Economic trends
With one of the largest oil reserves in the world (314 billion barrels), Venezuela is the fourth largest Latin-American economy, after Brazil, Mexico and Argentina.It depends excessively on the fluctuations in oil prices. Venezuela's economy was strongly affected by the global economic crisis, the growth of its GDP contracted to -3.3% in 2009 and -1.3% in 2010. Growth again became positive in 2011, with 2.8%.
The Venezuelan growth model rests on two pillars: domestic consumption (72% of GDP) and high public spending (estimated at 32% of the GDP for 2011), oriented towards redistributing the revenues from oil in favor of the least privileged population groups.
In this context, the priority of the government is to get Venezuela out of the crisis. Facing a high increase in inflation (27% in 2010 and 26% in 2011), Chavez set up a double exchange rate and devalued the national currency by almost 50%. The result of this was the emergence of a parallel market in which the USD is exchanged at very high rates. The government must also deal with the conjunction of two major sectoral crises: lack of water in the country and the production shortfall in the electricity sector, generated by a years-long lack of adequate investment. The debt owed to China, who became a major trading partner, has risen sharply in recent years
The economic model of the Venezuelan economy combines state-managed oil rent economy, mass consumption and increasing socialization of the means of production. The country's wealth is unevenly distributed within the population. The unemployment rate reached 8.3% in 2011 and nearly 40% of the population lives below the poverty line.
Main branches of industry
The agricultural sector of Venezuela contributes to 16.9% of the GDP and employs about 9% of the active population. The main agricultural products of the country are: corn, wheat, soya, sugar cane, rice, cotton, bananas, vegetables, coffee, beef and pork meats, milk, eggs and fish. Venezuela benefits from important natural resources: oil, gas, gold and silver mines, bauxite and diamonds.
According to the OPEC, proven oil reserves of the country reach 296.50 billion barrels, which makes it a world leader ahead of Saudi Arabia.
The industrial sector represents almost 23.6% of the GDP and employs close to 24% of the population. The main industrial activities are oil (controlled by a state's company, oil represents the first natural wealth source of the country), construction material, foodstuffs, textile, iron, steel, aluminum and motor-car assembly.
The services sector represents a little less than 40% of the GDP and employs two thirds of the active population.
International trade
Foreign trade in Venezuela represents about one third of the GDP. The country is trying, above all, to improve and to increase its trade relations with the Latin American zone, the EU and China. The United States remains the first buyer of Venezuelan oil and the largest economic and trading partner. It pays for its purchases at market prices, which represents Venezuela's largest source of cash.
Venezuela exports oil, iron bauxite and aluminum, agricultural products, semi-manufacturing products, vehicles and chemical products. Its main clients are: the United States, China and India.The country imports manufactured and luxury products, machinery, transportation equipment, construction material and pharmaceutical products. Venezuela's main suppliers are: the United States, China and Brazil.
The trade balance of Venezuela is structurally very positive due to its richness in oil. It reflects the significant share of oil in the country's economy, despite the increasing difficulties faced by this sector, following those of the entire business environment in the country. In 2011, oil exports (over 32% of GDP) increased in value but decreased in volume. This decrease, continuous since 2005, reflects the orientation of a growing part of oil revenues towards the financing of social projects and policies (domestic public expenditure and in support of allies abroad) at the expense of production investment. Non-oil exports, which accounted for 35% of the total in the 1990s, have been considerably reduced (less than 6% in 2011), a consequence of the weakening of the productive apparatus and of an increased reliance on oil revenues.
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Last updates: May 2012
