Low Oil Prices Pushing Venezuela Towards Default

Posted by Libergirl

TIME

Low oil prices are putting major oil producers in a squeeze. The Russian central bank has been forced to cough up foreign exchange in order to defend itself from a currency crisis. But it may be Venezuela that is the least prepared and most in danger of an economic freefall because of the dramatic decline in oil prices.

Venezuela is particularly vulnerable as its economy depends on oil for 95 percent of its export revenue. The economy was stagnant even when oil prices were in triple digit territory. In fact, the violent protests that broke out in Caracas in February 2014 occurred when oil prices were well over $100 per barrel. But mismanagement of the economy is not a new phenomenon – inflation-adjusted per capita GDP in Venezuela is 2 percent lower today compared to what it was in 1970.

However, the South American OPEC member saw its fortunes…

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