Venezuela continues to be in the throes of a deep political crisis under the authoritarian rule of President Nicolás Maduro. Narrowly elected to a six-year term in 2013 following the death of longtime populist President Hugo Chávez (1999-2013), Maduro is unpopular. Despite serious economic challenges and recurring protests, Maduro has various policies, including use of the courts and security forces, to repress and divide the political opposition. The Maduro regime has been accused of committing serious human rights abuses; creating a deepening humanitarian crisis in Venezuela; establishing an illegitimate legislature, the National Constituent Assembly, which has usurped power from the democratically elected National Assembly; engaging in rampant corruption; and persecuting the political opposition. Underpinning the political crisis is an acute and increasingly unstable economic crisis. Venezuela's economy is built on oil, which accounts for more than 90% of the country's exports. The 2014 collapse in oil prices hit Venezuela's economy hard. Venezuela's economy has contracted by 35% since 2013, a larger contraction than the United States experienced during the Great Depression in the 1930s. In addition, the crisis is marked by inflation, shortages of consumer goods, default on the government's debt obligations, and deteriorating living conditions with significant humanitarian consequences. Congress has long-standing interests in both U.S.-Venezuela relations and foreign economic crises that affect U.S. economic interests. This report analyzes the economic crisis in Venezuela, arguably the most acute crisis in the global economy today, including the causes, policy responses by the government, and recent developments. The report also examines how the crisis affects U.S. economic interests, including U.S. investors' holdings of Venezuelan bonds, Venezuelan assets in the United States, U.S.-Venezuelan trade and direct investment, and possible future involvement of the International Monetary Fund (IMF) in the crisis. For decades, Venezuela was one of South America's most prosperous countries, but now lags behind other key economies in the region ( Figure 1 ). Venezuela has the world's largest proven reserves of oil in the world, and its economy is built on oil. Oil accounts for more than 90% of Venezuelan exports and oil sales fund the government budget. Oil exports also provide the country with the foreign exchange it needs to import consumer goods. After years of economic mismanagement under President Hugo Chávez, Venezuela was not well equipped to withstand the sharp fall in oil prices in 2014. Economic conditions have deteriorated rapidly under President Maduro. In November 2017, the government's increasingly dire fiscal situation came to a head, as the government announced it would seek to restructure its debt. Venezuela benefited from the boom in oil prices during the 2000s. When Hugo Chávez took office in 1999, oil was $10 a barrel. Oil prices steadily rose over the following several years, reaching a peak of $133 a barrel in July 2008. Between 1999 and 2015, the Venezuelan government earned nearly $900 billion from petroleum exports, with about half ($450 billion) earned between 2007 and 2012 (Chávez's second term). President Chávez used the oil windfall to spend heavily on social programs and expand subsidies for food and energy. Social spending as a share of GDP rose from 28% to 40% between 2000 and 2013, a much bigger rise than in Latin America's other large economies. Chávez borrowed against future oil exports, running budget deficits in nine of the years when he was in office (1999-2013). Venezuela's public debt more than doubled between 2000 and 2012, from 28% of GDP to 58% of GDP. Additionally, Chávez used oil to expand influence abroad, for example through Petro C aribe , a program that allowed Caribbean countries to purchase oil at below-market prices. The Chávez government also engaged in widespread expropriations and nationalizations, with the number of private companies dropping from 14,000 in 1998 to 9,000 in 2011. It also adopted currency and price controls. Substantial government outlays on social programs helped Chávez gain political favor and drive down poverty rates in Venezuela, from 37% in 2005 to 25% in 2012. However, widespread economic mismanagement had long-term consequences. Government spending was not directed toward investment that could have helped increase economic productivity and reduce its reliance on oil. Expropriations and nationalizations discouraged foreign investment that could have provided the country with increased expertise and capital. Price controls created market distortions and stifled the private sector. Economic growth and poverty reduction in Venezuela lagged behind the rest of South America. When Nicolás Maduro was elected President in April 2013, he inherited economic policies that were broadly viewed as unsustainable and overly reliant on proceeds from oil exports. When oil prices crashed in 2014, the Maduro government was ill-equipped to soften the blow to the Venezuelan economy. While many other major commodity producers used the boom years to build foreign exchange reserves or sovereign wealth funds to mitigate risks from big swings in commodity prices, the Chávez government created no such stabilization fund to guard against a potential future fall in oil prices. Instead, Chávez had borrowed on the expectation that oil prices would remain high. The crash in oil prices led to a sharp decline in government revenue and, combined with the government's policy choices, triggered a broad economic crisis. Venezuela's economy is estimated to have contracted by nearly 35% between 2012 and 2017. The fall in oil prices strained public finances; instead of adjusting fiscal policies through tax increases and spending cuts, the Maduro government tried to address its growing budget deficit by printing money, which led to inflation. Inflation, about 20% in 2012, was projected to exceed 1,100% by the end of 2017. The government has tried to curb inflation through price controls, although these controls have been largely ineffective in restricting prices, as supplies have dried up and transactions have moved to the black market. Unemployment in Venezuela is forecast to reach 26% in 2017, more than triple the level of unemployment in 2012. Table 1 provides a snapshot of changes in key economic indicators for Venezuela since 2013. Until recently, the Maduro government had committed to repaying its debts despite tight resources, fearing the legal challenges from creditors that plagued Argentina for more than a decade after its default in 2001. Such legal challenges against the Venezuelan government could result in the seizure of Venezuela's overseas assets, such as CITGO, a subsidiary of Venezuela's state oil company, Petróleos de Venezuela, S.A. (PdVSA); oil shipments; and cash payments for oil exports. Maduro's commitment to debt service came at a high cost: to meet its international payments, the government tightened restrictions on access to foreign currency, imposed price controls, and cut imports. Venezuela's imports of goods fell from $62.9 billion in 2013 to $21.4 billion in 2016. Venezuela relies heavily on imports for most consumer goods, and cuts to imports led to severe shortages of food and medicine, creating a humanitarian crisis. The Venezuelan government pursued a variety of policies to fill its funding gaps and avoid default. The government approached allies China and Russia for financing, securing loans to be repaid through future oil exports ("oil-for-loan" deals), although it fell behind on these deals. In May 2017, the Venezuelan central bank raised funds through the sale of $2.8 billion in PdVSA bonds to Goldman Sachs Asset Management at a steep discount (Goldman paid $865 million). The deal was controversial, and the government had difficulty finding buyers for a similar transaction in subsequent months. The Venezuelan government was running out of foreign exchange reserves to make debt payments, with official reserves down from $21.5 billion at the end of 2013 to $10 billion in the third quarter of 2017. In August 2017, new U.S. sanctions exacerbated the government's precarious fiscal position. Specifically, the August 2017 sanctions restrict Venezuela's ability to borrow from U.S. investors or access U.S. financial markets. The Maduro government is pursing the creation of a new currency, "petros" backed by oil, gas, gold, and diamonds, as a way to circumvent sanctions. After months of speculation about if and when Venezuela would default, on November 2, 2017, President Maduro announced in a televised address that the country would seek to restructure and refinance its debt. The announcement signaled a significant shift in policy and highlighted the government's dire fiscal situation, but Maduro provided few details about how the restructuring would proceed. While it is difficult to find reliable data on the composition of Venezuelan debt, it is estimated that Venezuela owes about $64 billion to bondholders, $20 billion to China and Russia, $5 billion to multilateral lenders (such as the Inter-American Development Bank), and tens of billions to importers and service companies in the oil industry. Maduro blamed U.S. sanctions for Venezuela's need to restructure, arguing that U.S. sanctions made it impossible for the government to find new financing.