How a Country Sitting on Trillions Went Broke — and What We Must Learn

How could a country sitting on trillions of dollars go broke? There are so many ways to learn. We can learn from success stories, especially the inspirational ones, where people break their limits to reach their dreams.

We can also learn about stories of failure. Of what not to do. They are equally valuable because it is important to see the contrast.

In today’s blog post, we will examine Venezuela: How a Country Sitting on Trillions Went Broke—and What We Must Learn.

Venezuela:

“The Country That Sat on an Ocean of Oil — and Still Went Broke”

How Venezuela Became Rich:

In the early to mid-20th century, Venezuela was known as one of the wealthiest countries in Latin America, and sometimes compared to the United States in its economic boom.

Key factors:

• Massive oil reserves:
  In the 1920s, vast quantities of oil were discovered under Venezuela’s soil.
• Global oil demand:
  Especially after World War II, when countries were rebuilding and needed energy.
• Foreign investment:
  Major oil companies (like Shell and Exxon) poured billions into developing Venezuela’s oil fields.

Concrete example:

• By the 1950s, Venezuela had the fourth highest GDP per capita in the world — higher than Germany, Japan, and Spain.
• Caracas (the capital) was filled with skyscrapers, shopping malls, and modern highways.
• Universities, culture, and technology thrived.
• The middle class grew rapidly, owning cars, homes, and even second properties.

How Venezuela Became Poor:

Venezuela’s fall was dramatic and brutal — and it didn’t happen overnight.
Several critical mistakes turned wealth into deep poverty.

1. Overdependence on oil:
   • About 95% of Venezuela’s export earnings came from oil.
   • When oil prices were high, money flooded in. When prices dropped, the economy crashed.
2. Massive government spending:
   • Starting especially in the 1970s, governments used oil profits to expand social programs — health care, education, subsidies, housing.
   • But they didn’t save during the good times — they spent everything.
3. Corruption and mismanagement:
   • Billions of dollars disappeared into the pockets of politicians and so-called elites.
   • Public companies were bloated with “ghost employees” and cronyism.
4. Nationalization and scaring away investors:
   • In the 1970s and again under Hugo Chávez in the 2000s, the government nationalized key industries (especially oil).
   • Foreign companies left. Investment dried up.
5. Populism over economic fundamentals:
   • Chávez promised “free everything” — food, homes, health care.
   • The country became addicted to cheap oil money instead of building a diversified economy.
6. Hyperinflation:
   • After years of money-printing to pay for government programs, Venezuela fell into hyperinflation.
   • In 2018, inflation hit over 1,000,000%.
   • Concrete example:
     A cup of coffee that cost 0.50 bolívares at the start of 2018 cost over 100,000 bolívares by the end of the year.
7. Food and medicine shortages:
   • By the late 2010s, grocery stores were empty.
   • Hospitals had no supplies.
   • Millions of Venezuelans fled the country, creating one of the world’s largest refugee crises.

Concrete Personal Stories:

• Middle-class families who once lived comfortably had to sell their furniture to buy bread.
• Professional doctors, lawyers, and engineers emigrated and worked as taxi drivers abroad just to survive.
• Entire cities suffered rolling blackouts and water shortages

Key Takeaways:

What can we learn from this story, and how can we apply it to our pursuit of financial freedom? Let’s have a look at some key takeaways from this tragic story:

1. Don’t just rely on one source of income:

About 95% of Venezuela’s export earnings came from oil. So, most of their income was dependent on other countries importing oil from them. That means if the price of oil goes down, their income goes down massively, and that creates instability and is not a reliable source of income. Underneath, I will give 3 things they could have done differently:

Develop agriculture:

• Venezuela has vast fertile land and a favorable climate for farming, yet it imports much of its food, even before the crisis.
  • What they could have done:
    • Invest in modernizing agriculture (machinery, irrigation, logistics).
    • Support local farmers with education, credit, and access to markets.
    • Build export industries in coffee, cocoa, fruits, and vegetables (like Colombia and Ecuador did).
    • Example: Colombia, Venezuela’s neighbor, became a global coffee and flower exporter — Venezuela also could’ve done the same.

Build manufacturing and industry:

• Instead of nationalizing and weakening private industries, Venezuela could have:
  • Encouraged light manufacturing, like textiles, packaging, and food processing.
  • Promoted automotive assembly, electronics, and steel with foreign partnerships.
  • Built industrial hubs for regional export, leveraging its location near the Caribbean and Atlantic. Example:
    • Brazil diversified with strong automotive and aerospace sectors (e.g. Embraer).
    • South Korea moved from agriculture to high-tech manufacturing within a few decades.

Encourage tourism:

• Venezuela is incredibly beautiful:
  • Caribbean beaches (Margarita Island, Los Roques).
  • Rainforests and national parks.
  • Angel Falls — the tallest waterfall in the world.
    • What they could have done:
      • Invest in tourism infrastructure: airports, hotels, transport.
      • Market the country internationally (like Costa Rica or the Dominican Republic).
      • Support small tourism businesses (guides, lodges, restaurants).
  • Tourism brings jobs across income levels, and unlike oil, it’s more stable in demand.

There are plenty of other things they could have done, but their country was poorly managed, which was their downfall. They had so many things they could have done to build a more reliable, stable, and longer-lasting wealth.

2. Save for the bad times:

The Government of Venezuela spent everything it had, instead of putting some money away for the difficult times. I don’t think that saving everything is good, but at least put away something, so that you are safe when the bad times come. When you have enough money saved so that you are safe when the bad times comes, you can start investing and create multiple streams of income.

3. Greed is destructive:

The politicians who were in charge of Venezuela mismanaged the country, mostly because of greed. Billions of dollars magically disappeared into their pockets in shady ways. Be careful of who you put in charge of your company, your economy, etc. Be sure that they also share your values. And be sure not to be tempted by greed, because even though you might win in the short term, you will definitely lose in the long term.

Last thoughts:

I think it’s important to look at these kinds of stories, to see what not to do also. Hopefully, you also learned something from this interesting story; I know I have.

Please comment on this post and let me know what you think. I’d love to hear from you!

If you like these kinds of stories, check out this post I made some days ago, about a man who overcame homelessness and became financially independent: https://freedomwithmarkus.com/chris-gardner-financial-freedom-story/

I recommend this video for you if you want to see more about the story of ”How a country sitting on trillions went broke”: https://youtu.be/S1gUR8wM5vA?si=lpcHJbJErEdci8WM