Venezuela: From prosperity to chaos

Venezuela – a country where a massive economic crisis has led to people waiting throughout the night in lines to get their hands on a basic packet of pasta.

A country where food riots have become the order of the day and dozens of stores have been looted.

A country where a shortage of medicines at hospitals has resulted in patients dying.

A country where multinational soft drink manufacturers have stopped production after farmers couldn't grow enough sugar cane...

...and where beer distilleries have shut their doors because they don't enough have money to import barley.

This is Venezuela today, a country with the largest proven oil reserves in the world.

Once the most prosperous state in Latin America, the country is currently going through a severe economic crisis partly stemming from its dependence on a single natural resource.

When the price of oil was high between 2003 and 2013, the government of late President Hugo Chavez went on a massive social welfare spending spree.

This included handing out subsidised food items, concessionary loans and free medical services to the poor.

Chavez's intentions were not bad.

Alejandro Velasco, a Latin American historian and associate professor at New York University explains:

But little of that money was spent on encouraging domestic industry and an inflow of petrodollars allowed the country to buy better quality imported products.

This discouraged domestic manufacturers.

The country depends too much on its oil – over 90 percent of export income comes from the sale of crude oil.

A steep plunge in the price of oil in the last two years has worsened the fallout of such a heavy dependence on a single export.

With dollar reserves depleting, Venezuela's government has put in place restrictions on how many dollars can be bought.

This has created problems for companies, especially those which have to pay in dollars to import raw material.

The controls have also pushed many multinational corporations out of the country.

During the boom years, the government spent more than its export earnings by borrowing from international markets, especially China.

Velasco says this practice of borrowing on hopes that repayments could be made from future oil income is now coming back to haunt the government of President Nicolas Maduro, Chavez's handpicked successor.

Now Maduro has to prioritise debt repayments over everything else.

So the relatively depressed revenue from oil sales is being diverted to payback the country's debt instead of importing everyday use items like toilet paper and medicine.

Venezuela has to prioritise debt because it faces the risk of losing assets like oil refineries and tankers which can be seized by international creditors in case of default in debt repayment.

President Maduro and his aides accuse opposition parties of deepening the crisis by creating artificial shortages.

The problems faced by Venezuela have also reignited a debate over the ideology of socialism, especially in the context of the US presidential elections.

Bernie Sanders, who ran for the Democratic nomination for president, was often accused of towing the same socialist line which landed Venezuela in crisis.

But Velasco says socialism has nothing to do with Venezuela's economic mess.

"Venezuela isn't now, it wasn't and it won't be a socialist state."

The country faced a possibly even worse crisis in 1989 when western reporters were hailing it as democracy, he says.

"If you're going to blame socialism for the crisis now, then you would have to blame capitalism for the crisis in 1980s and 1990s. So I think those arguments fall under the weight of history."