Venezuela's Economic Crisis and Bitcoin

The assignment examines the severe economic crisis in Venezuela, attributed to government policies and market conditions. It explores how Venezuelans are turning to Bitcoin mining as an alternative income source despite its legal and financial risks. The analysis highlights the limitations of Bitcoin as a viable solution for the Venezuelan economy and emphasizes the need for appropriate policy interventions.

Business finance

TABLE OF CONTENTS
Introduction................................................................................................................................3
Analysis of economic crisis of Venezuela.................................................................................3
Four primary reasons that had led Venezuela into their present state of unrest....................3
Impact of cryptocurrency on financial management decisions and goals of Venezuela.......4
Conclusion..................................................................................................................................5
References..................................................................................................................................7

INTRODUCTION
The present study is based on analysis of reason that had led Venezuela into their present
state of unrest by considering overall economic conditions. Further; the impact of
cryptocurrency will be analysed on financial management decisions and goals of Venezuelan
economy on the basis of unrest circumstances.
ANALYSIS OF ECONOMIC CRISIS OF VENEZUELA
Four primary reasons that had led Venezuela into their present state of unrest
Economic Crises
The primary reason for the current condition of Venezuela is increasing economic crisis. It is
because; Venezuela is now in its 3rd year of recession. As per the IMF (International
Monetary Fund), economy of Venezuela is likely to catch up 10 percent in this third year.
The estimates of IMF regarding Venezuela economy will be in collapse up till 2019. During
the shrinkage of the economy, prices of commodities rise abruptly (Kingsbury, 2016). This
year, inflation can take off at 475%, in accordance with the IMF. The current of Venezuela
also crashes down in value. By considering this aspect, two years ago 1 dollar equals to 100
bolivars and now 1 dollar equals to 1,262 bolivars. Over years government has spent an
excessive amount on welfare programs but it had not worked well due to weak management
and decaying farms lined up crisis.
Broken engine oil of Venezuela
Things went worse when the prices of oil began to fall during 2014. Venezuela contained
largest oil minerals all over the world, but the question was that oil was the only choice. It
produced 95 percent of Venezuela's proceeds made from exports. There will be no money in
hands of Venezuela if they stop selling oil. In 2014, prices of oil were more than $100 per
barrel. At present, they drift at $50 per barrel, after the price drops $26 formerly this year.
The segment of BCG matrix Cash Cow in the economy of Venezuela was not effectively
managed that means opportunities were not driven properly during the good times. Since the
state ignored with the maintenance of their oiling facilities and further the production
plummet to lower than 13-year (Walker and Cooper, 2017). The Venezuela run the
companies of oil, and Petróleos de Venezuela, S.A. (PDSVA) did not make payment to
companies who helped in extracting oil like the Schlumberger, further they considerably

made a reduction in operational work with PDSVA, alluding to due payments. Last week, a
warning was made by PDSVA that it can evade on its debt if the person holding bonds will
not accept new terms of payment. An adequate amount of investors agreed to the new deal
that will enable PDSVA to potentially prevent evade this year. On the other hand,
professionals seem to say that it was just postponed evade by a few months.
Soaring food prices & broken hospitals
Due to crashing currency and declining oil revenue there is price controls on products of
supermarkets. Venezuela was said to the richest state of South America, however not it is
stuck in economic crises. It is placed at the edge of civil war having fatal objections numb
city centres. It is one of the most indebted countries in the world, and its gross domestic
product also collapsed. Basic needs like food are in short supply (Sigalos, 2017).
International Monetary Fund is expecting prices in Venezuela to rise more than 1,100 percent
this year.
Lack of cash and gold
Venezuela is weak at financial sources, it does not contain sufficient amount of money to pay
its unpaid bills. The math of the economy doesn’t work out well as it has a loan of $15 billion
amid now and 2017 end (Gillespie, 2016). Whilst the central bank of Venezuela has only
$11.8 billion in its reserves. While PDVSA was the only option for Venezuela as a financial
source, however, PDVSA is generating less oil and default risks. Mostly, reserves are in gold
form, so to pay out debts Venezuela exported bars of gold to Switzerland. The Chinese
government had bailed out Venezuela and made a loan for it in billions of dollars. China also
put an end to provide cash to Latin American. Protests made on Wednesday are severe
reminders that Venezuela is suffering from lack of time, effort, money and choices very
quickly. Eric Farnsworth (Vice president of American council) had cited that Irritabilities are
increasing in the economy of Venezuela, all these reminders in this situation in fast falling
and it is not getting better.
Overall analysis shows that there is corruption in policy and interest of the individual is more
worthy in comparison to harmony and caring aid and this is causing significant issues to the
economy (Venezuela's worst economic crisis: What went wrong, 2017). It has been 18 years
of cheating, repression, hunger, injustice, insecurity, poverty, power abuse, weak inputs,
theft, weak public services, smuggling, unhealthy, illegal authority, violence for human rights
and restriction, declining culture and facilities for public, poor education, economic crises,

high inflation, fake promises, bolívar deflation, park, electoral scam, squares, constitution
violation, political prisoners, stolen election and incompetence. Venezuela needs help and
strict norms of governance.
Impact of cryptocurrency on financial management decisions and goals of Venezuela
Cryptocurrencies such as bitcoin tend to be a risky investment, however, in states such as
Venezuela, they can lead to being hazardous. The marketplaces for bitcoin and currency type
are not publicly available (Bouoiyour and Selmi, 2017). It is because of the uncertainty and
high ratio of killing, kidnapping, crimes not in favour of people who hold up foreign
currencies, the market for similar is also not public. Digital currencies such as bitcoin are
purchased and sell secretly between friends, family, acquaintances and sometimes by using
social networks.
Due to lack of regulation, this currency in the current state is not viable at all. It can be said
that due to non-availability of cryptocurrency law in Venezuela police have arrested many
mine operators by putting spurious charges (McGinnis and Roche, 2017). The most
resourceful miners of Venezuela are now moving on to a new inflation-buster which is
known as the cryptocurrency ether (ETH). The margins of profits are higher; however, the
risk factor is low as compared to the profit margins.
However, it is not exceptional to trade foreign duties publicly for instance, in situations where
drivers drive several foreign drivers. As all thanks will not be given to the government,
individuals who get dollars, PayPal transfers, amazon gift card or bitcoin is by effort. A
number of Venezuelans have engaged in secret mining of digital currency due to increase in
the prohibition of law. Further, it is close to $5,000 for their survival in the economy, and for
many, that means risking jail time.
The currency of Venezuela (Bolivar) is in free fall. Not in favour of black market rates, value
has been declined by 99.4% since 2012. However, bitcoin and other currencies are lined up
from all that. They are completely decentralized further they are known of what is currently
happening in a country despite the location of mining.
To the time 2017, it has been marked by concerning political confrontations levels in
Venezuela. The south of America state is by distant state’s worst performance in the
economy. GDP is likely to keep up 2017 contract. Inflation is likely to rise this year by 700%.
The economy of county stays confined by an irrational method of controlling the currency.

CONCLUSION
In accordance with the provided analysis, it can be said a major reason for the current state of
Venezuelan economy is poor government policies and adverse market circumstances.
Further; as per their current scenario bitcoin strategy is not financially viable for the economy
because there is no proper law and it will increase their issues. Thus they are required to
introduce appropriate policy regarding the same and set it in accordance with the economic
circumstances.

REFERENCES
Bouoiyour, J. and Selmi, R., 2017. The Bitcoin price formation: Beyond the fundamental
sources. arXiv preprint arXiv:1707.01284.
Gillespie, P., 2016. 4 reasons why Venezuela became the world's worst economy. [Online].
Available through < http://money.cnn.com/2016/10/25/news/economy/venezuela-breaking-
point/index.html >. [Accessed on 3rd October 2017].
Kingsbury, D.V., 2016. From Populism To Protagonism (and Back?) in Bolivarian
Venezuela: Rethinking Ernesto Laclau’s on Populist Reason. Journal of Latin American
Cultural Studies, 25(4), pp.495-514.
McGinnis, J.O. and Roche, K.W., 2017. Bitcoin: Order without Law in the Digital Age.
Sigalos, M., 2017. This is one of the world's most dangerous places to mine bitcoin. Online].
Available through < https://www.cnbc.com/2017/08/30/venezuela-is-one-of-the-worlds-
most-dangerous-places-to-mine-bitcoin.html>. [Accessed on 3rd October 2017].
Venezuela's worst economic crisis: What went wrong? 2017. [Online]. Available through <
http://www.aljazeera.com/indepth/features/2017/05/venezuela-worst-economic-crisis-wrong-
170501063130120.html>. [Accessed on 3rd October 2017].
Walker, M. and Cooper, R.J., 2017. Venezuela's Restructuring: A Realistic Framework.