The Rise and Fall of Venezuela: A Self Destructing Economy and a Talent Exodus

Lately, Venezuela has made headlines for all the wrong reasons. Whether it’s to cover hyperinflation, lack of food, or the plummeting economy, coverage of the former Latin American powerhouse is dire. As of 2017, Venezuela was home to 31M people, with the highest concentration in Caracas, the capital. A reported 2.5 million Venezuelans have fled and 90% of emigration has happened within the past 15 years as the economy has worsened.

In the past, Venezuela was a shining example of established democracy in South America, but due to political unrest, the economy has taken a turn for the worse. The 750% inflation rate (which is actually probably higher) has led to insurmountable shortages or basic goods and turmoil for citizens. It’s to the point where some restaurants ask you to pay your bill when you order your meal, because prices will be higher after dinner. The average wage for those lucky enough to have a job is now US$11 month, of which only US$5 is actual money. The balance is a food allowance, which makes it nearly imposible to survive.

You can find entrepreneurial, talented Venezuelans on Upwork and other platforms working abroad and earning money in dollars just to have enough money to survive. Others have turned to mining Bitcoin using subsidized electricity. Most of the most talented people have left the country. I’ve run into medical doctors driving Uber in Houston and Miami, lawyers and engineers running property companies in Chile and extremely talented people working across all professions all around the world.

Venezuela’s has the world’s largest supply of crude oil and nearly half of government income comes from oil export. It costs US$1,225 for the exportation process and another US$1,500 for the importation process, which includes gathering documents and inspections. To put that in perspective, the average cost in Latin America and the Caribbean is USD$527.

It takes an average of 230 days to open a business in Venezuela (unless you bribe someone), compared to the average 31.6 days for the rest of Latin American and the Caribbean and it would not be advisable to try to do business in Venezuela at this time.

Many fear that the Venezuelan economy cannot bounce back. However, there is a strong sense of pride among Venezuelans, despite an ongoing political nightmare with lack of access to things to meet their basic needs, leading to the “Venezuelan Diet”, a derisive term to show that the average person has lost 19 pounds in the past year and 33% miss at least a meal per day. Venezuela’s rise and fall is a nearly fully self inflicted wound: reliance of high oil prices to meet government spending, massive corruption, hyperinflation and politicians who care more about staying in power than actually helping their citizens.

Some entrepreneurs are powering through and speaking out about surviving. In a time of uncertainty and volatility, operating a business can be extremely difficult, but it is not impossible. Others have made the decision to leave Venezuela, moving to places like Colombia, Chile, Argentina, Brazil, Mexico and the US.

Tech startups continue to push forward, especially working on companies that help people operate in Venezuela’s dire circumstances. A startup called Frigo provides a solution to limited goods. Frigo is a recipe app where consumers can manage shopping lists and receive curated recipes based on the contents of their kitchen. Users can keep track of their groceries, along with their expiration dates.

In some cases, entrepreneurs have audiences in Venezuela and beyond, making it easy to continue international business. SinCola is headquartered in Cumaná, Venezuela with offices in Chile, Puerto Rico, Peru, Mexico, Guatemala and Costa Rica. The company uses a cloud-based platform to help streamline queues and create an efficient customer experience. An application like this comes in handy for Venezuelans in a time when resources are rationed and interactions with the government are tense. The startup continues to operate within Venezuela and in other Latin American countries.

Venezuela still has a few accelerator programs, though most programs are on pause. Wayra is a program that has helped over 45 startups in Venezuela get off the ground, 35 of which are still currently in business, including Pleiq, a Magma Partners portfolio company whose founders immigrated to Chile to continue to run their business. Bitpagos, now Ripio, a Bitcoin credit card provider, operates with many Venezuelan clients and cryptocurrency usage is high.

As Venezuela works through political unrest and poor allocation of resources, there is no telling what the next ten years may hold, or even the next few months. Business owners are bracing themselves and locals are taking to the streets to fight back. In a time of insecurity, one thing is for sure, Venezuelans will continue to innovate and create opportunities in the tech world, even through the toughest of times, but most of this innovation will likely take place outside of Venezuela.