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Economy of Venezuela
Currency Bolívar fuerte (VEF)
Fiscal year calendar
Trade organisations WTO, OPEC, Unasur, MERCOSUR , ALBA
Statistics
GDP $334.600 billion (2007 est.)
GDP growth -2.9% (2009 est.)[1]
GDP per capita $12,800 (2007 est.)
GDP by sector agriculture: 4%, industry: 41.9%, services: 54.1% (2005 est.)
Inflation (CPI) 21.9% (Central bank report for January 2008)[2]
Population
below poverty line
12.3% (2007 est.) [3]
Labour force 12.31 million (2005 est.)
Labour force
by occupation
agriculture: 13%, industry: 23%, services: 64% (1997 est.)
Unemployment 6.2% (Dec. 2007 est.)
Main industries petroleum, construction materials, food processing, textiles and apparrel; toys, iron ore mining, steel, aluminum; motor vehicle assembly, aircraft, real state, tourism and ecotourism
External
Exports $65.94 billion f.o.b. (2007 est.)
Export goods petroleum, bauxite and aluminum, steel, chemicals, agricultural products, basic manufactures
Main export partners US 46.2%, Netherlands Antilles 13.5%, China 3.2% (2006)
Imports $44.38 billion f.o.b. (2007 est.)
Import goods raw materials, machinery and equipment, transport equipment, construction material
Main import partners US 30.6%, Colombia 10.2%, Brazil 10.1%, Mexico 5.9%, China 4.9%, Panama 4.8% (2006)
Public finances
Public debt $45.44 billion (31 December 2007 est.)
Revenues $39.63 billion
Expenses $41.27 billion; including capital expenditures of $2.6 billion (2005 est.)
Economic aid $74 million (2000)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

The economy of Venezuela is a mixed economy based in large part on petroleum. The petroleum sector dominates the economy, accounting for roughly a third of GDP, around 80% of export earnings, and more than half of government operating revenues. Venezuela is the fifth biggest member of OPEC by production. From the 1950s to the early 1980s the Venezuelan economy was the strongest in South America. The continuous growth during that period attracted many immigrants. During the collapse of oil prices during the 1980s the economy contracted. With the 2007 rise in oil prices and rising government expenditures, Venezuela's economy grew by 9% in 2007. There was income inequality.

Government spending as a percentage of GDP in Venezuela in 2007 was 30%, smaller than other capitalist mixed-economies such as France (49%) and Sweden (52%) [4]. According to official sources, the percentage of people below the national poverty line has decreased significantly during the presidency of Hugo Chavez, from 48.1% in 2002 to 30.2% in 2006.[3]

Contents

History

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Economy 1922 - 1964

When oil was discovered at the Maracaibo strike in 1922, Venezuela's dictator, Juan Vicente Gómez, allowed US oil companies to write Venezuela's petroleum law (Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power[5] But oil history was made in 1943 when Standard Oil of New Jersey accepted a new agreement in Venezuela based on the 50-50 principle, "a landmark event."[6] Terms even more favorable to Venezuela were negotiated in 1945, after a coup brought to power a left-leaning government that included Juan Pablo Pérez Alfonso.

From the 1950s to the early 1980s the Venezuelan economy was the strongest in South America. The continuous growth during that period attracted many immigrants.

In 1958 a new government again included Pérez Alfonso, who devised a plan for the international oil cartel that would become OPEC.[7] In 1973 Venezuela voted to nationalize its oil industry outright, effective 1 Jan. 1976, with Petróleos de Venezuela (PDVSA) taking over and presiding over a number of holding companies; in subsequent years, Venezuela built a vast refining and marketing system in the US and Europe.[8]

During Jimenez' dictatorship from 1952 to 1958, Venezuela enjoyed remarkably high GDP growth, so that in the late 1950s Venezuela's real GDP per capita almost reached West Germany's. However, from 1958/1959 onward, Romulo Betancourt (president from 1959 to 1964) inherited an enormous internal and external debt caused by rampant public spending during the dictatorship. Nevertheless, he managed to balance Venezuela's public budget and initiate a successful agrarian reform.[citation needed]

1960s - 1990s

Bouyed by a strong oil sector in the 1960s and 1970s, Venezuela's governments were able to maintain social harmony by spending fairly large amounts on public programs including health care, education, transport, and food subsidies. "Great strides were made in literacy and welfare programs." [9]

Because of the oil wealth, Venezuelan workers "enjoyed the highest wages in Latin America."[10] This situation was reversed when oil prices collapsed during the 1980s. The economy contracted. The number of people living in poverty rose from 36% in 1984 to 66% in 1995.[11]

Table

Venezuelan Economy
Year   GDP . Oil
bolivares x 109,
current
bolivares x 109,
constant 1990
per capita
bolivares x 103,
constant 1990
Petroleum exports,
$US x 109,
constant 2007
Crude oil price
per barrel, $US,
constant 2007
Crude oil exports,
barrels x 106
. . . .
2007 508,239 3,680 134 . 52.1 69 772
2006 396,140 3,395 126 49.7 63 701
2005 304,087 3,077 116 41.4 53 653
2004 212,683 2,789 107 30.4 37 572
2003 134,228 2,358 92 20.9 31 560
2002 107,840 2,556 101 21.3 27 574
2001 88,946 2,804 113 23.2 26 717
2000 79,656 2,713 112 31.3 32 731
1999 59,345 2,616 110 19.7 21 702
1998 50,013 2,782 119 14.7 15 819
1997 41,943 2,774 121 22.5 23 807
1996 28,486 2,608   23.3 26 721
1995 13,243 2,613 119 17.6 22 664
     
1990 2,206 2,206 112 20.4 35 453
     
1985 450 1,937 111 21.9 52 301
     
1980 297 2,073 137 38.9 82 470
     
1975 138 1,760 138 26.2 50 537
     
1970 61 1,383   10.3 12 889
     
1965       12.1   851
     
1960       11.3   729
Sources:

Gross National Product (GNP) data:
United Nations, UNdata (online), Databases, UNSD National accounts official country data:

Table 1.1, "Gross domestic product by expenditures at current prices;"
Table 1.2, "Gross domestic product by expenditures at constant prices;"

United Nations, UNdata (online), Databases, UNSD Key Global Indicators >> World Bank, World Development Indicators:

"GDP per capita, current international dollars (ppp);"
"GDP in current international dollars (ppp)."

Oil data:
OPEC, Annual Statistical Bulletin (online, interactive version):

Summary tables and basic indicators:
Table 5: "OPEC Members' values of petrolem exports;"
Table 23: "Crude oil exports by OPEC Member Countries;"
Prices:
Table 72: "Spot crude oil prices;

United States Department of Commerce, Bureau of Economic Analysis, Interactive Access to National Income and Product Accounts Tables, Table 1.1.9: "Implicit Price Deflators for Gross Domestic Product."

Notes:

The crude oil price given here is the world crude oil price from the OPEC Annual Statistical Bulletin, Table 73. Particular countries sell somewhat above or below this price. The price given for Venezuelan crude (TJL) in the OPEC Bulletin is typically about 5 to 10% below the world price.
"Petroleum Exports," data column 4 in this table, encompass crude oil plus petroleum products such as refined products and natural gas liquids. OPEC gives this data in current dollars; we have converted to constant dollars using the US government Bureau of Economic Analysis deflator cited above. The price deflator that OPEC uses to put its crude oil price in constant dollars (OPEC table 73, our data column 5) is not the same; it is based on world averages and gives a higher estimate of inflation than the US data.

1999 - present

Hugo Chávez was elected president in December 1998 and took office in February 1999. His economic policies have been more socialistic than those of his predecessors. In the first four years of the Chávez presidency, the economy contracted, at first because of low oil prices, then because of the turmoil caused by the 2002 coup attempt and the 2002-2003 business strike. Other factors in the decline were an exodus of capital from the country, and a sudden reluctance of foreign capitalists to invest there. Gross Domestic Product was 50.0 trillion bolivares in 1998. At the bottom of the recession, 2003, it was 42.4 trillion bolivares (in constant 1998 bolivares).[12] However, with a calmer political situation in 2004, GDP rebounded 50.1 trillion bolivares, and has risen strongly since, to 66.1 trillion bolivares in 2007 (both in constant 1998 bolivares). Particularly important in the recovery was the defeat of the oppositionist management at PdVSA after the 2002-2003 lockout/strike, which gave the government, for the first time, actual control of the state oil company and allowed the pursuit of a unified economic policy.[13]

In response to the low oil prices at the end of the 1990s, Chavez played a leading role within OPEC to reinvigorate that organisation and obtain members' adherence to lower production quotas designed to drive up the oil price. Venezuelan oil minister Ali Rodríguez's announcement in 1999 that his country would respect OPEC production quotas marked "a historic turnaround from the nation's traditional pro-US oil policy." [14]

Rising petroleum prices in 2000 took some pressure off the budget and currency. However, with the president's economic cabinet attempting to reconcile a wide range of views, the country's economic reform program had largely stalled.[citation needed] Reforms that were undertaken included the reduction or abolition of education, healthcare and nutrition fees to millions of Venezuelans.

The government sought international assistance to finance reconstruction after massive flooding and landslides in December 1999 caused an estimated US$15 billion to $20 billion in damage.

The hardest hit sectors in the worst recession years, 2002–2003, were construction (-55.9%), petroleum (-26.5%), commerce (-23.6%) and manufacturing (-22.5%). The drop in the petroleum sector was caused by adherence to the OPEC quota established in 2002 and the virtual cessation of exports during the PdVSA-led strike/lockout. The non-petroleum sector of the economy contracted by 6.5% in 2002. The bolivar, which has been suffering from serious inflation and devaluation relative to international standards since the late 1980s,[15] continued to weaken. The inflation rate, as measured by consumer price index, was 12.3% in 2001 and 31.2% in 2002. On 23 January 2003, in an attempt to support the bolivar and bolster the government's declining level of international reserves, as well as to mitigate the adverse impact from the oil industry work stoppage on the financial system, the Ministry of Finance and the central bank suspended foreign exchange trading. On 6 February, the government created CADIVI, a currency control board charged with handling foreign exchange procedures. The board set the US dollar exchange rate at 1,596 bolivares to the dollar for purchases and 1,600 to the dollar for sales.

The Macroeconomic Stabilization Fund (FIEM) decreased from US$2.59 billion in January 2003 to US$700 million in October, but central bank-held international reserves actually increased from US$11.31 billion in January to US$19.67 billion in October 2003.

* Sources: WDI/World Bank. GDP and GDP per capita is in year 2000 VEB, adjusted for inflation. Unemployment data for 2005 is the CIA World Factbook estimate. 1 trillion = 1,000,000,000,000. The vertical scales do not start at 0 to make more details visible. Oil production figures from IEA in millions of barrels per day

The economy recovered and grew by 16.8% in 2004. This growth occurred across a wide range of sectors - the oil industry directly provides only a small percentage of employment in the country. International reserves grew to US$27 billion (old data, probably circa 2004). Polling firm Datanalysis noted that real income in the poorest sectors of society grew by 33% in 2004.[citation needed]

From 2004 to the first half of 2006, non-petroleum On the black market the bolívar fell 28% in 2007 to Bs. 4,750 per US$,[16] and declined to around VEF 5.5 (Bs 5500) per US$ in early 2009.[17]

On 7 March 2007 the government announced that the Venezuelan bolívar would be redenominated at a ratio of 1 to 1000 at the beginning of 2008 and renamed the bolívar fuerte ("strong bolivar"), to ease accounting and transactions. This was carried out on 1 January 2008, at which time the exchange rate was 2.15 bolívar fuerte per US$.[18] The ISO 4217 code for the bolívar fuerte is "VEF".

Government spending as a percentage of GDP in Venezuela in 2007 was 30%, smaller than other capitalist mixed-economies such as France (49%) and Sweden (52%) [4]. According to official sources, the percentage of people below the national poverty line has decreased during the presidency of Hugo Chavez, from 48.1% in 2002 to 30.2% in 2006.[3]

With the 2007 rise in oil prices and rising government expenditures, Venezuela's economy grew by 9% in 2007.

Oil prices fell starting in July 2008 resulting in a major loss of income.

Hit by a global recession, the economy contracted by 2% in early 2009.[19]

The economy contracted 4.5% in the third quarter, 2009. Chavez stated that this mis-stated economic facts; that the economy should cease to be measured by "capitalistic standards"; that socialistic ones were needed.[20]

The central bank reported on 17 November 2009, that private sector activity declined by 4.5% and that inflation was averaging 26.7%.

A drought which the government says was caused by El Nino, has resulted in rationing of water and electricity and placed food in short supply.[21]

Economic policy (1999 - present)

At the beginning of Chávez's presidency, from 1999 to 2004, per-capita gross domestic product (GDP) dropped 1–2%,[22] but with the help of rising petroleum prices, the end of the petroleum strike, and strong consumption growth, recent economic activity under Chávez has been robust. GDP growth rates were 18% in 2004,[23] 9% in 2005,[24] and 9.6% in the first half of 2006, with the private sector growing at a 10.3% clip.[25] From 2004 to the first half of 2006, non-petroleum sectors of the economy showed growth rates greater than 10%.[26] Datos reports real income grew by 137% between 2003 and Q1 2006.[27] Official poverty figures dropped by 10%.[28][29] Some economists argue that this subsidized growth could stop if oil prices decline,[30] but the government argues its budget uses US$29 a barrel and 60 billion dollars in reserves as a cushion for a sudden drop.[31]

Some social scientists and economists claim that the government's reported poverty figures have not fallen in proportion to the country's vast petroleum revenues in the last two years.[23] The president of Datos said that, although his surveys showed rising incomes because of subsidies and grants, the number of people in the worst living conditions has grown. "The poor of Venezuela are living much better lately and have increased their purchasing power... [but] without being able to improve their housing, education level, and social mobility," he said. "Rather than help [the poor] become stakeholders in the economic system, what [the government has] done is distribute as much oil wealth as possible in missions and social programs."[32]

According to government figures, unemployment has dropped by 7.7% since the start of Chávez's presidency.[33][34] It dropped to 10% in February 2006, from the 20% high in 2003 during a two-month strike and business lockout that shut down the country's oil industry. According to the government, an unemployed person is a citizen above the age of 15 who has been seeking employment for more than one week.[35] But, according to The Boston Globe, critics say that the government defines "informal workers, such as street vendors, as employed, and exclud[es] adults who are studying in missions from unemployment numbers." Critics also point to figures released by the president of the Venezuelan National Statistics Institute, Elías Eljuri, which showed that poverty had risen by more than 10% under Chávez (to 53% in 2004). Chávez called for a new measure of poverty, a "social well-being index". Under this new definition, poverty registers at 40%.[32] Eljuri denies changing the statistic and claims it is entirely income excluding social programs.[36] The World Bank calculated a 10% drop in poverty.[37][38]

In 2006, while the Venezuelan Government was benefititing from windfall taxes from high petroleum profits[39][citation needed] the business environment was "risky and discouraged investment". As measured by prices on local stock exchanges, foreign investors were willing to pay on average 16.3 years worth of earnings to invest in Colombian companies, 15.9 in Chile, 11.1 in Mexico, and 10.7 in Brazil, but only 5.8 in Venezuela. The World Economic Forum ranked Venezuela as 82 out of 102 countries on a measure of how favorable investment was for financial institutions. In Venezuela, a foreign investor needed an average of 119 days and had to complete 14 different applications to organize a business, while the average in OECD countries was 30 days and six applications.[40]

Chávez announced Venezuela's withdrawal from the International Monetary Fund and World Bank after paying back all his country's debts to both institutions; he charged them with being an imperial tool that aims to exploit poor countries, news sources reported. But as of March 2008, Venezuela is still a member of both institutions.[41][42] In June 2007, the Bank for International Settlements forecast an economic growth of 7% and a 18.9% inflation rate for Venezuela.[43]

In January 2008, Hugo Chávez stated that Latin American countries needed to begin their withdrawal of money from United States-based banks. His statement went on to say, "We should start to bring our reserves here," Chávez said. "Why does that money have to be in the north? You can't put all your eggs in one basket." and "imperialism is entering into a crisis that can affect all of us" and said Latin America "will save itself alone."[44]

Consumer prices

Venezuela: inflation (average consumer prices)
Year Inflation
rate (%)
  Year Inflation
rate (%)
  Year Inflation
rate (%)
1980 21.4   1990 40.7   2000 16.2
1981 16.2   1991 34.2   2001 12.5
1982 9.6   1992 31.4   2002 22.4
1983 6.2   1993 38.1   2003 31.1
1984 12.2   1994 60.85   2004 21.7
1985 11.4   1995 59.9   2005 16.0
1986 11.5   1996 99.9   2006 13.7
1987 28.1   1997 50.0   2007 18.7
1988 29.5   1998 35.8   2008 30.4
1989 84.5   1999 23.6   2009  
Price controls

Since 2003, the Venezuelan government has set price controls on around 400 basic foods in an effort according to the Washington Post, to "counter inflation and protect the poor."[45] However it is reported that these price controls have caused "sporadic food shortages"[46] due to the regulated prices not keeping pace with inflation so that producers are faced with either selling their goods at 30-60% above the regulated price, or with hoarding in hope of government action to revise regulated prices upwards.[45][47] The measures have also caused problems with smuggling, with products being bought at regulated prices in Venezuela and smuggled across the border into Colombia, leading the Venezuelan government to strengthen border security in early 2008 with an additional 1200 troops.[48] Similarly, the price controls have, according to the government, led Venezuelan food producers to try to evade them, for example by focussing on non-regulated foods, or by cutting back production. As a result, in February 2009 the government's National Institute in Defense of People's Access to Goods and Services (INDEPABIS) temporarily took control of a rice processing plant in Guárico State that is owned by the nation's largest food producer, Empresas Polar. The plant was operating at only 50% capacity and had switched to producing 90% of its rice as flavoured rice, which is not subject to price controls; INDEPABIS immediately stopped the addition of artificial flavouring to the rice so that production was 100% regular rice (which is price-controlled). Polar complained that the regulated price, 2.33 bolivares per kilogram, was below its production cost, which it claimed was more than 4 bolivares/kg. It also said that it was operating at half capacity because of a shortage of rice; however the government reported finding 16,000 tons (2 months' production supply) of raw rice at the plant. Venezuelan rice production has risen considerably since Chávez took office: by 94% according to the Agriculture and Land Ministry; by 50% according to the opposition group Fedecamaras.[49] In March 2009, the BBC reported that Chavez had set minimum production quotas for 12 basic foods that were subject to price controls, including white rice, cooking oil, coffee, sugar, powdered milk, cheese, and tomato sauce. Food processing companies said regulated prices had not kept pace with inflation, forcing them to produce at a loss.[50] In mid-2009 the Venezuelan government took temporary control of Fama de America and Cafe Madrid coffee plants, accusing the manufacturers, which together have 70% of the Venezuelan market, of hoarding and of smuggling coffee to Colombia.[51]

Inflation

According to the Banco Central de Venezuela, inflation dropped from 29.9% in 1998 to 14.4% in 2005.[24][52] During 2005, imported goods were cheaper than commodities made in Venezuela; variability in the price of goods was linked to import performance and exchange stability.[24] In the second quarter of 2006, gross fixed investment was the highest ever recorded by the Banco Central de Venezuela since it started tracking the statistic in 1997.[25] However, the BBC reported on 15 February 2007 that Venezuela's inflation rate rose to a two-year high in January, with consumer prices rising 18.4% in 12 months.[53]

Public spending in Venezuela has reached unprecedented highs, as measured by local currency Central Bank debt, which could increase inflation.[54]

In 2007, while Venezuela earned record proceeds from oil exports, consumers faced at times shortages of foodstuffs, since the companies refuse to sell at a loss, a consequence of the consumer prices set by the government which are lower than the production costs. The price for a liter of gasoline in Venezuela is 3 cents, the cheapest in the world. The government has responded by giving importers more dollars at the official exchange rate. Imports soared 43% in 2007 after tripling from 2004 to 2007. The account surplus fell almost in half to $8.8 billion even as near record high oil prices buoyed exports. Around 2007, annual inflation was 16%, the highest in the Americas, as President Chavez tripled government spending from 2003 to 2007.

Nationalisations

The Chávez government nationalised several industries in 2007 and 2008. The nation's largest private electricity producer, 82-percent owned by US-based AES Corp, was obtained by paying $740 million to AES for its share – fair compensation according to financial analysts cited by Reuters.[55] In 2008, cement production was largely nationalised, with Venezuelan-located plants belonging to Mexico's Cemex, Switzerland's Holcim, and France's Lafarge being bought by the government. Compensations of $552 million for Holcim and $267 million for Lafarge were agreed upon, with both of those companies agreeing to stay on as minority partners and retaining 10 to 15 percent shares; the takeover from Cemex was less friendly and compensation had not been agreed on as of March 2009.[56] According to Chávez, the cement plants were exporting cement that was needed in Venezuela, because they could obtain higher prices outside Venezuela.[57] In 2007 the main telephone company, CANTV, was nationalised by buying US-based Verizon Communications' 28.5 percent share for $572 million – again, fair compensation according to analysts cited by Reuters.[55] In 2008 Chávez ordered the halting of the construction of a mega-shopping mall, in downtown Caracas by Sambil, saying that it was inappropriate development in an already overcrowded, over-trafficked area. He suggested the land would be nationalized and turned into a hospital or university.[58] In 2008 the Venezuelan government nationalized the leading steel company, Argentine-controlled Sidor, following months of strikes and labour-management disputes.[59] A food plant owned by US giant Cargill was nationalised in early 2009.[55]

Petroleum and other resources

Venezuela is a major producer of petroleum products, which remain the keystone of the Venezuelan economy. Chávez has gained a reputation as a price hawk in the Organization of the Petroleum Exporting Countries (OPEC), pushing for stringent enforcement of production quotas and higher target petroleum prices. At a June 2006 meeting, Venezuela was the only OPEC country calling for lowered production to drive petroleum prices higher.

Chávez has attempted to broaden Venezuela's customer base, striking joint exploration deals with other developing countries, including Argentina, Brazil, China and Russia. Record oil prices have meant more funding for social programs, but have left the economy increasingly dependent on both the Chávez government and the oil sector; the private sector's role has correspondingly diminished.

Chávez has redirected the focus of PDVSA by bringing it more closely under the direction of the Ministry of Energy and Petroleum. He has also attempted to repatriate more petroleum funds to Venezuela by raising royalty percentages on joint extraction contracts that are payable to Venezuela. Chávez has also explored the liquidation of some or all of the assets belonging to PDVSA's US-based subsidiary, Citgo. Citgo, whose profitability made many Venezuelans skeptical, has been paying record dividends to the government of Venezuela.[60] Chávez said that "Venezuela had not received a penny from this enterprise for 20 years".[61] According to finance minister Nelson Merentes, the Venezuelan 2006 budget would get more income from taxation than from the petroleum industry, unlike formerly.[62] A key non-oil related poverty reduction policy has been the application of the concept of the microcredit pioneered by Nobel peace prize laureate Muhammad Yunus of the Grameen Bank.[63]

Economic prospects remain highly dependent on oil prices and the export of petroleum. A founding member of OPEC, Venezuela reasserted its leadership within the organization during its year as OPEC's president, hosting the organization's second leadership conference in 40 years, as well as having its former Minister of Energy, Alvaro Silva Calderon, appointed as Secretary-General. The collapse of oil prices in 1997-98 prompted the Rodriguez administration to expand OPEC-inspired production cuts in an effort to raise world oil prices. In 2002, this sector accounted for roughly a quarter of GDP, 73% of export earnings, and about half of central government's operating revenues. Venezuela is the fourth-leading supplier of imported crude and refined petroleum products to the United States.

The government of Venezuela has opened up much of the hydrocarbon sector to foreign investment, promoting multi-billion dollar investment in heavy oil production, reactivation of old fields, and investment in several petrochemical joint ventures. Almost 60 foreign companies representing 14 different countries participate in one or more aspects of Venezuela's oil sector. The Venezuelan national petroleum company Petroleos de Venezuela and foreign petroleum companies have signed 33 operating contracts for marginal fields in three bidding rounds. New legislation dealing with natural gas and petrochemicals is further opening the sector. A new domestic retail competition law, however, disappointed investors who had been promised market-determined prices[citation needed].

On 13 November 2001, under the enabling law authorized by the National Assembly, President Chávez enacted the Hydrocarbons Law, which came into effect in January 2002. This law replaced the Hydrocarbons Law of 1943 and the Nationalization Law of 1975. Among other things, the new law provided that all petroleum production and distribution activities were to be the domain of the Venezuelan state, with the exception of joint ventures targeting extra-heavy crude oil production. Under the new Hydrocarbons Law, private investors can own up to 49% of the capital stock in joint ventures involved in upstream activities. The new law also provides that private investors may own up to 100% of the capital stock in ventures concerning downstream activities, in addition to the 100% already allowed for private investors with respect to gas production ventures, as previously promulgated by the National Assembly.

During the December 2002-February 2003 lock-out where managers and skilled highly-paid technicians of PDVSA locked out PDVSA and sabotaged the industry, petroleum production and refining by PDVSA almost ceased. This sabotage was politically motivated; at the same time, many business owners across Venezuela closed down their stores in order to create instabilitiy within Venezuela. Despite the lock-out, these activities eventually were substantially restarted when the rank-and-file oil workers restarted PDVSA without the managers. Out of a total of 45,000 PDVSA management and workers, 19,000 were subsequently dismissed, many of which were managers and highly paid technicians.

Venezuela's crude oil production was 3.12 million barrels a day when Chávez took office and in 2007 was 2.949 million barrels a day.[64]

A range of other natural resources, including iron ore, coal, bauxite, gold, nickel, and diamonds, are in various stages of development and production. In April 2000, Venezuela's President decreed a new mining law, and regulations were adopted to encourage greater private sector participation in mineral extraction.

Venezuela utilizes vast hydropower resources to supply power to the nation's industries. The national electricity law is designed to provide a legal framework and to encourage competition and new investment in the sector. After a 2-year delay, the government is proceeding with plans to privatize the various state-owned electricity systems under a different scheme than previously envisioned.

Socioeconomic indicators

Like most Latin American countries, Venezuela has an unequal distribution of wealth. The rich tend to be very rich and the poor very poor. The table below shows the distribution of household income in Venezuela in 1970. For comparison, the distributions in the USA and UK are shown in the table below that.

Household Income Distribution

 

Share of household income (%) received by:

Year

Poorest fifth

2nd fifth

3rd fifth

4th fifth

Wealthiest fifth

Wealthiest 10%

1970

3.0

7.3

12.9

22.8

54.0

35.7

Source: World Bank, World Development Report, 1980, Table 24, pp 156–7.

Comparison: USA and UK Household Income Distribution

 

Share of household income (%) received by:

Country and Year

Poorest fifth

2nd fifth

3rd fifth

4th fifth

Wealthiest fifth

Wealthiest 10%

United Kingdom 1973

6.3

12.6

18.4

23.9

38.8

23.5

United States 1972

4.5

10.7

17.3

24.7

42.8

26.6

Source: World Bank, World Development Report, 1980, Table 24, pp 156–7.

The more recent income distribution data available is for distribution per capita, not per household. The two are not strictly comparable because poor households tend to have more members than rich households; thus, the per household data tends to show less inequality than the per capita data. The table below shows the available per capita data for recent years from the World bank.

Personal Income Distribution

 

Share of personal income (%) received by:

 

Year

Poorest fifth

2nd fifth

3rd fifth

4th fifth

Wealthiest fifth

Wealthiest 10%

GINI index

1987

4.7

9.2

14.0

21.5

50.6

34.2

 

1995

4.3

8.8

13.8

21.3

51.8

35.6

46.8

1996

3.7

8.4

13.6

21.2

53.1

37.0

48.8

2000

4.7

9.4

14.5

22.1

45.4

29.9

42

Note that personal (per capita) income distribution, given in this table, is not exactly comparable with household income distribution, given in the previous table, because poor households tend to have more members.

Sources:
1987 data: 1991 World Development Report, Table 30, pp 262–3.
1995 data: 1998 World Development Report, Table 2.8, p 70.
1996 data: 2000/2001 World Development Report, Table 5, pp 282–3.
2000 data: 2006 World Development Indicators, Table 2.8.
All of the above publications are by the World Bank.

Poverty in Venezuela increased during the 1980s and 1990s but has decreased during the Chávez presidency, with the exception of the troubled years 2002 and 2003. The table below shows the percentage of people, and the percentage of households, whose income is below a poverty line which is equal to the price of a market basket of necessities such as food.[65] Note that as an income-based measure of poverty, this omits the effect of some other factors that may affect economic wellbeing, such as the availability of free health care and education.

P o v e r t y

Percentage of people and households with income below national poverty line

Year 1989  · · ·  1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Households · · · 48.1 43.9 42.0 40.4 39.0 48.6 55.1 47.0 37.9 30.6 28.5
People 31.3 · · · 54.5 50.4 48.7 46.3 45.4 55.4 62.1 53.9 43.7 36.3 33.6

Sources:

World Bank, 1997 World Development Indicators, p 52;
Weisbrot et al., Poverty Rates in Venezuela (CEPR, 2006);
Venezuela, Instituto Nacional de Estadística, Venezuela. Medición de la pobreza, según hogares y personas, 2000-07 (./pobreza/LIhogares.asp), accessed May 2009.

Note: The Instituto Nacional de Estadística gives these poverty data twice yearly. For brevity we have included only the end of year data. For example, in 2007, household poverty in the first six months was 27.5% (not shown), and in the last six months, 28.5% (shown). The 1989 datum is from the World Bank and, as far as we know, is a whole year average.

Manufacturing, agriculture, and trade

Manufacturing contributed 17% of GDP in 2006. The manufacturing sector continues to increase dramatically in spite of private under-investment. Venezuela manufactures and exports steel, aluminium, transport equipment, textiles, apparel, beverages, and foodstuffs. It produces cement, tires, paper, fertilizer, and assembles cars both for domestic and export markets.

Agriculture in Venezuela accounts for approximately 3% of GDP, 10% of the labor force, and at least one-fourth of Venezuela's land area. Venezuela exports rice, corn, fish, tropical fruit, coffee, beef, and pork. The country is not self-sufficient in most areas of agriculture. Venezuela imports about two-thirds of its food needs. In 2002, U.S. firms exported $347 million worth of agricultural products, including wheat, corn, soybeans, soybean meal, cotton, animal fats, vegetable oils, and other items to make Venezuela one of the top two U.S. markets in South America. The United States supplies more than one-third of Venezuela's food imports.

Thanks to petroleum exports, Venezuela usually posts a trade surplus. In recent years, nontraditional (i.e., nonpetroleum) exports have been growing rapidly but still constitute only about one-fourth of total exports. The United States is Venezuela's leading trade partner. During 2002, the United States exported $4.4 billion in goods to Venezuela, making it the 25th-largest market for the U.S. Including petroleum products, Venezuela exported $15.1 billion in goods to the U.S., making it its 14th-largest source of goods. Venezuela opposes the proposed Free Trade Agreement of the Americas.

Venezuela Economic Indicators (2003–2007)[66]
indicator Historical averages (%)(2003–2007)
Real GDP growth 7.6
Real domestic demand growth 14.4
Inflation 20.1
Current-account balance (% of GDP) 13.7
FDI inflows (% of GDP) 1.1
Foreign trade[66]
Major exports  % of total Major imports  % of total
Oil& gas 90.4 Raw materials&intermediate goods 44.5
Other 9.6 Consumer goods 24.5
Capital goods 31.0
Foreign trade[66]
Leading markets 2006  % of total Leading suppliers  % of total
United States 53.5 United States 44.5
Netherlands Antilles 8.8 Colombia 9.6
China 3.7 Brazil 7.9

Labor

Venezuela has a labor force of about 12.1 million, and in June 2007, official unemployment was 8%. In May 2007, 55.9 percent of Venezuelan workers are included in the formal sector, with 44.1 percent in the informal sector.

Chávez has had a combative relationship with the nation's largest trade union confederation, the Confederación de Trabajadores de Venezuela (CTV), which is historically aligned with the Acción Democrática (AD) party. During the December 2000 local elections, Chávez placed a referendum measure on the ballot that would mandate state-monitored elections within unions. The measure, which was condemned by the International Labour Organization (ILO) and International Confederation of Free Trade Unions (ICFTU) as undue interference in internal union matters, passed by a large margin on a very low electoral turnout. In the ensuing CTV elections, Carlos Ortega declared his victory and remained in office as CTV president, while chavista (pro-Chávez) candidates declared fraud.

The Unión Nacional de Trabajadores (UNT—"National Union of Workers"), a new pro-Chávez union federation, formed in response and has been growing in membership; it seeks to ultimately supplant the CTV. Several chavista unions have withdrawn from the CTV because of their strident anti-Chávez activism, and have instead affiliated with the UNT. In 2003, Chávez chose to send UNT, rather than CTV, representatives to an annual ILO meeting.

Further augmenting state involvement in Venezuela's economy, Chávez nationalized Venepal, a formerly closed paper and cardboard manufacturing firm, on 19 January 2005. Workers had occupied the factory floor and restarted production, but following a failed deal with management and amidst management threats to liquidate the firm's equipment, Chávez ordered the nationalization, extended a line of credit to the workers, and ordered that the Venezuelan educational missions purchase more paper products from the company.

Under Chávez, Venezuela has also instituted worker-run "co-management" initiatives in which workers' councils play a key role in the management of a plant or factory. In experimental co-managed enterprises, such as the state-owned Alcasa factory, workers develop budgets and elect both managers and departmental delegates who work together with company executives on technical issues related to production.[67]

Infrastructure

Venezuela has an extensive road system. The capital Caracas has a modern subway system over 31.6 mi (51 km) long. Maracaibo and Valencia (third city) has recently inaugurated a metro system. The Maracaibo (second city) metro system is still unfinished. Rail transport in Venezuela has been practically non-existent since the 1950s (with only one line operating), but the IAFE is currently working on several lines, hopefully connecting most of Venezuela via railway by 2020, which, if achieved, would lead to a significant improvement in the countries' transport infrastructure.

At the beginning of August 2008, Venezuelan president Hugo Chavez and his colleagues from Argentina and Brazil spoke about Latin American integration and Chavez threw an ambitious idea out: a train that would connect Venezuela's capital (Caracas) with Argentina's (Buenos Aires), and cities in between [68].

The Chavez government has launched a National Railway Development Plan designed to create 15 railway lines across the country, with 8500 miles of track by 2030. The network is being built in cooperation with China Railways, which is also cooperating with Venezuela to create factories for tracks, railway cars and eventually locomotives.[69]

Miscellaneous data

Electricity – production by source:
fossil fuel: 25.46%
nuclear: 0%
other: 0% (1998)

Electricity Production 110.7 KWh (2007)

Electricity – consumption: 83.84 KWh (2006)

Electricity – exports: 0.542 kWh (2006 est.)

Electricity – imports: 0 kWh (2007)

Agriculture – products: maize, sorghum, sugar cane, rice, bananas, vegetables, coffee; beef, pork, milk, eggs; fish

Currency: 1 bolívar fuerte (Bs.F.) = 100 centimos (Currency code: VEF)

Exchange rates:
bolívares fuertes (Bs. F) per US$1: 2,15 (January 2008)
bolívares (Bs) per US$1: 2150 (January 2006), 1440 (September 2002), 652,33 (January 2000), 605,71 (1999), 547,55 (1998), 488,63 (1997), 417,33 (1996), 176,84 (1995)

See also

Sources

Government of Venezuela, Instituto Nacional de Estadística (National Institute of Statistics.) Wide range of statistics. Adding pobreza/menupobreza.asp to the URL gives a menu of poverty statistics.

Michael McCaughan, The Battle of Venezuela, London, 2004.

United Nations, UNdata Explorer.

Mark Weisbrot and Luis Sandoval:

The Venezuelan Economy in the Chávez Years, Center for Economic and Policy Research, 2007.
Update: The Venezuelan Economy in the Chávez Years CEPR, 2008.

Mark Weisbrot, Luis Sandoval, and David Rosnick, Poverty

References

  1. ^ "Venezuelan Economy Shrinks 2.9 Percent", VoA, December 31, 2009
  2. ^ "Venezuela's IPC. February, 2007 - January, 2008". Banco Central de Venezuela. 1 February 2007. http://bcv.org.ve/. Retrieved 15 January 2008. 
  3. ^ a b c [PEN-L] ECLAC: Venezuela's poverty & extreme poverty 2002-2006: down 18
  4. ^ a b http://www.cepr.net/documents/publications/venezuela_2007_07.pdf
  5. ^ [Simon and Schuster, 1990], pp. 233-36; 432
  6. ^ [Simon and Schuster, 1990], pp.435
  7. ^ [Simon and Schuster, 1990], pp.510-13
  8. ^ [Simon and Schuster, 1990], pp.767
  9. ^ McCaughan, p 31; he mentions health, education, transport, and food.
  10. ^ McCaughan, p 31.
  11. ^ McCaughan, p 32.
  12. ^ United Nations data, National accounts estimates of main aggregates.
  13. ^ Weisbrot and Sandoval, 2008. Sections: 'Executive Summary,' and 'Social Spending, Poverty, and Employment.'
  14. ^ McCaughan, p 73.
  15. ^ UN data site >> World Bank estimates >> GDP deflator, national currency.
  16. ^ Venezuela to Give Currency New Name and Numbers by Simon Romero of The New York Times.
  17. ^ Latin American Herald Tribune, 16 March 2009, Molano: Venezuela is Priced for Failure
  18. ^ Reuters, "Venezuela cuts three zeros off bolivar currency".
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  21. ^ [1]
  22. ^ Economist (June 2003). "Country Briefings: Venezuela Factsheet". The Economist. Accessed 4 June 2003.
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  27. ^ Datos, (2006). Perspectivas Sociales 2006 de VenAmCham p.18. Retrieved 29 August 2006. (Spanish)
  28. ^ Weisbrot, Mark & Sandoval, Luis & Rosnick, David (CEPR May 2006). Poverty Rates in Venezuela: Getting the Numbers Right Retrieved 19 August 2006
  29. ^ El Universal Más de dos millones de hogares en Venezuela son pobres Retrieved 23 September 2006 (Spanish) "La pobreza se ubicó en 33,9% en el primer semestre del año, lo que representó una disminución de 8,5 puntos porcentuales con respecto an igual período de 2005"
  30. ^ Bronstein, H. (14 June 2006), "Colombians in Venezuela thank Chavez for new life", Washington Post, Accessed 22 June 2006. Also available at boston.com, Accessed 28 May 2007.
  31. ^ Marx, Gary(Chicago Tribune 13 November 2006) Venezuela riding wave of prosperity Retrieved 14 November 2006
  32. ^ a b Lakshmanam, Indira A.R. Critics slam Venezuelan oil windfall spending. Boston.com Boston Globe (13 August 2006).
  33. ^ Instituto Nacional de Estadistica. (INE, January 1999) Globales de Fuerza de Trabajo. Retrieved 13 June 2006."Tasa de Desocupacion 16.6%" (Spanish)
  34. ^ Instituto Nacional de Estadistica. (INE, April 2006) Globales de Fuerza de Trabajo. Retrieved 18 November 2006."Tasa de Desocupacion 8.9%" (Spanish)
  35. ^ Instituto Nacional de Estadisticas. Tasa de desocupacion Retrieved 19 August 2006 (Spanish) "Personas de 15 años o más, de uno u otro sexo, quienes declararon que durante la semana anterior al día de la entrevista no estaban trabajando y estaban buscando trabajo con remuneración. Asimismo, se incluyen aquellas personas que nunca han trabajado y buscan trabajo por primera vez."
  36. ^ El Universal (El Universal 15 October 2005) La pobreza se redujo en 14,6 puntos en un año Retrieved 19 August 2006 (Spanish) "Según explicó Elías Eljuri, las cifras presentadas por el instituto en esta oportunidad miden la pobreza sólo por el nivel de ingreso de los hogares. " "Aclaró que las cifras presentadas no incluyen el efecto que han logrado en el tema la aplicación de los programas sociales del actual gobierno y que esto será presentado en otra oportunidad. "
  37. ^ Férnandez Urdaneta, Jainelly (31 May 2006). "“Venezuela ha avanzado en la lucha contra la pobreza”". Panorama (available at Boletin Digital Universitario, Universidad de Carabobo). http://boletin.uc.edu.ve/index.php?option=com_content&task=view&id=823&Itemid=2. Retrieved 29 December 2006. (Spanish)
  38. ^ Panodi (Venezuelanalysis.com 3 June 2006). World Bank: Venezuela decreased poverty Retrieved 19 August 2006
  39. ^ according to El Universal
  40. ^ A dual economy. El Universal (17 August 2006).
  41. ^ Chavez: Venezuela to pull out of IMF, World Bank
  42. ^ Chávez: goodbye IMF, WB
  43. ^ "Prevén crecimiento económico y alta inflación en el país". El Universal. 25 June 2007. http://www.eluniversal.com/2007/06/25/eco_art_preven-crecimiento-e_332852.shtml. Retrieved 25 June 2007. (Spanish)
  44. ^ Chávez pushes for withdrawal of international reserves from U.S. banks - The International Herald Tribune (27 January 2008)
  45. ^ a b Washington Post, 8 February 2007, Meat, Sugar Scarce in Venezuela Stores
  46. ^ Reuters, 5 March 2009, Food, farms the new target for Venezuela's Chavez
  47. ^ Venezuelan shoppers face food shortages, BBC, 10 January 2006
  48. ^ Reuters, 22 January 2008, Venezuela troops to block food smuggling to Colombia
  49. ^ Chavez Seizes Venezuelan Rice Plants, Associated Press, 28 February 2009 (dead link, 2009).
    Venezuelanalysis.com, 2 March 2009, Venezuelan Government Takes Control of Rice Plants that Evade Regulated Prices
  50. ^ Chavez boosts food price controls, BBC, 4 March 2009
  51. ^Venezuelanalysis.com, 4 August 2009, Venezuela Takes Over Coffee Manufacturers Suspected of Hoarding and Speculation
  52. ^ Banco Central de Venezuela. (BCV 12 December 2006). INDICE DE PRECIOS AL CONSUMIDOR DEL ÁREA METROPOLITANA DE CARACAS DICIEMBRE 1998. Retrieved 11 August 2006 (Spanish) "la variación acumulada del IPC para el año 1998, se ubicó en 29,9%"
  53. ^ "BBC NEWS". 15 February 2007. http://news.bbc.co.uk/2/hi/business/6364515.stm. Retrieved 4 December 2007. 
  54. ^ Venezuelan Central Bank debt smashes unprecedented record. El Universal (18 August 2006).
  55. ^ a b c Reuters, "Venezuela's nationalisations under Hugo Chavez" 5 March 2009.
  56. ^ Reuters, "Venezuela's nationalisations under Hugo Chavez" (cited above);
    CBS news, Hugo Chavez Nationalizes Cement Industry April 2008;
    NY Times, Venezuela is set to take control of Cemex plants.
  57. ^ CBS article in previous reference.
  58. ^ Outraged Chávez puts stop to near-complete shopping mall, The Guardian, 24 December 2008
  59. ^ Venezuela nationalizes steel industry, CNN, 1 May 2008
  60. ^ Romero, Simon (5 March 2005). "Citgo's Status Is Giving Houston the Jitters". New York Times. http://select.nytimes.com/gst/abstract.html?res=F50F10FA3A590C768CDDAA0894DD404482&n=Top%2fNews%2fWorld%2fCountries%20and%20Territories%2fVenezuela. Retrieved 3 January 2007.  Available at infovenezuela.org
  61. ^ "941 billion bolivars Citgo dividends to fund Misión Ciencia". PDVSA. 19 February 2006. http://www.pdvsa.com/index.php?tpl=interface.en/design/salaprensa/readnew.tpl.html&newsid_obj_id=2292&newsid_temas=1. Retrieved 3 January 2007. 
  62. ^ "Congreso aprueba presupuesto". La Prensa. 15 December 2005. http://mensual.prensa.com/mensual/contenido/2005/12/15/hoy/negocios/435668.html. Retrieved 27 December 2006. (Spanish)
  63. ^ Unb, Dhaka (The Daily Star May 2007) Prof Yunus gets highest Venezuelan honour Accessed 14 May 2007.
  64. ^ OPEC Annual Statistical Bulletin, online version, Oil and gas data, Table 38, Crude oil production in OPEC member countries since commencement (www.opec.org/library/ ).
    Also, McDermott, Jeremy (13 October 2008). "Venezuela's oil output slumps under Hugo Chavez". Telegraph. http://www.telegraph.co.uk/news/worldnews/southamerica/venezuela/3183417/Venezuelas-oil-output-slumps-under-Hugo-Chavez.html. Retrieved 13 October 2008. 
  65. ^ The Instituto Nacional de Estadística describes their method for compiling these statistics at http://www.ine.gov.ve/fichastecnicas/idh/fichaindicalineapobreza.htm .
  66. ^ a b c "Factsheet". http://www.economist.com/countries/Venezuela/profile.cfm?folder=Profile-FactSheet. Retrieved 17 February 2009. 
  67. ^ Bruce, Iain. Chavez calls for democracy at work. BBC News. (17 August 2005). Accessed 22 September 2006.
  68. ^ http://www.treehugger.com/files/2008/09/train-to-cross-south-america-southern-train-venezuela-argentina.php
  69. ^ Venezuelanalysis.com, 24 March 2009, Venezuela Inaugurates New Line for Extensive Rail System Project

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