Name:________________________________________________________________
Class:_________________________ Date: ________________ IB Unit: ___2.6___
Venezuelas paradox: People
are hungry, but farmers cant
feed them.
By Mariana Zuiga and Nick Miroff, May 22
YUMA, Venezuela With cash running low
and debts piling up, Venezuelas socialist
government has cut back sharply on food
imports. And for farmers in most countries,
that would present an opportunity.
But this is Venezuela, whose economy operates
on its own special plane of dysfunction. At a
time of empty supermarkets and spreading
hunger, the countrys farms are producing less
and less, not more, making the caloric deficit
even worse.
Drive around the countryside outside the
capital, Caracas, and theres everything a
farmer needs: fertile land, water, sunshine and
gasoline at 4 cents a gallon, cheapest in the
world. Yet somehow families here are just as
scrawny-looking as the city-dwelling
Venezuelans waiting in bread lines or picking
through garbage for scraps.
Having attempted for years to defy
conventional economics, the country now faces
a painful reckoning with basic arithmetic.
Last year I had 200,000 hens, said Saulo
Escobar, who runs a poultry and hog farm here
in the state of Aragua, an hour outside Caracas.
Now I have 70,000.
Several of his cavernous henhouses sit empty
because, Escobar said, he cant afford to buy
more chicks or feed. Government price
controls have made his business unprofitable,
and armed gangs have been squeezing him for
extortion payments and stealing his eggs.
Venezuelas latest public health indicators
confirm that the country is facing a dietary
calamity. With medicines scarce and
malnutrition cases soaring, more than 11,000
babies died last year, sending the infant
mortality rate up 30 percent, according to
Venezuelas Health Ministry. The head of the
ministry was fired by President Nicols
Maduro two days after she released those
statistics.
(Cut the margins off and glue this page in your economics notebook.)
1) What economic situation(s) would you say Venezuela is experiencing, regarding the
macroeconomic objectives? Mention them and show it with a diagram.
Child hunger in parts of Venezuela is a
humanitarian crisis, according to a new
report by the Catholic relief organization
Caritas, which found 11.4 percent of children
under age 5 suffering from moderate to severe
malnutrition, and 48 percent at risk of going
hungry.
The Maduro diet
The protesters who have been marching in the
streets against Maduro for the past seven
weeks scream, Were hungry! as riot police
blast them with water cannons and tear gas.
In a recent survey of 6,500 Venezuelan
families by 2) What economic policy would you recommend to fix the venezuelan situation: Fiscal or
the Monetary? Why?
countrys
leading
universities,
three-
quarters of
adults said SUPPLY SIDE POLICIES
they lost Saulo Escobar holds an egg 1) Define Supply side Policies.
weight in produced at his farm. Due to the
2016 an lack of food, his chickens are laying
average of undersized eggs.
19 pounds.
This collective emaciation is referred to dryly
here as the Maduro diet, but its a level of 2) What is the appeal of the Supply side Policies?
hunger almost unheard-of outside war zones or
areas ravaged by hurricane, drought or
plague.
Venezuelas disaster is man-made, economists
point out the result of farm nationalizations,
currency distortions and a government
takeover of food distribution. While millions of
Venezuelans cant get enough to eat, officials 3) What is the long-run aim/objective of the Supply side policies? Explain it using a
have refused to allow international aid groups diagram.
to deliver food, accustomed to viewing their oil-
rich country as the benefactor of poorer
nations, not a charity case.
Its not only the nationalization of land, said
Carlos Machado, an expert on Venezuelan
agriculture. The government has made the
decision to be the producer, processor and
distributor, so the entire chain of food
production has decreased, and now suffers
from an inefficient agricultural bureaucracy.
(to read the full Washington Post article, go to this
shortened link: http://wapo.st/2rrv1Pe)
INTERVENTIONIST SUPPLY SIDE POLICIES 2. INVESTMENT IN NEW TECHNOLOGY
What are interventionist Supply side Policies?

List the interventionist Supply side Policies, and explain how each of them work.
Include Evaluation of each type.
1. INVESTMENT IN HUMAN CAPITAL
3. INVESTMENT IN INFRASTRUCTURE

a) Education 4. INDUSTRIAL POLICIES

b) Training

a) Financial incentives

c) Health services
b) Protection for infant industries

(Cut the margins off and glue this page in your economics notebook.)
MARKET-BASED SUPPLY SIDE POLICIES 2. LABOUR MARKET REFORMS
What are Market-based Supply side Policies?

a) Reducing trade union power

List the Market-based Supply side Policies, and explain how each of them work.
b) Reducing unemployment benefits
Include Evaluation of each type.
1. POLICIES TO ENCOURAGE COMPETITION

a) Deregulation c) Ending the minimum wage

b) Anti-monopoly regulation 3. INCENTIVE-RELATED POLICIES

a) Reducing income tax

c) Privatization

b) Reducing business taxes and capital gains taxes

d) Trade liberalization (free trade)

(Cut the margins off and glue this page in your economics notebook.)
1) Using a diagram, analyze the possible solution to the Venezuelan situation 2) Evaluate the effectiveness of the use of Supply side policies in the venezuelan
described in the The Washington Post article (DEDO). economy (PEPASO).

(Cut the margins off and glue this page in your economics notebook.)