IV.

Economy

The economy of Venezuela is built upon the nation’s rich petroleum and mineral resources. However, its reliance on petroleum leaves the nation vulnerable to fluctuations in world markets. The government has made numerous efforts to diversify the economy but without success. At the beginning of the 21st century, the economy suffered from inflation and high unemployment and underemployment. In addition political instability had a negative effect on the economy. Opposition to President Hugo Chávez led to a general strike in late 2002 and early 2003 that worsened the country’s already weak economy.

Despite the strike that slowed oil production in the early 2000s, oil revenues rose as a result of an increase in oil prices. Chávez pledged to spend the money on social welfare, including health and education. With the increase in oil revenues beginning in 2004, Venezuela’s economy improved. However, critics said government spending was out of control.

The national budget in 2005 included revenues of $36.5 billion and expenditures of $41.1 billion. The gross domestic product (GDP), the total of all goods and services produced within a country, in 2006 was $181.9 billion.

A.

Agriculture

Agriculture plays a much smaller role in Venezuela’s economy than in the economies of other South American countries. Before the discovery of oil, agriculture provided the country’s major exports, including coffee, cacao, cattle, and hides. Oil production, however, led to years of neglect of the agricultural sector, and by the 1950s the country was importing more than one-third of its food. In 1960 the government passed the Agrarian Reform Law, which was aimed at expanding and diversifying agricultural production. For a time food production grew rapidly, but by the mid-1970s rapid population growth outpaced the growth in agricultural production. In addition, much of the best farmland remained in the hands of large landowners and often lay idle, while those who need to earn a living from the land worked the poorer farmland. Today, Venezuela still must import much of its food. The United States is a major supplier.

Much of the best farmland in Venezuela is concentrated in the hands of a few large landowners, while those who need to earn a living from the land are left with poorer land. The lack of arable land for the poor has led to heavy migration from rural areas to the cities. In 2005 Venezuela’s president initiated plans to increase food production by breaking up the large estates. The first step was to review land use. Ranchers objected to inspections of their estates and declared the measures unconstitutional.

Agriculture, including forestry and fishing, employed 11 percent of the workforce; in 2003 it contributed 5 percent of the GDP. The principal crops include sugarcane; fruits such as bananas, plantains, and oranges; maize; rice; and cassava. Livestock raising is carried on chiefly on the Llanos and east of Lake Maracaibo.

B.

Forestry and Fishing

In 2005, 52 percent of Venezuela was forested. However, the country’s timber industry is underdeveloped largely because of the inaccessibility of the forest areas. Timber is used mainly as fuel and by the building, furniture manufacturing, and paper industries.

The rich fishery resources of Venezuela include a wide variety of marine life. The fish catch in 2005 was 492,210 metric tons. The country’s fish catch includes tuna, sardines, herrings, shrimp, and shellfish. Important pearl fisheries are located off Margarita Island.

C.

Mining

Petroleum, located in the Maracaibo Basin and in the eastern part of the country, dominates the Venezuelan economy. Crude and refined oil are the main source of government revenue and account for about one-third of the GDP. In 2004 Venezuela produced almost 1 billion barrels. Much of its oil is exported to the Netherlands Antilles for refining. Venezuela is a founding member of the Organization of Petroleum Exporting Countries (OPEC).

The Venezuelan government nationalized the petroleum industry in 1976, although private investment and foreign participation has been permitted since 1992. In 2007 the country had petroleum reserves estimated at 80 billion barrels.

Venezuela also is a major producer of natural gas; output in 2003 was 29.7 billion cubic meters (1.05 trillion cubic feet). Venezuela has tapped its vast reserves of bitumen to produce liquid coal, an emulsion of bitumen and water principally for use in power plants.

Other minerals commercially exploited in Venezuela include iron ore, bauxite, diamonds, gold, silver, platinum, coal, salt, copper, tin, asbestos, phosphates, titanium, and mica. In 2000 the country adopted new mining regulations intended to encourage greater private-sector and foreign investment in the mining sector. But growth failed to follow, largely because of labor unrest.

D.

Manufacturing

The government of Venezuela has given high priority to the development of heavy industry since the 1960s. It established a significant steel industry and began the production of aluminum and petrochemicals, especially nitrogen-based fertilizers. In the late 1970s, a significant portion of the country’s oil revenue was invested in these state-owned industries. Ciudad Guayana, a city founded in an area rich in natural resources, became a major industrial center. But petroleum revenues dropped in the 1980s, as did investment in industry. By the late 1990s, the manufacturing sector was contracting, smaller firms shut down, and jobs were lost. Political instability in the early 2000s added to the problems of the manufacturing sector.

The leading manufactured goods of Venezuela include refined petroleum and petroleum products, steel, aluminum, fertilizer, cement, tires, motor vehicles, processed food, beverages, clothing, and wood items.

E.

Tourism

Venezuela has a number of tourist attractions, including its long Caribbean coastline, the Andes Mountains, and the world’s highest waterfall (Angel Falls). However, its tourism industry remains largely undeveloped. Most of the country’s tourists visit the beaches on Margarita Island. More adventurous visitors seek out the wildlife and natural beauty of the Orinoco Delta and the interior highlands and tropical rainforests.

F.

Energy

In 2003, 68 percent of Venezuela’s electricity was produced in hydroelectric facilities, particularly at the Guri Dam, a major installation on the Caroní River. Venezuela generated 87 billion kilowatt-hours of electricity in 2003.

G.

Currency and Banking

The basic unit of currency is the bolivar, consisting of 100 centimos (2,147 bolivars equal U.S.$1; 2006 average). The Banco Central de Venezuela, founded in 1940, is the government banking agent, the sole bank of issue, and the clearinghouse for commercial banks. The country’s principal stock exchange is in Caracas.

H.

Foreign Trade

The principal exports of Venezuela are petroleum and petroleum products, which together account for 82 percent of foreign sales. Other exports include bauxite and aluminum, steel, chemicals, agricultural products, and basic manufactures. Total exports were estimated at $25 billion in 2003.

Main imports include raw materials, machinery, transportation equipment, chemicals, foodstuffs, and basic manufactures. Imports were estimated at $8.4 billion in 2003.

Principal trading partners for exports are the United States, The Netherlands (primarily petroleum to the Netherlands Antilles for refining), Brazil, and Colombia. Chief sources of imports are the United States, Colombia, Brazil, Japan, and Mexico.

Venezuela is a member of five international trade organizations, the Andean Community, Latin American Integration Association (LAIA), Mercosur, Group of Three, and the Association of Caribbean States (ACS). These organizations work toward improving conditions within member countries by increasing economic integration and international trade.

I.

Transportation

Roads are the principal means of transport for goods and people in Venezuela, and the country has an extensive road network. In 1999 Venezuela had 96,155 km (59,748 mi) of roads, of which 34 percent were paved. Highway density is greatest in the north central area.

The railway network, by contrast, is poorly developed. In 2005 the country had only 682 km (424 mi) of operated railroad track, principally a line from Puerto Cabello to Barquisimeto. The leading seaports of Venezuela include La Guaira, Puerto Cabello, and Maracaibo. Transport on interior waterways, particularly the Orinoco River, also is important.

The main international airport is located in Caracas with others located in major cities such as Maracaibo and Barcelona. Venezuela has a number of passenger airlines based in the country.

J.

Communications

In 2005 Venezuela had some 136 telephone lines for every 1,000 people. The number of mobile cellular phones in use increased substantially during the 1990s because of dissatisfaction with the country’s phone system. An estimated 189 television sets and 301 radios were in use for every 1,000 residents. Influential daily newspapers included Últimas Noticias, El Mundo, El Universal, and El Nacional, all published in Caracas.

K.

Labor

In 2006 the employed labor force of Venezuela was 13.3 million people. Some 11 percent of the workforce was employed in agriculture, 69 percent in services, and 20 percent in industry, including manufacturing, mining, and construction. However, Venezuela suffers from high unemployment and underemployment; in 2003, 17 percent of the labor force was unemployed. Organized labor in Venezuela consists of trade unions and peasant leagues. The largest and most powerful organization is the Confederation of Venezuelan Workers, with a membership of about 2.5 million.