Economy of Venezuela

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Economy of Venezuela
CaracasCentre.jpg
Rank35th
CurrencyBolívar fuerte (VEF)
Fiscal yearcalendar
Trade organisationsWTO, OPEC, Unasur, MERCOSUR , ALBA
Statistics
GDP$402.1 (2012, PPP)
$338 billion (2012, Real)[1][2]
GDP growthIncrease 1.1%  (3Q 2013 est.)[3]
GDP per capita$13,200 (2012, PPP)[1]
GDP by sectoragriculture: 4.1%, industry: 34.9%, services: 61.1% (2010 est.)
Inflation (CPI)56.2% (2013)[4]
Population
below poverty line
31.6% (2012 est.) [5]
Labour force13.7 million (2012 est.)
Labour force
by occupation
agriculture: 7.3%, industry: 21.8%, services: 70.9% (2011 est.)
Unemployment9.4% (January 2013)[6]
Main industriespetroleum, construction materials, food processing, iron ore mining, steel, aluminum; motor vehicle assembly, real estate, tourism and ecotourism
Ease of doing business rank180th[7]
External
Exports$96.9 billion (2012)[1]
Export goodspetroleum, chemicals, agricultural products, basic manufactures
Main export partners United States 39.3%
 China 14.4%
 India 12.0%
 Netherlands Antilles 7.6%
 Cuba 4.5% (2012 est.)[8]
Imports$56.7 billion (2012)[1]
Import goodsfood, clothing, cars, technological items, raw materials, machinery and equipment, transport equipment, construction material
Main import partners United States 31.2%
 China 16.5%
 Brazil 8.9% (2012 est.)[9]
Public finances
Public debt49% of GDP (2012 est.)
Revenues$116.3 billion
Expenses$175.3 billion (2012 est.); including capital expenditures of $2.6 billion (2012 est.)
Credit rating

Standard & Poor's:[10]
B- (Domestic)
B- (Foreign)
B- (T&C Assessment)
Outlook: Negative

Moody's:[11]
Caa1 (Domestic)
Caa1 (Foreign)
Outlook: Negative

Fitch:[12]
B+
Outlook: Negative
Foreign reserves$21.3 billion (2013)[13]

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars
 
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Economy of Venezuela
CaracasCentre.jpg
Rank35th
CurrencyBolívar fuerte (VEF)
Fiscal yearcalendar
Trade organisationsWTO, OPEC, Unasur, MERCOSUR , ALBA
Statistics
GDP$402.1 (2012, PPP)
$338 billion (2012, Real)[1][2]
GDP growthIncrease 1.1%  (3Q 2013 est.)[3]
GDP per capita$13,200 (2012, PPP)[1]
GDP by sectoragriculture: 4.1%, industry: 34.9%, services: 61.1% (2010 est.)
Inflation (CPI)56.2% (2013)[4]
Population
below poverty line
31.6% (2012 est.) [5]
Labour force13.7 million (2012 est.)
Labour force
by occupation
agriculture: 7.3%, industry: 21.8%, services: 70.9% (2011 est.)
Unemployment9.4% (January 2013)[6]
Main industriespetroleum, construction materials, food processing, iron ore mining, steel, aluminum; motor vehicle assembly, real estate, tourism and ecotourism
Ease of doing business rank180th[7]
External
Exports$96.9 billion (2012)[1]
Export goodspetroleum, chemicals, agricultural products, basic manufactures
Main export partners United States 39.3%
 China 14.4%
 India 12.0%
 Netherlands Antilles 7.6%
 Cuba 4.5% (2012 est.)[8]
Imports$56.7 billion (2012)[1]
Import goodsfood, clothing, cars, technological items, raw materials, machinery and equipment, transport equipment, construction material
Main import partners United States 31.2%
 China 16.5%
 Brazil 8.9% (2012 est.)[9]
Public finances
Public debt49% of GDP (2012 est.)
Revenues$116.3 billion
Expenses$175.3 billion (2012 est.); including capital expenditures of $2.6 billion (2012 est.)
Credit rating

Standard & Poor's:[10]
B- (Domestic)
B- (Foreign)
B- (T&C Assessment)
Outlook: Negative

Moody's:[11]
Caa1 (Domestic)
Caa1 (Foreign)
Outlook: Negative

Fitch:[12]
B+
Outlook: Negative
Foreign reserves$21.3 billion (2013)[13]

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

The economy of Venezuela is largely based on the petroleum sector and manufacturing.[14] Revenue from petroleum exports accounts for more than 50% of the country's GDP and roughly 95% of total exports. Venezuela is the fifth largest member of OPEC by oil production. From the 1950s to the early 1980s the Venezuelan economy experienced a steady growth that attracted many immigrants, with the nation enjoying the highest standard of living in Latin America. During the collapse of oil prices in the 1980s the economy contracted, and inflation skyrocketed to reach peaks of 84% in 1989 and 99% in 1996, three years prior to Hugo Chavez taking office. With high oil prices and rising government expenditures, Venezuela's economy grew by 9% in 2007.

Manufacturing contributed 17% of GDP in 2006. Venezuela manufactures and exports heavy industry products such as steel, aluminium and cement, with production concentrated around Ciudad Guayana, near the Guri Dam, one of the largest in the world and the provider of about three-quarters of Venezuela's electricity. Other notable manufacturing includes electronics and automobiles, as well as beverages, and foodstuffs. 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.

The United States is Venezuela's most important trading partner. U.S. exports to Venezuela include machinery, agricultural products, medical instruments, and autos. Venezuela is one of the top four suppliers of foreign oil to the United States. About 500 U.S. companies are represented in Venezuela.[14] According to Central Bank of Venezuela, the government received from 1998 to 2008 around 325 billion USD through oil production and export in general,[15] and according to the International Energy Agency, to June 2010 has production of 2.2 million barrels per day, 800,000 of which go to the United States of America.[16]

Venezuela has one of the highest inflation rates in the world averaging 29.1% in 2010, according to the CIA world fact book.[17] Since Hugo Chavez imposed stringent currency controls in 2003 in an attempt to prevent capital flight,[18] there have been a series of currency devaluations, disrupting the economy.[19] According to the Heritage Foundation and the Wall Street Journal, Venezuela has the weakest property rights in the world, scoring only 5.0 on a scale of 100; expropriation without compensation is common.[20] A 2010 International Monetary Fund (IMF) study qualified as "delayed and weak" the economic recovery of Venezuela in comparison with other countries of the region.[21] Price controls, expropriation, and other government policies have caused severe shortages of food and other goods, including medical supplies.[22]

History[edit]

1922 - 1964[edit]

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.[23] 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."[24] 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.[25] In 1973 Venezuela voted to nationalize its oil industry outright, effective 1 January 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.[26]

During Pérez 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. On 1950, Venezuela was the world's 4th largest wealthiest nation per capita[27] 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 an unsuccessful agrarian reform.[28]

1960s - 1990s[edit]

Buoyed 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." [29]

Because of the oil wealth, Venezuelan workers "enjoyed the highest wages in Latin America."[30] This situation was reversed when oil prices collapsed during the 1980s. The economy contracted, and the number of people living in poverty rose from 36% in 1984 to 66% in 1995.[31] The country suffered a severe banking crisis (Venezuelan banking crisis of 1994).

As the economy contracted in the 1980s, inflation levels (consumer price inflation) fell, remaining between 6 and 12% from 1982 to 1986.[32] In the late 80s and early 90s inflation rose to around 30 - 40% annually, with a 1989 peak of 84%.[32] The mid-1990s saw annual rates of 50-60% (1993 to 1997) with an exceptional peak in 1996 at 99.88%.[32] Subsequently inflation has remained in a range of around 15% to 30%.[32]

By 1998, the economic crisis had grown even worse. Per capita GDP was at the same level as 1963 (after adjusting 1963 dollar to 1998 value), down a third from its 1978 peak; and the purchasing power of the average salary was a third of its 1978 level.[33]

1999 - 2012[edit]

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 grew at first (1999–2001), then contracted from 2001 - 2003 to GDP levels similar to 1997, 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 reluctance of foreign investors. 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).[34][dead link] 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 opposition 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.[35]

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 Alí Rodríguez Araque'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." [36]

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.[citation needed]

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 Venezuelan general strike of 2002-2003. 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,[37][full citation needed] continued to weaken.

The inflation rate, as measured by consumer price index, was 35.8% in 1998, falling to a low of 12.5% in 2001 and rising to 31.1% in 2003. Historically, the highest yearly inflation was 99.9% in 1996. 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 housing market in Venezuela has shrunk significantly in recent years. Developers have avoided Venezuela due to the massive number of companies who have had their property expropriated by the government.[38] The shortage of housing is so significant that in 2007, a group of squatters occupied Centro Financiero Confinanzas, a cancelled economic center that was supposed to symbolize Venezuela's growing economy.[39] However, this building still does symbolize the economy of Venezuela under Chávez as it hasn't been able to fully recover to the same heights since the building was abandoned nearly twenty years ago.[40] There are currently thousands of occupants still inside of the complex today.

The Venezuelan economy shrank 5.8 percent in the first three months of 2010 compared to the same period last year[41] and now has the highest inflation rate in Latin America (30.5%).[41] President Hugo Chavez expressed optimism that Venezuela would soon emerge from recession,[41] despite the International Monetary Fund forecasts showing that Venezuela would be the only country in the region to remain in recession that year.[42] However after Chavez's death in early 2013, Venezuela's economy continued to fall into an even greater recession.

2013 - Present[edit]

In early 2013, Venezuela devalued its currency due to growing shortages in the country.[43] The shortages included necessities such as toilet paper, milk, and flour.[44] Fears rose so high due to the toilet paper shortage that the government occupied a toilet paper factory.[45] In late 2013, Venezuela's inflation rates increased even higher, to 54.3%,[46] and forecasts from the International Monetary Fund show Venezuela as one of the slowest-growing economies in Latin America for 2013.[47] Black market estimates that most Venezuelans have to use for purchases have risen to almost ten times the official exchange rate.[48]

Shortages leave empty store shelves in a Venezuelan store.

Venezuela's bond ratings have also decreased multiple times in 2013 due to decisions by the president Nicolás Maduro. One of his decisions was to force stores and their warehouses to sell all of their products, which may lead to even more shortages in the future.[49] Venezuela's outlook has also been deemed negative by most bond-rating services.[50] According to a Johns Hopkins University professor, Venezuela had a 297% implied inflation rate for 2013.[51]

The year 2014 does not look much better for Venezuela, as analysts believe the country will continue tumbling deeper into recession, and another devaluation of the bolívar seems imminent.[52] As of early 2014, many companies have either slowed or stopped operation due to the lack of hard currency in the country. Ford Motor Co. is one of the largest companies that has slowed production in Venezuela due to its lack of foreign currency for supplies. Because of recent economic uncertainties, Ford also believes that there will be a significant devaluation of the bolívar as well.[53] In January 2014, many airlines, including Air Canada, Air Europa, American Airlines, Copa Airlines, TAME, TAP Airlines, and United Airlines, suspended international flights operating in Venezuela because the government has been restricting access to the U.S. dollar.[54][55] There are talks among airlines of canceling even more international flights out of the country since Venezuela still owes foreign airlines nearly $3.3 billion USD.[56] Venezuela has also dismantled CADIVI, a government body in charge of currency exchange. CADIVI was known for holding money from the private sector and suspected to be corrupt.[57] In February, Toyota, the largest automobile manufacturer, has stopped production indefinitely in Venezuela due to an 87% drop in automotive sales.[58] General Motors Company has also suspended production after losing $162 million USD and stated that they "saw no horizon or resolutions to business operations in Venezuela".[59]

Sectors[edit]

Petroleum and other resources[edit]

Venezuela is a major producer of petroleum products, which remain the keystone of the Venezuelan economy. The International Energy Agency shows how Venezuela's oil production has fallen in the last years, producing only 2,300,000 barrels (370,000 m3) daily, down from 3.5 million in 1998, but with the recent currency devaluation the oil incomes will double its value in local currency.[60]

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.

Manufacturing[edit]

Manufacturing contributed 15% of GDP in 2009. The manufacturing sector is experiencing severe difficulties, amidst lack of investment and accusations of mismanagement.[61][62] 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[edit]

Agriculture in Venezuela accounts for approximately 3% of GDP, 10% of the labor force, and at least a quarter 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. Recent government policies have led to problems with food shortages.[18]

Trade[edit]

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 a quarter 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.

Since 1998 People's Republic of China-Venezuela relations have seen an increasing partnership between the government of the Venezuelan president Hugo Chávez and the People's Republic of China. Sino-Venezuelan trade was less than $500m per year before 1999, and reached $7.5bn in 2009, making China Venezuela's second-largest trade partner,[63] and Venezuela China's biggest investment destination in Latin America. Various bilateral deals have seen China invest billions in Venezuela, and Venezuela increase exports of oil and other resources to China.

Labor[edit]

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.[64]

In November 2010, following the expropriation of U.S. bottle-maker Owens-Illinois, workers spent a week protesting outside factories in Valera and Valencia.[65]

Infrastructure[edit]

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.

The Chavez government launched a National Railway Development Plan designed to create 15 railway lines across the country, with 8,500 miles (13,700 km) 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.[66] However, Venezuela's rail project is being put on hold due to Venezuela not being able to pay the $7.5 billion and owing China Railway nearly $500 million.[67]

Venezuela's electrical grid is plagued with occasional blackouts in various districts of the country. In 2011, it had so many problems that rations on electricity were put in place to help ease blackouts.[68] On September 3, 2013, 70% of the country plunged into darkness with 14 of 23 states of Venezuela stating they did not have electricity for most of the day.[69] Another power outage on December 2, 2013 left most of Venezuela in the dark again and happened just days before elections.[70]

Statistics[edit]

Economy Data[edit]

Source (1980-2008): International Monetary Fund: Data & Statistics Source (2009-2012): CIA: The World Factbook Source (2013): Reuters

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$19.67 billion in October 2003.From 2004 to the first half of 2006, non-petroleum On the black market the bolívar fell 28% in 2007 to Bs. 4,750 per US$,[71] and declined to around VEF 5.5 (Bs 5500) per US$ in early 2009.[72]

*Sources: International Monetary Fund, World Bank. GDP is in billions of Local Currency Unit that has been adjusted for inflation.

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]

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$.[73] 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%) .[74] According to official sources from the United Nations, the percentage of people below the national poverty line has decreased during the presidency of Hugo Chávez, from 48.1% in 2002 to 28% in 2008.[75][76]

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 the second quarter of 2009,[77] contracting a further 4.5% in the third quarter of 2009. Chavez's response has been that these standards mis-state economic fact and that the economy should be measured by socialistic standards.[78] For 17 November 2009 the Central Bank reported that private sector activity declined by 4.5% and that inflation was averaging 26.7%. Compounding such problems is a drought which the government says was caused by El Nino, resulting in rationing of water and electricity and a short supply of food.[79]

The year 2010 promises a Venezuela still in recession as Gross Domestic Product has fallen by 5.8% in the first quarter of 2010.[80] The Central Bank has stated that the recession is due largely "to restricted access to foreign currency for imports, lower internal demand and electricity rationing." The oil sector's performance is also particularly troubling, with oil GDP shrinking by 5%. More importantly the Central Bank hints at the root cause of the oil contraction: "the bank said it was due to falls in production, "operative problems", maintenance stoppages and the channeling of diesel to run thermal generators during a power crisis."[80] While the public sector of the economy has fallen 2.8%, the private sector has dropped off an astounding 6%.[80]

The year 2013 proved to be difficult for Venezuela as shortages of necessities and extreme inflation attacked the nation's economy. Items became so scarce that nearly one quarter of items were not in stock.[81] The bolívar was devalued to 6.3 per USD in early 2013 taking one third of it's value away.[82] However, inflation still continued to rise drastically in the country to the point President Maduro forced stores to sell their items just days before elections. Maduro said that the stores were charging unreasonable prices even though the owners were only charging so much due to the actual devaluation of the bolivar.[83]

As the year 2014 began, it was pretty rough as well. The central bank of Venezuela stopped releasing statistics for the first time in its history as a way to possibly manipulate the image of economy.[84] Venezuela has also dismantled CADIVI, a government body in charge of currency exchange[57]

Currency Black Market[edit]

Sources: Banco Central de Venezuela, Dolar Paralelo, Federal Reserve Bank, International Monetary Fund. Calculations: Prof. Steve Hanke, The John Hopkins University. Implied Annual Inflation Rate represents Black Market Inflation Rate.

In the first few years of Chavez's office, his newly created social programs required large payments in order to make the desired changes. On February 5, 2003, the government created CADIVI, a currency control board charged with handling foreign exchange procedures. It's creation was to control capital flight by placing limits on individuals and only offering them so much of a foreign currency.[85] This limit to foreign currency led to a creation of a currency black market economy since Venezuelan merchants rely on foreign goods that require payments with reliable foreign currencies. As Venezuela printed more money for their social programs, the bolívar continued to devalue for Venezuelan citizens and merchants since the government held the majority of the more reliable currencies.[86]

As of January 2014, the official exchange rate is 1 USD to 6.3 VEF while the black market exchange rate is over ten times higher since the actual value of the bolívar is overvalued for Venezuelan businesses. Since merchants can only receive so much necessary foreign currency from the government, they must resort to the black market which in turn raises the merchant's prices on consumers.[87] The high rates in the black market make it difficult for businesses to purchase necessary goods since the government often forces these businesses to make price cuts. This leads to businesses selling their goods and making a low profit, such as Venezuelan McDonald's franchises offering a Big Mac meal for only $1.[88] Since businesses make low profits, this leads to shortages since they are unable import the goods that Venezuela is reliant on. Venezuela's largest food producing company, Empresas Polar, has stated that they may need to suspend some production for nearly the entire year of 2014 since they owe foreign suppliers $463 million.[89] The last report of shortages in Venezuela showed that 22.4% of necessary goods are not in stock.[90] This was the last report by the government since the central bank no longer posts the scarcity index. This has led to speculation that the government is hiding it's inability to control the economy which may create doubt about future economic data released.[91]

Socioeconomic indicators[edit]

Like most Latin American countries, Venezuela has an unequal distribution of wealth. The rich tend to be very rich and the poor very poor. In 1970, the poorest fifth of the population had 3% of national income, while the wealthiest fifth had 54%.[92] For comparison the UK 1973 figures were 6.3% and 38.8%, and the US in 1972, 4.5% and 42.8%.[92]

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
YearShare of personal income (%) received by:GINI index
Poorest fifth2nd fifth3rd fifth4th fifthWealthiest fifthWealthiest 10%
19874.79.214.021.550.634.2~43.42
19954.38.813.821.351.835.646.8
19963.78.413.621.253.137.048.8
20004.79.414.522.145.429.942.0
20043.512.954.845.59
20075.114.247.742.37
20105.714.944.838.98
20115.715.944.839.02

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.

2004 data: Instituto Nacional de Estadística, Page 8[93]
2007 data: Instituto Nacional de Estadística, Page 8[93]
2010 data: Instituto Nacional de Estadística, Page 8[93]
2011 data: Instituto Nacional de Estadística, Page 8[93]

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.[94] 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.

Percentage of people and households with income below national poverty line
Year1989  1997199819992000200120022003200420052006200720082009201020112012
Households48.143.942.040.439.048.655.147.037.930.628.523.423.623.521.2N/A
People31.354.550.448.746.345.455.462.153.943.736.333.632.631.832.533.2N/A
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). Retrieved 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.
Venezuela Economic Indicators (2003–2007)[95][dead link]
indicatorHistorical averages (%)(2003–2007)
Real GDP growth7.6
Real domestic demand growth14.4
Inflation20.1
Current-account balance (% of GDP)13.7
FDI inflows (% of GDP)1.1
Foreign trade[95]
Major exports % of totalMajor imports % of total
Oil& gas90.4Raw materials&intermediate goods44.5
Other9.6Consumer goods24.5
Capital goods31.0
Foreign trade[95]
Leading markets 2006 % of totalLeading suppliers % of total
United States53.5United States44.5
Netherlands Antilles8.8Colombia9.6
China3.7Brazil7.9

Miscellaneous data[edit]

Electricity – production by source:
fossil fuel: 35.7% (2012 est.)
"hydroelectric" 64.3 (2012 est.)
nuclear: 0% (2012 est.)
other: 0% (2012 est.)

Electricity Production 127.6 billion kWh (2012 est.)

Electricity – consumption: 85.05 billion kWh (2011 est.)

Electricity – exports: 633 million kWh (2009 est.)

Electricity – imports: 260 million kWh (2009 est.)

Electricity - installed generating capacity: 27.5 million kW (2012 est.)

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: 6,30 (February 2013), 4,30 (May 2012)
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)

Social development[edit]

In recent years, the Bolivarian Republic of Venezuela, under the direction of President Hugo Chávez, has made leaps in the realm of social development. With social programs such as the Bolivarian Missions, Venezuela has made progress in areas such as health, education, and poverty. Through what President Hugo Chávez terms 21st Century Socialism,[96] Venezuela has been able to fix many of its domestic issues. Many of the social policy pursued by Chávez and his administration were jumpstarted by the Millennium Development Goals, eight goals that Venezuela and 188 other nations agreed to in September 2000.[97] In each of the goals, Venezuela has made improvements, and at this rate, will meet all eight goals by their 2015 deadline.[98]

When the international community agreed to the Millennium Development Goals, each country pledged to use social policy to achieve each of the eight goals. The former President of the General Assembly of the United Nations, Ali Abdessalam Treki, stated: “What Venezuela has achieved with regards to the Millennium Development Goals should serve as a model for all other countries."[99]

The country has allocated much of its government spending on social policy. From 1999-2009, 60% of government revenues focused on social programs.[98] Social investment went from 8.4% of Gross Domestic Product (GDP) in 1988 to 18.8% in 2008.[100] Through this social spending, Venezuela has been able to stay on track to reaching the Millennium Development Goals.

Millennium Development Goals[edit]

In 2000, the United Nations adopted the Millennium Development Goals, eight goals that combat social problems in our world today.[101] The eight goals are as follows: eradicate extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality, improve maternal health, combat HIV/AIDS, malaria and other diseases, ensure environmental sustainability, and develop a global partnership for development. At the September 2010 United Nations Summit, Jorge Valero, Vice-Minister of Foreign Affairs stated: “Venezuela has achieved the majority of the Millennium Development Goals.”[98]

Goal 1: Eradicate extreme poverty and hunger[edit]

According to Venezuela government statistics, the percentage of people living in extreme poverty was 29.8% in 2003 and decreased to 12.5% in 2006, the year Venezuela officially met the first target of this goal.[102] The percentage of those living in extreme poverty continued declining and in 2011 was 6.8%.[103] The overall poverty index was 49% in 1998 and lowered to 24.2% in 2009.[104] In terms of unemployment, Venezuela has been able to lower the rate to 7.5% in 2009 in spite of the global financial crisis.[98]

In relation to hunger, under-nutrition was lowered drastically from its 1998-2000 level of 21% to its 2005-2007 level of 6%.[98] Between 1998 and 2010, Venezuela’s food production increased by 44%.[103] In 1991, the population that was undernourished was 10% and decreased to 7% in 2007.[105] The percentage of children under the age of five who are moderately or severely underweight decreased from 6.7% in 1990 to 3.7% in 2007.[105] Infant malnutrition in children below five years of age decreased from 7.7% in 1990 to 2.9% in 2011.[106]

Goal 2: Achieve universal primary education[edit]

The total net enrollment ratio in primary education for both sexes increased from 87% in 1999 to 93.9% in 2009.[105] The primary completion rate for both sexes reached 95.1% in 2009, as compared to 80.8% in 1991.[105] In 2005, the United Nations Educational, Scientific and Cultural Organization declared Venezuela free of illiteracy.[103] The literacy rates of 15-24 year olds in 2007, for men and women, were 98% and 98.8%, respectively.[105] The free government program, Misión Robinson, is largely responsible for Venezuela's success with literacy rates. Since starting in 2003, the program has taught more than 2.3 million people to read and write. The program has also focused much of its attention on reaching out to geographically isolated and historically excluded members of the population, including indigenous groups and Afro-descendents.[107] Through improvements in primary education and literacy, Venezuela is on target to achieve this goal by the year 2015.[102]

Goal 3: Promote gender equality and empower women[edit]

Gender equality in the education sector has already been achieved, with a ratio of 103 girls for every 100 boys registered in schools.[102] In university education, women’s participation increased by 1.46% in 2009, and there are now more women enrolled in universities than men.[103] Elias Eljuri, President of Venezuela’s National Institute of Statistics, stated that Venezuela ranks second after Cuba in university enrollment.[106]

In the working sector, the percentage of women in the non-agricultural workforce has increased from 35.44% in 1994 to 41.96% in 2009.[98] The percentage of seats held by women in the national parliament has increased to 17% in 2011 from 10% in 1990.[105] At the time of the September 2010 UN Summit, four of Venezuela’s five branches of government were led by women (the legislature, judiciary, electoral authority, and citizen’s branch).[98]

Goal 4: Reduce child mortality[edit]

In 2008, the children under-five mortality rate was 16.35 per every 1,000 births, a 49% decrease from 1990.[98] The infant mortality rate decreased from 28 per 1,000 live births in 1990 to 16 per 1,000 live births in 2010.[105] Through the Misión Barrio Adentro, the infant mortality rate is on track to be reduced to the rate of 8.6 per 1,000 live births in 2015.[103] The percentage of one year olds immunized against measles has varied between highs of 98% in 2001 and 92% in 1998, from 61% in 1990 and 1992 and a low of 47% in 1995. In 2011, the last year with results available, the rate was 86%.[105]

Goal 5: Improve maternal health[edit]

In 2010, the maternal mortality ratio per 100,000 live births was 92, essentially unchanged since 2000 when it was 91, but down from 94 in 1990.[108] The current contraceptive use among married women 15–49 years old increased from 58% in 1993 to 70.3% in 1998.[105] The Venezuelan government has implemented a multitude of policies and programs aimed at accelerating progress on this goal: Proyecto Madre, Misión Barrio Adentro, Misión Niño Jesús, and the National Sexual and Reproductive Health Program.[102] Misión Niño Jesús, known as Mission Baby Jesus in English, aims to provide better attention to pregnant women. The program attempts to improve hospital infrastructure, increase the availability of medicine, provide health education for pregnant women and young children, and construct prenatal care houses.[109] The Venezuelan government has increased the total expenditure on health as a percentage of Gross Domestic Product (GDP) over the years. In 1996, the level was 3.5% and rose to 6.0% in 2009.[110]

Goal 6: Combat HIV/AIDS, malaria and other diseases[edit]

The number of primary health care physicians treating HIV/AIDS and other diseases has increased from 1,628 in 1998 to 19,500 in 2009.[103] The prevalence of tuberculosis per 100,000 people has decreased slightly from 51 in 1990 to 48 in 2010.[110] The number of people receiving free antiretroviral therapy increased from 1,059 in 1999 to 25,657 in 2008. Spending on HIV has exceeded US $230 million.[102] The tuberculosis treatment success rate has increased from 68% in 1994 to 83% in 2008.[105]

In terms of malaria, during the period lasting from 1995 to 2004, the malaria mortality rate ranged from 0.10-0.36 deaths per 100,000 people. Almost a third of these deaths were children.[111] The Venezuelan Ministry of Health is intensifying efforts to reach all sectors of the population in order to reduce the prevalence of diseases such as HIV/AIDS and malaria.[112]

Goal 7: Ensure environmental sustainability[edit]

As the environment continues to be one of the most prominent topics in government today, Venezuela has taken an active approach to achieving the seventh Millennium Development Goal. The Ministry of People’s Power for the Environment will receive $675 million from the 2012 national budget to develop policies, strategies, plans, and actions aimed at boosting environmental conservation and education.[103] Roughly 73% of Venezuela’s territory is covered with natural areas under protection. The country ranks second behind Ecuador in the amount of protected area.[113] In 2006, President Hugo Chávez launched Misión Arbol, a program that attempts to combat the deforestation of Venezuela.[114] Through this project, 22,000 acres of trees have been planted.[102]

Venezuela has one of the highest biodiversity richness levels in the world. The nation is ranked in the top 10 countries with the highest biodiversity on the planet.[115] Venezuela has some known 2,356 known species of amphibians, birds, mammals, and reptiles. Out of these, 13.3% are endemic, meaning they exist in no other country, and 5.6% are threatened. There are over 21,000 species of plants in the country, and 38.0% of them are endemic.[116]

The proportion of people with sustainable access to safe drinking water increased from 68% in 1990 to 92% in 2007, well above the target of 84%.[100] The proportion of the population using improved sanitation facilities increased to 91 in 2005 from 82 in 1990.[105]

Goal 8: Develop a global partnership for development[edit]

In dealing with debt, Venezuela's debt service as a percentage of exports and net income from abroad has decreased from its 1990 level of 19.6% to 10.5% in 2004.[117]

Venezuela has been at the forefront of making available the benefits of new technologies to its citizenry. In 1990, the number of Internet users was minimal. By 2010, 35.63% of Venezuelans were Internet users.[105] In fact, the number of Internet subscribers has increased sixfold.[102] Programs such as the National Technological Literacy Plan, which provides free software and computers to schools, have assisted Venezuela in meeting this goal.[118]

The number of fixed telephone lines per 100 inhabitants was 7.56 in 1990. The number increased to 24.44 in 2010.[105] In 2000, 2,535,966 Venezuelans had landline telephones. By 2009, this had increased to 6,866,626.[98]

The Bolivarian government has also started an aerospace program and sent into orbit the first Venezuelan satellite, called Simón Bolívar.[103]

See also[edit]

Sources[edit]

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.

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

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External links[edit]