Economy of Venezuela

The petroleum sector dominates the economy, accounting for roughly a third of GDP, around 80% of export earnings, and more than half of government operating revenues. The sector operates through the government-owned Petroleos de Venezuela, which among other things owns the US Citgo distributor, which has 14,000 service stations in the US.

Venezuela also depends highly on the agricultural sector. Venezuela has the potential to export coffee and cocoa on a grand scale.

Venezuela is one of the five founding members of OPEC. The idea itself (an international oil cartel) was the initiative of Juan Pablo Perez Alfonzo, who proposed it as a response to low domestic and international oil prices in August 1960. Since December 2005, Venezuela is a member of Mercosur, joining with Brazil, Argentina, Paraguay and Uruguay, although it has yet to finalize policy changes in order to gain voting rights.

Although a manufacturing sector producing consumer goods exists, the economy of Venezuela is still based on oil. Since 1950s to the beginning of 1980s the Venezuelan economy was one of the strongest in South America. This continuous growth during that period attracted many immigrants. Since the collapse of the oil price in mid 1980s the economy has mainly contracted. The positive sign of the economy has been a balance of payments surplus due to the strong oil export.

In the 1950s, during Jimenez reign, Venezuela enjoyed remarkably high GDP growth, so in the late 1950s, Venezuela’s real GDP per capita was close to West Germany’s. However, democracy established in 1958 didn’t bring economic prosperity: on the contary, GDP growth reduced, and ultimately throughout many years GDP even declined.

As mr.Illarionov has pointed out in his article , the ‘triumph’ of Venezuela’s state capitalism (successive governments had carried out wide-range nationalisation campaign from 1958 on) effectively turned out debacle: The “patriotically motivated” economic policy proved devastating as Venezuela slid into its deepest economic crisis. By 2004 its per capita GDP was 37 percent lower than half a century before that. The degrading impact of state command in the economy spread beyond government institutions - it caused the degeneration of Venezuelan society, affecting two generations of people who grew up during state capitalism. Today, Venezuela has no political forces capable of leading it out of the historical deadlock.