The decline of oil price brought some distress, even crisis to several countries in Latin America, especially Venezuela, Mexico and Brazil, who dependent heavily on high oil prices.

Since the global oil prices falling down, Venezuela's economy got into the absurd situation of despair, but this is definitely not the entire shock which low oil prices have brought to Latin America. From June 2014 to the present, the oil price has fallen 60%, due to serious long-term financial chaos and inflation, Venezuela was attacked the most severely in this crisis. But other countries with relatively cautious policies, such as Brazil and Mexico, also felt a strong pain.

Out of different reasons, those three countries have invested heavily in gamble money for global oil prices continuously rising. They now only have to suffer the consequences of lost, along with leaders faced with challenges of the decline in support rate. In Brazil, the state-owned oil company broke serious corruption, political and economic reform in Mexico is still suffering, economic chaos in Venezuela cause social and political crises. If we say that 2015 is destined "low oil prices year", the world's major economies will go through in trouble.

Brazil's offshore oil resources discovered in 2007 was considered to be the huge success of state-owned oil company Petrobras business, which also indicated the prosperous future of this country. Former President Lula left for the Gulf in person to celebrate the production of the first barrel of crude oil, and said “this is the whole country won lottery”. Petrobras monopolized Brazil’s energy sector all the time, produced 90% oil and monopolized all the gasoline retail outlets. Although it is a listed company, the government is the largest shareholder and CEO is appointed by the President. This intimate was strengthened owing to the Brazilian government planning to exploit offshore oil, government gave Petrobras 30% ownership of new reserves, and announced that at least 85% of the technology and equipment must come from local companies in Brazil during the mining process. Obviously, Petrobras is the largest contractor. Many observers were worried about corruption, the follow-up survey found that some of the largest construction companies in Brazil offered bribes to Petrobras and received a contract worth $ 23 billion, many of these funds flow directly to the Labour government. A sudden drop in oil prices led to a lot of projects’ suspending, the construction companies only had to repay debt. Petrobras recently announced that the overvalued assets were over $ 30billion, stock also was named "junk." Last year in September, the company's stock had dropped 55 percent, and the market value reduced $ 50 billion. As long as oil price is below $ 100 a barrel, Brazil's offshore oil cannot profit. The economy is expected to shrink by 0.1 percent because of it. The ruling party got entangled in corruption scandals, president's support rate was less than 20%. The new oil once with hope is now a giant pit of corruption.

Mexico reformed and opened long-closed monopoly domestic energy industry, global oil prices brought variables. Since large oil reserves were found in the early 70s, Mexico became the third-largest oil producer in the region. Fortunately, the government has been operating multi-export industry to avoid becoming "oil country". Oil revenues accounted for 30% of government revenue, only occupied 15% of exports, and therefore the state of Mexico was a lot better than Brazil.

Mexico's oil industry has long been monopolized by state-owned company Pem ex, but major oil field exploitation was closed to limitation for decades. So they need foreign technology and expertise to help exploit the deep Gulf of Mexico oil, shale oil and potential gas. After the 2012 election, President Nieto promised that the reforms, the exploration, drilling and production would be full open to foreign investment, which is expected to improve 1% of Mexican GDP. But this prediction hadn’t really think about oil price fluctuation, now oil prices are not only lower than the Mexican budget breakeven point, but also let Pem ex stuck in financial predicament. If the international oil price is below $ 70 a barrel in 2015, the Mexican government will face major difficulties, prior to economic growth forecast of 4% in 2015 is likely to fall to 2.5-3.5%. Oil prices also hit the foreign investor enthusiasm for the Gulf of Mexico oil, government now only maintain the shallow mining plan, and deepwater exploration wells have been shelved.

State-owned oil monopoly had been a "myth" in Mexico. Nieto's reforms have touched the restricted zone, challenging the interests of hundreds of thousands of oil workers and encountering strong opposition. Now reform suffers a setback due to falling oil prices, which will imperil their governance and political stability. His approval rating fell to the lowest in the past 20 years of the president.

However the situation in Venezuela that they cannot even afford the toilet paper could only be described as desperate. In Chavez era, oil accounted for more than 95% in exports, the domestic industry chain was incomplete, and even many basic life necessities were unable to produce. At the same time due to lack of investment in new technology, oil production fell from 300 million barrels per day in 2000 to now less than 241 million barrels. The government revenue fell sharply, the Federal Reserve is less than $ 21 billion, and the matured debts were $ 11 billion.

Incumbent President Maduro's support rate is less than 22%. He considered all the economic problems as "American conspiracy" while resolutely suppress opposition. Venezuela's economy once breakdown, it will cause a ripple effect in the region. From Cuba to Dominica, Haiti and other Latin American countries have received a series of low-cost loans or free oil from Venezuela. 10% of Cuba's GDP is a gift from Venezuela. When Venezuela's prosperity disappear, these countries’ economy will be horrible.

Brazil, Mexico and Venezuela have proved that high expected oil prices will bring economic and political instability. Countries without wise oil policy will one day get into trouble. Such as those people who cannot manage their money, even if they win the lottery, one day they will finally lost all their money, rest nothing. 

For more information, please visit Zoranoc's official website: www.zoranoc.com