelan government has proved that it has the administrative policies and capacity to administer elections. During the past year, the country had a significant reduction of the capital flight, which had amazing incentives under the exchange rates. Venezuela also had funds that ensured that citizens accessed basic necessities at favorable prices (Bates 20).
The Collapse of Democracy in Brazil – Michael Wallerstein
Wallerstein’s view of his policy is that once systems have been placed, administrators should unify the rate of exchange since it is crucial to economic imbalance. The author argues that this imbalance leads to a high rate of depreciation and income inequality (Wallerstein 4). On the other hand, the increase in unrecorded rates led to inflation that affect prices, which leads to a drastic impact on the economy (Wallerstein 7). The best and fastest method to stop this trend is to encourage and enable the float of the currency. The devaluation would lead to inflation, but may disappear fast. The exchange rate is considered to be spiral and may lead to the end of the black market. The author also notes that once the currency has stabilized, the US dollars will be readily available in the country and everything would be cheaper in the long run. A government that manages the exchange rate in the next coming years should be at realistic levels. A devaluation that does not lead to any break of the inflationary spiral may result in an economic crisis. Proper exchange rate management will, in turn, put an end to the balance of payment crisis and most of the corruption that comes from overestimated exchange rates (Wallerstein 5).
A suitable policy may include the elimination of price controls that may be dysfunctional. Once the measure is taken, consumers are protected from essential goods and rising prices. An announcement involving an increase in gasoline prices is a major step in a positive direction. There exist price controls involving food and other items. Hence it is important to eliminate shortages. The projected outcome of the move is saving billions of dollars on the foreign exchange. Consumers would be sufficiently protected from an increase in prices. Adjusting the prices of gasoline will result in the diversification of income from the oil sector. In 2011, Venezuela imported an approximate of about 24% of its food, and the country would be considered self-sufficient in the food sector. Self-sufficiency is vital as other diversification strategies and import substitutions thrive, which may have a lower currency and more feasible. The government should have additional measures to reduce inflation and emphasize on the policies that lead to the development and economic growth. In addition to that, the government should engage various policies to subsidize products (Oldani, Kirton and Savona 19). The administration spends time by subsidizing gasoline, electricity than on social amenities such as education and health care. Abolishing subsidies is not a simple task like redirecting money. It means abolishing the patronage that has been created that results in a normal phenomenon for administrative purposes and hence rewarded the allies regardless of the management. The outcome is widespread corruption, embezzlement of funds and stunted economic growth (Wallerstein 6).
Observing the current situation, the author suggests that by enforcing stringent market rules will force the government to withdraw its subsidies. The policies would work since the higher prices would help companies make profits and boost more employment opportunities. The initiative will cut on Venezuela’s deficit and boost their democracy and reduce the money spent. Maduro’s government was considered to have taken baby steps to address the economic crisis. His negotiations with Venezuelan creditors and gasoline hikes are quite slow, but efficient (Wallerstein 7).
Modern Latin America- Thomas Skidmore and Peter Smith
The authors’ view is that most economists advocate a country to request a loan from international agencies such as the IMF. The implication is that the country gains not only crucial...