ASSESSMENTS

Low Oil Prices Continue to Hurt Venezuela

Dec 12, 2014 | 10:00 GMT

Low Oil Prices Continue to Hurt Venezuela
The Venezuelan bolivar currency is presented next to the U.S. dollar

(JUAN BARRETO/AFP/Getty Images)

Summary

The Venezuelan economy continues its downward spiral as 2015 approaches. Faced with rising domestic expenses that it can no longer meet through dollar income from oil exports alone, Caracas has accelerated measures to increase its money supply since 2012. The central bank has also printed more bolivars to keep up with spending obligations. This expansion of the monetary supply has spurred inflation, which was already exacerbated by government foreign exchange mechanisms and smuggling to Colombia, making food and goods less available to consumers in Venezuela. The decline in global oil prices that began in September has compounded these troubles.

A drop in oil prices has led to a drop in revenue for the Venezuelan economy, lower foreign exchange reserves and higher inflation....

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