VENEZUELAS ECONOMY AS A WHOLE ECONOMY Venezuela is rich in oil and other mineral resources. Its per capita income is about average for Latin America. The country’s public external debt (excluding the obligations of the central bank and PDVSA, the parastatal oil company) stood at approximately $26.5 billion in 1996. The economy grew by 4.5% in real terms in 1997. Consumer prices rose only 37.6% in 1997 compared to the record 103% of 1996. The government is hoping for inflation of 24% during 1998. The Venezuelan economy is making a comeback under the Agenda Venezuela, propelled primarily by the opening of the petroleum sector to foreign investment (the apertura), a far-reaching privatization program, and plans to reform public sector operations.
Oil prices have shown a continual decline since 1996, which is serving to erode the budgetary surplus from 4.5% in 1996 to an estimated 1.5% in 1997. In July 1996, the Venezuelan Government and the IMF formally announced a $1.4 billion stand-by loan. The World Bank and Inter-American Development Bank are also contributing to efforts to promote fundamental structural reforms–in the judiciary, electoral system, and social security/severance pay programs. Petroleum and Other Resources Venezuela’s economy is dominated by petroleum, and the country is a founding member of the Organization of Petroleum Exporting Countries (OPEC). In 1997, this sector accounted for more than one-quarter of GDP, almost three-quarters of export earnings, and almost half of central government’s revenues. Most of Venezuela’s energy exports consist of crude oil, but the country is also the United States’ leading foreign source of refined petroleum products.
The Government of Venezuela has opened up much of the hydrocarbon sector to foreign investment, promoting the establishment of massive new petrochemical joint ventures and reactivation of inactive fields. The Venezuelan petroleum corporation and foreign oil companies signed eight contracts for exploration and production joint ventures in July 1996. These contracts are expected to generate over $15 billion in foreign investment. A range of other natural resources, including iron ore, diamonds, coal, bauxite, hydroelectric power, gold, and nickel are in various stages of development. In 1996, CVG, the state-owned mining firm, announced its first joint venture with a foreign company to develop the Las Cristinas gold mine.
Congress is also considering legislation which would update Venezuela’s 1945 mining law in an effort to encourage greater private sector participation in mineral extraction. Manufacturing, Agriculture, and Trade Manufacturing contributed 15.6% of GDP in 1997. The manufacturing sector grew slightly (2.2%) in direct contrast with the contraction in 1996. Venezuela manufactures and exports steel, aluminum, textiles, apparel, beverages, and foodstuffs. It also produces cement, tires, paper, and fertilizers, and assembles cars for both the domestic and export market.
The Agenda Venezuela envisions the privatization of a range of state-owned enterprises, including banks. Agriculture accounts for 4% of GDP, 12% of the labor force, and 24% of Venezuela’s land area. Venezuela exports beef, rice, coffee, and cocoa. However, the country is not self-sufficient in most areas of agricultural production and imports about 60% of food consumed. In 1996, U.S. firms exported approximately $475 million of agricultural products including wheat, soybeans, corn, soymeal, and cotton to Venezuela, our third-largest agricultural export market in Latin America. The U.S. usually accounts for slightly more than a third of Venezuela’s food imports. Thanks to petroleum exports, Venezuela usually posts a trade surplus.
In recent years, non-traditional (i.e. non-petroleum) 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 the first 10 months of 1997, the United States registered $3.0 billion in exports (about 38% of Venezuela’s total) and purchased $12.9 billion in imports (about 55% of Venezuela’s total). Venezuela’s trade with other Andean Pact members, particularly Colombia, is growing in importance. Labor and Infrastructure Venezuela’s labor force of about 8.8 million is growing faster than total employment.
At the end of 1997, official unemployment was 12.8%, but unofficial estimates are higher. The public sector employs 14% of the work force, while less than 1% work in the capital-intensive oil industry. About 25% of the labor force is unionized. Unions are particularly strong in the public sector. Venezuela has an extensive road system. With the exception of air service, transportation and communications have failed to keep pace with the country’s needs.
Much of the infrastructure suffers from inadequate maintenance. Caracas has a modern subway, but only one functioning rail line serves the rest of the country. Economical indicators GDP (1997 est.): $72.1 billion. Growth rate (1997): 4.5%. GDP per capita: $3,164.
Natural resources: Petroleum, natural gas, coal, iron ore, gold, other minerals, hydroelectric power, bauxite. Agriculture (4.7% of GDP): Products–rice; coffee; corn; sugar; bananas; dairy, meat, and poultry products. Petroleum industry (27.6% of GDP): Oil refining, petrochemicals. Manufacturing (15.6% of GDP): Types–iron and steel, paper products, aluminum, textiles, transport equipment, consumer products, and petroleum refining. Trade (1997 est.): Exports–$23.7 billion: petroleum ($18.3 billion), iron ore, coffee, steel, aluminum, cocoa.
Major markets–U.S. (Jan.-Oct.1997, 55%), Japan, Germany, Colombia, Netherlands, Brazil, Italy. Imports–$10.6 billion: machinery and transport equipment, manufactured goods, chemicals, foodstuffs. Major suppliers–U.S. (Jan.-Oct. 1997, 38%), Japan, Germany, France, Canada, Italy, Colombia, Brazil.
Exchange rate (Dec. 1997): 504.25 bolivars=U.S.$1.