MGT 321 Saudi Electronic University Venezuela under Hugo Chavez and Beyond Case Study The Assignment must be submitted on Blackboard (WORD format only) via

MGT 321 Saudi Electronic University Venezuela under Hugo Chavez and Beyond Case Study The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.Assignments submitted through email will not be accepted.Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.Students must mention question number clearly in their answer.Late submission will NOT be accepted.Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).Submissions without this cover page will NOT be accepted. All students are encouraged to use their own word. Assignment -2 should be submitted on or before the end of Week-11 in Black Board only. This assignment is an individual assignment.Citing of references is also necessary in APA style. College of Administrative and Financial Sciences
Assignment 2
Deadline: 28-03-2020 @ 23:59
Course Name: Intro to International
Business
Student’s Name:
Course Code: MGT-321
Student’s ID Number:
Semester: II
CRN:21926
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name: Dr. Farrukh Ahmad
Students’ Grade: /10
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
Assignment Regulation:

All students are encouraged to use their own word.

Assignment -2 should be submitted on or before the end of Week-11 in Black Board only.

This assignment is an individual assignment.
• Citing of references is also necessary in APA style.
Assignment Structure:
A.No
Assignment-2
Total
Type
Critical Thinking
Marks
10
10
Learning Outcomes:

Analyze the effects of culture, politics and economic systems in the context of international
business (Lo 1.9 & 2.1)


Identify the major components of international business management (Lo 1.2)
Carry out effective self-evaluation through discussing economic systems in the international
business context (Lo. 3.6)
Critical Thinking
Please read Case 2: “Venezuela under Hugo Chávez and Beyond” available in your e-book (page
no.611), and answer the following questions:
Assignment Question(s):
(Marks: 10)
1. Under Chávez’s leadership, what kind of economic system was put in place in Venezuela?
How would you characterize the political system?
2. How do you think that Chávez’s unilateral changes to contracts with foreign oil companies will
affect future investment by foreigners in Venezuela?
3. How will the high level of public corruption in Venezuela affect future growth rates?
4. During the Chávez years, many foreign multinationals exited Venezuela or reduced their
exposure there. What do you think the impact of this has been on Venezuela? What needs to
be done to reverse the trend?
5. By 2016, Venezuela’s economy appeared to be on the brink of total collapse. What do you
think needs to be done to reverse this?
Answer:
1.
2.
3.
4.
5.
&&&&
Venezuela under Hugo Chávez and Beyond
On March 5, 2013, Hugo Chávez, the president of Venezuela, died after losing a battle against cancer.
Chávez had been president of Venezuela since 1999. A former military officer who was once jailed for
engineering a failed coup attempt, Chávez was a self-styled democratic socialist who won the
presidential election by campaigning against corruption, economic mismanagement, and the “harsh
realities” of global capitalism. When he took office in February 1999, Chávez claimed he had inherited
the worst economic situation in the country’s recent history. He wasn’t far off the mark. A collapse in
the price of oil, which accounted for 70 percent of the country’s exports, left Venezuela with a large
budget deficit and forced the economy into a deep recession.
Soon after taking office, Chávez worked to consolidate his hold over the apparatus of government. By
2012, Freedom House, which annually assesses political and civil liberties worldwide, concluded
Venezuela was only “partly free” and that freedoms were being progressively curtailed. In 2006, for
example, Parliament, which was dominated by his supporters, gave him the power to legislate by decree
for 18 months. In late 2010, Chávez yet again persuaded the National Assembly to grant him the power
to rule by decree for another 18 months.
On the economic front, the economy shrank in the early 2000s, while unemployment remained
persistently high (at 15 to 17 percent) and the poverty rate rose to more than 50 percent of the
population. A 2003 study by the World Bank concluded Venezuela was one of the most regulated
economies in the world and that state controls over business activities gave public officials ample
opportunities to enrich themselves by demanding bribes in return for permission to expand operations
or enter new lines of business. Despite Chávez’s anticorruption rhetoric, Transparency International,
which ranks the world’s nations according to the extent of public corruption, noted that corruption
increased under Chávez. In 2012, Transparency International ranked Venezuela 165th out of 174 nations
in terms of level of corruption.
Consistent with his socialist rhetoric, Chávez progressively took various enterprises into state ownership
and required that other enterprises be restructured as “workers’ cooperatives” in return for
government loans. In addition, the government took over large rural farms and ranches that Chávez
claimed were not sufficiently productive and turned them into state-owned cooperatives.
In mid-2000, the world oil market bailed Chávez out of mounting economic difficulties. Oil prices started
to surge from the low $20s in 2003, reaching $150 a barrel by mid-2008. Venezuela, the world’s fifthlargest producer, reaped a bonanza. On the back of surging oil exports, the economy grew at a robust
rate. Chávez used the oil revenues to boost government spending on social programs, many of them
modeled after programs in Cuba. These included ultra-cheap gasoline and free housing for the poor.
In 2006, he announced plans to reduce the stakes held by foreign companies in oil projects in the
Orinoco regions, to increase the royalties they had to pay to the Venezuelan government, and to give
the state-run oil company a majority position. Simultaneously, he replaced professional managers at the
state-owned oil company with his supporters, many of whom knew little about the oil business. They
extracted profits to support Chávez’s social programs but at the cost of low investments in the oil
company, and over time its output started to fall.
Notwithstanding his ability to consolidate political power, on the economic front, Venezuela’s
performance under Chávez was mixed. His main achievements were to reduce poverty, which fell from
50 percent to 28 percent by 2012, and to bring down unemployment from 14.5 percent at the start of
his rule to 7.6 percent in February 2013. Profits from oil helped Chávez achieve both these goals.
However, despite strong global demand and massive reserves, oil production in Venezuela fell by a third
between 2000 and 2012 as foreign oil companies exited the country and the state-run oil company
failed to make up the difference. Inflation surged and was running at around 28 percent per annum
between 2008 and 2012, one of the highest rates in the world. To compound matters, the budget deficit
expanded to 17 percent of GDP in 2012 as the government spent heavily to support its social programs
and various subsidies.
Following Chávez’s death, his handpicked successor, Nicolas Maduro, took over the presidency. Maduro
continued the policies introduced by Chávez. Things did not go well. By 2014, the country was in a
recession. The economy contracted by 4 percent that year, while inflation surged to around 65 percent.
The situation continued to deteriorate in 2015 and 2016. Exacerbated by a sharp fall in oil prices and
hence government revenues, the economy was forecasted by the IMF to be 23 percent smaller in 2017
than it was in 2013, the worst decline in the world. By 2015, widespread shortages of basic goods had
emerged. In 2016, an estimated 75 percent of Venezuelans lost weight, averaging 8.7 kg per person,
because of a scarcity of food. Unemployment was rising. Inflation increased to 741 percent by the end of
2016 (the highest in the world). The poverty rate was back up over 30 percent. To cap this litany of
disaster, the value of the Venezuelan currency, the bolivar, fell from 64 per U.S. dollar in 2014 to 960 per
dollar by 2016.
Parliamentary elections held in December 2015 resulted in large losses for the ruling United Socialist
Party. For the first time since 1999, the opposition gained a majority of seats in Parliament. Page
612Maduro’s response was to have the supreme court, which was populated with Chavez appointees,
exercise “parliamentary power” while declaring the legislature to be in contempt of the court. In effect,
Venezuela has become a full-fledged dictatorship.

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