Finance Monthly March 2019 Edition

13 www.finance-monthly.com FRONT COVER STORY - VENEZUELA’S OIL CURSE VENEZUELA’S OIL CURSE By Katina Hristova Venezuela is a contradiction – it remains the country with the largest proven oil reserves on the planet, and yet, it is also a country whose people are starving and in some cases, dying fromhunger or illnesses. The so-called ‘resource curse’ has reduced a once prosperous nation into a financial meltdown. The increased social and economic upheaval has sparked protests on a nationwide level and led many poor people to lose faith and withdraw their allegiance to President Nicolás Maduro. Amidst the political and economic turmoil, the EU, the US and a number of other countries across the globe have recognised opposition leader Juan Guaidó as the South American nation’s rightful interim president. In a bid to alleviate “the poverty and the starvation and the humanitarian crisis” currently gripping Venezuela and stop “Maduro and his cronies” looting the assets of the country’s people, US President Donald Trump has announced sanctions against Venezuela’s state-owned oil company PDVSA. US National Security Adviser John Bolton announced that the measure will “block about $7 billion in assets and would result in more than $11 billion in lost assets over the next year”. Effective from 29th January, the sanctions guarantee that any purchases of Venezuelan oil from US entities flow into blocked accounts and are supposed to be released only to the country’s legitimate leaders. The situation in Venezuela has puzzled social scientists for years. On paper, oil-exporting countries and their economies are supposed to be thriving. Why is this not the case for Venezuela and what does the ‘resource curse’ have to do with it?