The Venezuelan Crisis has been adjudged as one of the worst humanitarian crisis’ in the world. At the moment, it is drawing the attention of every major nation as political tensions surrounding the situation continue to flare. To present an overview of the situation, would require us to traverse the winding roads of history of the nation. However, narrating a mere overview isn’t what we set out to achieve.
As part of our efforts to collaborate with various blockchain and cryptocurrency projects worldwide, we have monitored the situation closely. And devised a counter-specific strategic design whilst conducting an in-depth research into the economic and socio-political circumstances of the country, which would permit the region’s growth and development in moving forward.
The country is currently facing hyperinflation, food shortages, and a multi year recession. To make matters worse, US-Venezuela tensions are heating up and that is keeping US aid from reaching the people. Sanctions have been levied on the country by the US, as a result of which, US aid has been denied entry into Venezuela.
We at Nair Global, essentially attempted to understand primarily two aspects of the situation
- Why is Venezuela left behind in the growth race as compared to other Latin American countries, and
- What changed post 1970s, which led to the downfall of the national economy?
Understanding The Problem
The twentieth century saw the transformation of Venezuela from a poor Latin american country, to one of the richest latin American countries. In the 1970s, it was among the top twenty richest nations in the world. In 1998, Hugo Chávez, the country’s beloved leader began his long standing Presidency. The reason Chávez was widely loved and revered by the people was because of his wildly popular social welfare policies.
His policies launched a ‘Bolivarian Revolution’; introducing a new constitution, nationalizing of the oil industry, the profits from which were funnelled into boosting education, health care programs and funding food subsidies. He single handedly was able to facilitate the transformation of a poor Latin America into a rich, prosperous one. It is no surprise that under his rule, the unemployment and poverty rates halved and income per capita more than doubled.
After the death of Hugo Chávez, the Presidency was taken up by Nicolas Maduro, who was incidentally groomed by Chávez himself. Under Maduro’s rule, the State’s expenditure rose significantly and major state spending was carried out without any hesitation, thereby gradually draining the country’s economy. An official confirmation of the recession was delivered by the Venezuelan Central Bank on December 30, 2014. They claimed that the recession was a result of the sudden drop in oil prices. This forced the government to cut public spending and make matters worse for the general populous.
The country was experiencing major scarcity of food and basic amenities, coupled with an increase in violence and coercion to obey the State’s orders. Public demonstrations against Maduro lead to further aggravation of internal unrest. The political turmoil in the country had escalated steadily after Maduro came to power. It is quite evident that the situation on the ground became a horror, one that needed to be dealt with right away.
Finding The Right Solution
Now that we have an informed understanding of what went down in Venezuela, we can confidently claim that the State’s policies played a significant part in the escalation of the economic crisis in the country. The need of the hour is to restart the economy and chanel foreign investments into the country. These investments can come in by making the already crypto friendly country, a safe haven for the growing blockchain and cryptocurrency based businesses.
Building of a Special Economic Zone (SEZ) is highly recommended in the country, to encourage a steady flow of investments. A SEZ is an area in which business and trade laws are different from the rest of the country. This would act as an incentive for foreign companies to set up shop in the region, and a SEZ could positively promote trade, job creation and effective administration. This model has been tried and tested in various regions around the world, and they have reported a significant increase in trade. To demonstrate this, let’s take the example of Malta, which is a thriving business hub in the European Union. The presence of the Freeport in Malta has attracted many businesses into the region with the promise of lesser regulations and low taxes.
Moving forward, cryptocurrency can play an important role in reviving the country’s economic growth. We already know of Venezuela’s state backed cryptocurrency, Petro, which is also backed by a tangible asset such as oil. The year 2018 saw the rise of Petro cryptocurrency in the country, in an attempt to bypass US sanctions and keep the economy afloat. The most effective go-to-market strategy, would be to enable extensive promotion of Petro both on a national and international level. The country’s growth hinges on the product’s widespread global acceptance. Venezuela could also expect to accrue significant revenues if they decide to grow their travel and tourism industry. Our independent study into the ‘Trends of the Industry’ have revealed to us that a flourishing tourism industry could reinstate the faith of the people in the country’s potential development and changing times.
How to Execute the Plan, effectively?
By now we have agreed that foreign companies bringing their businesses to Venezuela, would be incredibly beneficial for the country. Firstly, Venezuela’s geographic location connecting the West and the East is a strategic and lucrative location for most businesses, which would receive access to both the markets. Secondly, the country’s repository of resources is rich in nature, and if utilized with caution, can fuel generations of businesses.
However, a creation of a SEZ would require country specific customization and appropriate implementation for the results to be successful.
- Experts from the blockchain and cryptocurrency industry, who boast extensive experience in building up connected ecosystems should be encouraged to usher in new business projects into the region. It is mandatory for them to possess industry specific knowledge.
- A thorough audit of the region should be conducted so as to zero down on the prime location for setting up an SEZ. This is a process that would require expert guidance and consultation at every step, to enable efficient growth of the project. Additionally, due-diligence needs to be carried out in order to present periodic reports and updates on the progress of the project.
Currently the situation has worsened on the political front, as the leader of the opposition, Guaidó, has declared himself the interim president, citing emergency powers granted from the constitution. He is receiving massive support from the US, in his actions, which has unfortunately led to an immediate rupture in diplomatic ties between the two countries, as seen fit by Maduro.
In such trying times, it would be prudent to begin a campaign of digital marketing and publicity support for the economic project mentioned above, so as to divert attention from the internal political turmoil in the country.
- There is an urgent need to tap into a globally connected network of investors, venture capitalists, entrepreneurs and experts from the industry, who would facilitate the forging of new partnerships and spread the word about the SEZ far and wide.
- A combination of Private Investment Promotion Agencies (IPA) like Nair Ventures and state-supported Investment promotion, facilitation agencies can help accommodate such strategies for the government and facilitate projects on behalf of the government, attracting investments and corporate establishments.
- A strong community need to be built around this project, containing influencers, spokespersons and evangelists. Furthermore, such a network can help with getting Petro listed on most of the major exchanges around the world, thereby ensuring more visibility and support for the cryptocurrency.
The world is watching Venezuela closely right now, anticipating what Maduro’s next move might be. The US’s saviour complex and commercial interests is also keeping them heavily invested in this situation. Under such circumstances, it would be a smart move on the part of the government, to focus on the growth of this SEZ, which would transform Venezuela into a thriving tech hub, and open up new opportunities for the people of the country. This should be made an immediate priority for the country, if they wish to end this ongoing crisis at the earliest.