International companies are withdrawing their businesses in Venezuela due to worsening economic, social, and political turmoil in the country.
LATAM Airlines, the biggest Latin American carrier, is the latest to cut service to Venezuela according to reports on Monday. On Sunday, the German airline, Lufthansa, also announced that it will suspend flights to the country beginning June 18.
Lufthansa spokesperson, Andreas Bartles, said that there are two reasons for their company’s decision. First, the demand in the country to fill flights is not enough, specifically among business travelers. The German company, in fact, noted a drop in the number of flights to Venezuela in 2015 and in the first quarter of 2016. Second, the company is having difficulties in converting the Venezuelan currency as it imposes strict currency controls beginning in 2003 which led to the use of complicated exchange rates.
To LATAM, Venezuela remains an essential market and its management said it will “work to resume these services as soon as global conditions permit.”
Both the American and German carriers hoped to restore business operations in the country.
Other airline companies that are planning to reduce or suspend flights to Venezuela include the US-based Delta and American Airlines as well as Air Canada, and Europe-based Alitalia. Coca-Cola, in addition, has recently announced the temporary stoppage of production in the country due to a sugar shortage.
Meanwhile, the socialist country, whose main source of income largely depends on its massive oil reserves, is currently experiencing an overwhelming economic crisis due to a sharp drop in oil prices in the last two years.
Venezuela’s economy, in addition, is seen declining by 8 per cent this year, with hyperinflation of 481.5 per cent on average, according to the International Monetary Fund (IMF).
The economic crisis in the country has led to severe shortages of basic goods and medicines, food rationing, and mass unemployment. The IMF has projected unemployment to hit 21 per cent in 2017. Now, employees in the public sector are only working two days a week.
The government already ordered rolling blackouts in an effort to conserve power.
Because of the daunting economic crisis in the country, the overthrow of Venezuelan President Nicolas Maduro seemed increasingly likely to happen. Earlier this month, US intelligence officials warned of the possibility of a “palace coup” led by associates of the incumbent president or a military uprising, said media reports.
“Serious and/or widespread social unrest remains the key variable that could alter the outlook and hasten the government collapse,” Senior Vice President at Teneo Intelligence, Nicholas Watson, said in a report on Thursday.
In the meantime, Venezuela is struggling to avoid the default of PDVSA, the state-owned oil company. The country said it will cut imports further to $20 billion in 2015 in order to continue to pay its foreign debts.
China is donating 96 tons of medication to help Venezuela fight the Zika virus outbreak, according to reports on Monday.