The president of Venezuela, has said that its subsidized fuel prices should rise, to stop the smugglers cheat the country of billions of dollars.
“Gasoline must be sold at an international price to stop smuggling to Colombia and the Caribbean,” Nicolas Maduro said in a televised speech.
As many oil producing nations, Venezuela offers to its citizens a major grant from the gasoline.
The smugglers can then line their pockets resale of oil in nearby countries.
Venezuela’s economy is in free fall, with inflation rates-estimated to reach up to a million percent this year, but the price of oil has hardly changed.
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Local media report that a cup of coffee costs around 2.2 million bolivars (about $0.50 £0.39 at black market rates). For the same price, you can fill up a small SUV with gasoline at nearly 9,000 times.
The movement to rein in fuel subsidies is part of a larger plan to raise revenue for the government, the correspondents of the BBC say.
Mr. Maduro said that “direct subsidies” would still be given to the citizens with the state, IDENTIFICATION cards, if they registered their cars in a government census, but it was not made clear how the scheme of work.
Many Venezuelans opposed to the Mature Lord of the government to reject the use of ID cards, however.What is at the root of Venezuela’s economic crisis?
Venezuela is rich in oil. It has the largest proven oil reserves in the world. But it could be said that it is precisely this wealth that is also at the root of many of their economic problems.
In Venezuela, oil revenues account for about 95% of their export earnings. This means that when oil prices were high, a lot of money flowed into the coffers of the Venezuelan government.
When socialist President Hugo Chavez, in power since February 1999 until his death in March 2013, used a portion of that money to finance the generous social programs to reduce inequality and poverty.
But when oil prices fell dramatically in 2014, the government was suddenly faced with a huge hole in their finances and had to cut back on some of their most popular programs.How the inflation spiral out of control?
The hyperinflation has been driven by the willingness of the government to print extra money and their willingness to regularly increase the minimum wage in an effort to regain some of his popularity with Venezuela’s poor.
The government is also becoming more and more difficult to get credit after you pay off some of its government bonds.
With creditors less likely to take the risk of investing in Venezuela, the government has moved back to printing more money, further undermining its value and fuelling inflation.