Once considered an emerging market for investors, the Venezuelan economy has fallen off a cliff since Hugo Chavez has come to power. Since the discovery of oil in the early 20th century,Venezuelahas been one of the world’s leading exporters of oil. Previously an underdeveloped exporter of agricultural commodities such as coffee and cocoa, oil quickly came to dominate exports and government revenues. The recovery of oil prices after 2001 boosted the Venezuelan economy and facilitated social spending, although the fallout of the 2008 global financial crisis saw a renewed economic downturn. With a population estimated at 29,105,632 in 2010 by the Venezuelan government, the Venezuelan market is of decent size. However, the population is not the richest in comparison to the other countries we have profiled. Since, the IMF measuredVenezuela’s nominal GDP per capita at $9,773. The IMF estimates the total nominal GDP of Venezuela to be $285.214 billion in 2010.
Venezuela has a mixed economy dominated by the petroleum sector, which accounts for roughly a third of GDP, around 80% of exports and more than half of government revenues. It suffers high levels of corruptionOnce considered an emerging market for investors, the Venezuelan economy has fallen off a cliff since Hugo Chavez has come to power. Since the discovery of oil in the early 20th century,Venezuelahas been one of the world’s leading exporters of oil, according to the Corruptions Perceptions Report in 2011. About 30% of the population of the country lives on less than US $2 per day, as reported by the UN Development Program. Venezuela also has the least expensive petrol in the world because the consumer price of petrol is so heavily subsidized. Manufacturing contributed 17% of GDP in 2006. Venezuela manufactures and exports heavy industry items such as steel, aluminum 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 food stuffs. 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.Venezuela has some of the largest oil and natural gas reserves in the world, and consistently ranks among the top ten crude oil producers in the world, according to the Energy Information Administration.
A 2010 IMF study qualified as “delayed and weak” the economic recovery ofVenezuela in comparison with other countries of the region that had emerged from the world economic crisis “comparatively well” and were now recovering to a “strong rhythm”. In fact, the Venezuelan economy contracted by 2.8% in 2010, according to the Voice of America news. The Venezuelan economy shrank 5.8 percent in the first three months of 2010 compared to the same period last year and now has the highest inflation rate in Latin America—30.5 percent, according to a report Bloomberg. President Hugo Chavez has expressed optimism thatVenezuela will soon emerge from recession, despite the International Monetary Fund forecasts showing thatVenezuela will be the only country in the region to remain in recession this year.
Overall, currently Venezuela seems like a basket case country to invest in or do trade in. The current government under Hugo Chavez has systematically nationalized or seized private businesses in various industries in order to bring various industries under the control of the government. As a result, private sector investment has largely dried up and many businesses and investors have either shut down or fled abroad. So long as the government continues to follow the “Bolivarian Revolution” as Chavez puts it, the Venezuelan economy will continue to suffer, and provide little opportunity for the private sector.