Important Lessons From Venezuela Which Has The Most Proven Oil Reserves:Introduction
One of the biggest headlines during the weekend was on Venezuela which went to an election to elect its next leader. As expected, Nicholas Maduro won the election by a wide margin because his other opponents boycotted the election. How did all this happen?
For starters, Venezuela is a Latin American country with a population of more than 31 million people. The country has the most proven oil reserves in the world. As such, it ought to be one of the richest countries in the world.
This is not the case. For decades, Venezuela was led by Hugo Chavez. He was a beloved leader in the country because of his socialist policies. He cared for all the people, especially the poor and the downtrodden.
During his presidency, he provided resources to build schools, hospitals and roads. People received all these things for free.
To achieve this, he used revenues from the country’s main oil company. At the time, the price crude oil was rising and there were no signs that it would cool down. When he died, he left the country to Nicholas Maduro, who was a faithful servant to him.
Maduro continued with the policies championed by Chavez. Unfortunately for him, the price of crude oil was falling. As such, he did not have the resources Chavez had to fund the socialist regime. To solve the problem, he started printing money. By doing this, he was attracting inflation, which recently grew by more than 18,000%. This made it impossible for people to buy basic items like food and shelter.
To stay in power, Maduro disbanded the supreme court and called for a new election. He did this so that he could place his loyalists in parliament and avoid impeachment. Sanctions followed.
Most people boycotted the election held yesterday. This is because the election commission is headed by people loyal to the regime. It was also certain that the election would be rigged.
The world reacted to the election by talking tough. This week, more economic sanctions are expected to be placed on the country and the people close to the regime. This will be done to pressure the president and his regime to resign, which will be impossible.
The implication of this is already being felt on the crude oil markets. Today, Brent and WTI crude oi are trading near the three and half year highs. Brent is trading near $79 while WTI is trading at almost $72 a barrel. This trend will continue as traders anticipate the impacts of the new sanctions.
However, traders need to be careful because recently, Venezuela has made deals with countries like China and Cuba. It is supplying the commodity and avoiding using the dollar for transactions. Therefore, while the new sanctions could impact the price of crude oil, they will not be felt very much.
In short, Venezuela offers valuable lessons for traders. For example, it offers the lesson on socialism and why it is very difficult to succeed. As such, it gives the lessons for people investing in countries that have embraced socialism. Second, it gives the lesson of diversifying investments. Most people who seen major impacts in Venezuela are people who failed to diversify their investments.
Important Lessons From Venezuela Which Has The Most Proven Oil Reserves :UsefulTips