The Economic Toll Of Venezuela’s Earthquake Could Amount To More Than 30% Of Its GDP. Some Are Calling For Sanctions Relief

In the wake of two devastating earthquakes that rocked Venezuela on June 24, numerous economists and humanitarian organizations are calling on the United States and other world powers to lift economic sanctions on the country in order to facilitate its economic recovery.

The United Nations has estimated that the economic toll of the natural disaster amounts to $37 billion, more than 30% of Venezuela's gross domestic product. Economists warn that, after years of sharp decline, the country will not be able to rebuild and recover under the current circumstances.

While some are saying sanctions should be lifted to help the country's reconstruction, others warn that the funds could be used recklessly by a regime with a history of widespread corruption.

A letter signed by more than 100 economists on July 7 called for sanctions to be lifted and for Venezuela to be "unfettered" in its recovery.

"Venezuela's people must not be made to pay twice: first through disaster, and then through sanctions, frozen reserves, and unsustainable debt servicing," read the letter,which was followed on July 14 by a group of 14 Democratic U.S. lawmakers who echoed the plea.

The document called on the International Monetary Fund to not only allow Venezuela access to approximately $5 billion in "in Special Drawing Rights" to which it is entitled, but also pump $4 billion in through a Rapid Financing Instrument, free of conditions, to facilitate the Venezuelan recovery.

Thomas Masterson, an economist at Bard College, was among the signatories.

"Sanctions are basically an economic siege on a country, and sieges never have positive impacts on the populace," he told International Business Times.

Masterson went on to say that sanctions on Venezuela — and those imposed on other countries — have only exacerbated economic inequalities.

Washington has imposed economic sanctions on Venezuela to varying degrees for more than 20 years, largely on the grounds that it is an anti-democratic and repressive state that supports narcotics trafficking.

Sanctions ramped up in 2017 in Trump's first term, when the U.S. blocked Venezuela from participating in its financial system, and the following year when it barred the purchase of Venezuelan debt.

But since capturing President Nicolás Maduro in January, the White House has effective influence of the Venezuelan government and economy. Now, many are looking to the Trump administration for solutions to a post-earthquake crisis Venezuelan leaders are ill-equipped to fix on their own.

The U.S. has already pledged more than $300 million in aid, provided military logistical resources to support the Venezuelan recovery effort, and waived sanctions on relief related directly to the recovery.

Asked whether it would lift sanctions, a White House spokesperson deferred to the Department of State, which did not respond to a request for comment.

Opinions on sanctions have been divided within Venezuela, as well. In 2023, opposition leader María Corina Machado described sanctions as a "form of leverage in a serious negotiation" and "the result of crimes against humanity, massive corruption, drug trafficking and financing of terrorism" by the Maduro regime.

But Caracas has long blamed sanctions for the country's economic collapse; Maduro described them at the United Nations as "illegal unilateral measures of economic persecution and blockade." Critics of the sanctions contend that they disproportionately harm already vulnerable people in the targeted countries, largely sparing the ruling class from their impact.

Phil Gunson, an analyst for the International Crisis Group based in Caracas, said that while sanctions do not tend to achieve their goals, "we don't buy the argument that sanctions caused the economic crisis."

"The economic crisis was caused by years of corruption and mismanagement and abuse of power," Gunson told International Business Times. "Sanctions of course, make it worse."

But the analyst said that withholding funds on the basis that the Venezuelan government can't manage them is a "lazy argument."

"I don't think it's an argument for not releasing funds for humanitarian relief," Gunson said. "I think it's an argument to be releasing the funds to be supervised by not just the government, but internationally, preferably with some oversight from Venezuelan civil society."

Asked about concerns that Venezuelan leaders would mismanage funds meant for the recovery, Masterson, who signed the letter opposing sanctions, acknowledged "a strong possibility that that happens to some degree."

"But the point is, it's not our money, we don't get to decide what happens with it," Masterson said. "There's no moral justification for sanctions on Venezuela, and there's really not any geopolitical justification for sanctions either."

Venezuela lacks the capacity to reconstruct on its own, explained Masterson.

"The thing about a natural disaster like this is that it's such a huge supply shock, (and) you just have this massive sudden need for everything," he added.

Interim Venezuelan President Delcy Rodriguez and International Monetary Fund Managing Director Kristalina Georgieva discussed Venezuela's access to $350 million of its reserve funds held by the IMF on July 9, according to Reuters.

Venezuelan government officials have also pleaded for an easing of sanctions and release of frozen funds at the United Nations and the Bank of England.

"There are accounts belonging to the Venezuelan state in various parts of the world that have been frozen as a result of illegal sanctions," Venezuelan Foreign Minister Yvan Gil Pinto said at a UN meeting on Wednesday.

Despite domestic pressure to lift its sanctions, the Trump administration appears to enjoy widespread support among Venezuelans; the U.S. president has a favorability rating that trails only that of Machado, according to a June poll conducted by AtlasIntel. The same pollster found in January that 57% of Venezuelans living inside and outside the country approved of the U.S. action to remove Maduro.