Economy of Venezuela

Theeconomy of Venezuelais based primarily onpetroleum,as the country holds the largest crude oil supply in the world.Venezuela was historically among the wealthiest economies in South America, particularly from the 1950s to 1980s.During the 21st century, under the leadership of socialist populistHugo Chávezit saw great increase in GDP,but under his successorNicolás Maduro, the Venezuelan economy has collapsed, prompting millions of citizens to flee Venezuela. GDP has fallen by 80 percent in less than a decade.The economy is characterized by corruption, food shortages, unemployment, mismanagement of the oil sector, and since 2014,hyperinflation.As of 2024, inflation has stabilized at 59.61%.
Venezuela is the25th largest producer of oil in the worldand the 8th largest member ofOPEC.Venezuelaalso manufactures and exports heavy industry products such assteel,aluminum, andcement. Other notable manufacturing includeselectronicsandautomobilesas well asbeveragesandfoodstuffs.Agriculture in Venezuelaaccounts for approximately 4.7% of GDP, 7.3% of the labor force and at least one-fourth of Venezuela's land area.Venezuela exportsrice,corn,fish, tropicalfruit,coffee,porkandbeef. Venezuela has an estimated US$14.3 trillion worthof natural resources and is not self-sufficient in most areas ofagriculture. Exports accounted for 16.7% of GDP and petroleum products accounted for about 95% of those exports.
Since the 1920s, Venezuela has been arentier state, offering oil as its main export.From the 1950s to the early 1980s, the Venezuelan economy experienced a steady growth that attracted manyimmigrants, with the nation enjoying the higheststandard of livingin Latin America. The situation reversed whenoil prices collapsed during the 1980s. Hugo Chavez became president in 1999 and implemented a form of socialism (theBolivarian Revolution) that resulted in the collapse or nationalization of many Venezuelan businesses, and purged the state-runPDVSAoil company, replacing thousands of workers with political supporters with no technical expertise.The Chavez administration also imposed stringent currency controls in 2003 in an attempt to preventcapital flight.These actions resulted in a decline in oil production and exports and a series of stern currency devaluations.
Price controlsandexpropriationof numerous farmlands and various industries are government policies along with a near-total freeze on any access to foreign currency at reasonable "official" exchange rates. These have resulted in severeshortages in Venezuelaand steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country as has been the case with several technological firms and most automobile makers.
Venezuela's economy has been in a state of totaleconomic collapsesince2013.In 2015, Venezuela had over 100% inflation—the highest in the world and the highest in the country's history at that time.According to independent sources, the rate increased to 80,000% at the end of 2018withVenezuela spiraling into hyperinflationwhile the poverty rate was nearly 90 percent of the population.On 14 November 2017,credit rating agenciesdeclared that Venezuela was indefaultwith its debt payments, withStandard & Poor'scategorizing Venezuela as being in "selective default".
TheUnited Stateshas been Venezuela's most important trading partner despite the strained relations between the two countries. American exports to Venezuela have included machinery, agricultural products, medical instruments and cars. Venezuela is one of the top four suppliers of foreign oil to the United States. About 500 American companies are represented in Venezuela.According to theCentral Bank of Venezuela, between 1998 and 2008 the government received around US$325 billion through oil production and exports in general.According to theInternational Energy Agency(as of August 2015), the production of 2.4 million barrels per day supplied 500,000 barrels to the United States.A report published by Transparencia Venezuela in 2022 estimated that illegal activities in the country made up around 21% of its GDP.
Venezuela was “once among South America's wealthiest countries” before the economic meltdown under Maduro regime.
“The formerly rich petro-state has seen GDP fall by 80% in less than a decade, driving some seven million of its citizens to flee. Most Venezuelans live on just a few dollars a month, with the health care and education systems in total disrepair and biting shortages of electricity and fuel” as of 2024, according toVOA(report fromAFP).
A report published by Transparencia Venezuela in 2022 estimated that illegal activities in the country made up around 21% of its GDP. According to the report, drug, oil and gold trafficking, as well as illegal activities in ports and customs had generated over 9.4 billion dollars for organized crime protected by corrupt officials. In 2021, gold extraction generated around 2.3 billion dollars, of which the State received only 25%.
By 2023, the economic situation of Venezuela improved, with the economy growing by 15% and extreme poverty rates decreasing, thanks to a liberalized economy and more access to theUnited States dollar. However, inequality is high, with wealthy Venezuelans making more than 70 times the poorest ones.In 2024 inflation cooled to 1.7% monthly after injection ofChevrondollars—the lowest in a decade.
After oil was discovered in Venezuela in 1922 during theMaracaibostrike, Venezuela's dictatorJuan Vicente Gómezallowed Americanoil companiesto write Venezuela's petroleum law.In 1943,Standard Oil of New Jerseyaccepted a new agreement in Venezuela based on the 50–50 principle, described as "a landmark event".Even more favorable terms were negotiated in 1945, after a coup brought to power a left-leaning government that includedJuan Pablo Pérez Alfonso.
From the 1950s to the early 1980s, the Venezuelan economy, which was buoyed by high oil prices, was one of the strongest and most prosperous in South America. The continuous growth during that period attracted manyimmigrants.
In 1958, a new government, again including Pérez Alfonso, devised a plan for an international oilcartel, that would becomeOPEC.
DuringPérez Jiménez'dictatorship from 1952 to 1958, Venezuela enjoyed remarkably highGDPgrowth, so that in the late 1950s Venezuela's realGDP per capitaalmost reached that of Ireland or West Germany. Albeit, West Germany was still recovering fromWW2destruction of German infrastructure. In 1950, Venezuela was the world's 4th wealthiest nation per capita.However,Rómulo Betancourt,presidentfrom 1959 to 1964, inherited from 1958 to 1959 onward an enormous internal and external debt caused by rampant public spending. He managed to balance Venezuela's public budget and initiate anagrarian reform.
Buoyed by a strong oil sector in the 1960s and 1970s, Venezuela's governments were able to maintain social harmony by spending fairly large amounts on public programs including health care, education, transport and food subsidies. Literacy and welfare programs benefited tremendously from these conditions.The first tenure ofCarlos Andrés Pérezfrom 1974 to 1979 benefited from the1970s energy crisis, tripling the amount of public spending and nationalizing the oil industry, establishingPDVSA.He also increased government debt significantly, nationalized the iron industry, created new state-owned companies, nationalized the central bank and replaced its board with cabinet members, eliminating the bank's independence as a result. His government was also allowed to establish the first minimum wage and salary increases with anenabling actapproved by theNational Congress. Pérez was accused of excessive and disorderly public spending.Venezuela's external debt grew from $2 billion in 1972 to $33 billion by 1982.
Venezuela's economic situation was reversed whenoil prices collapsed during the 1980s.Luis Herrera Campinswas elected just as the oil prices collapsed, with the economy experiencing turmoil throughout his tenure.The economy contracted andinflationlevels (consumer price inflation) rose, remaining between 6 and 12% from 1982 to 1986.Policies implemented by Herrera to reduce inflation and reverse increased government spending were not effective, resulting with the election ofJaime Lusinchiin the1983 Venezuelan general election.The Lusinchi administration continued strictforeign exchange controlsand excessive spending while oil prices continued to decrease.Lusinchi focused the nation's funds on paying foreign debtors, sending $15 billion out to international lenders from 1985 to 1988 to tend the remaining $32 billion of debt.By the end of his presidency, the public began to suffer from inflated prices and shortages of basic goods.
Carlos Andrés Pérezbased his campaign for the1988 Venezuelan general electionin his legacy of abundance during hisfirst presidential periodand initially rejected liberalization policies.Venezuela's international reserves were only US$300 million at the time of Pérez' election into the presidency; Pérez decided to respond to the debt, public spending, economic restrictions andrentier stateby liberalizing the economy.He announced atechnocraticcabinet and a group of economic policies to fix macroeconomic imbalances known asEl Gran Viraje[es](English:The Great Turn), called by detractors asEl Paquetazo Económico(English:The Economic Package). Among the policies there was the reduction of fuel subsidies and the increase of public transportation fares by thirty percent (VEB 16Venezuelan bolívares, or US$0.4).The increase was supposed to be implemented on 1 March 1989, but bus drivers decided to apply the price rise on 27 February, a day before payday in Venezuela. In response, protests and rioting began on the morning of 27 February 1989 inGuarenas, a town near Caracas;a lack of timely intervention by authorities, as theCaracas Metropolitan Police[es]was on alabor strike, led to the protests and rioting quickly spreading to the capital and other towns across the country.
By late 1991, as part of the economic reforms, Carlos Andrés Pérez' administration had sold three banks, a shipyard, two sugar mills, an airline, a telephone company and a cell phone band, receiving a total of US$2,287 million.The most remarkable auction wasCANTV's, a telecommunications company, which was sold at the price of US$1,885 million to the consortium composed of AmericanAT&TInternational, General Telephone Electronic and the VenezuelanElectricidad de CaracasandBanco Mercantil. The privatization ended Venezuela's monopoly over telecommunications and surpassed even the most optimistic predictions, with over US$1,000 million above the base price and US$500 million more than the bid offered by the competition group.By the end of the year, inflation had dropped from 84% in 1989 to 31%,Venezuela's international reserves were now worth US$14,000 million and there was an economic growth of 9% (called as an "Asian growth"), the largest in Latin America at the time.While foreign debtors were repaid and the economy grew, by 1992, the majority of economic benefits were experienced by the upper class while middle to lower classes faced increased poverty and high unemployment rates between ten and forty percent.
Overreliance on oil exports and a fractured political system without parties agreeing on policies caused many of the problems.By the mid-1990s, Venezuela under PresidentRafael Calderasaw annual inflation rates of 50–60% from 1993 to 1997, with the country suffering abanking crisis. In 1998, the economic crisis had grown even worse. Per capita GDP was at the same level as 1963 (after adjusting 1963 dollar to 1998 value), down a third from its 1978 peak; and the purchasing power of the average salary was a third of its 1978 level.
Hugo Chávezwaselected President in December 1998and took office in February 1999. From 1999 to the end of 2012, when Hugo Chavez health decayed preventing him from fulfilling anypresidentialduties,theGDPgrew from 97.52 billion dollars to 372.59 billion dollars.In the same period, inflation remained stable around 20% year.
From 1999 In 2000, oil prices soared, offering Chávez funds not seen since Venezuela's economic collapse in the 1980s.Chávez implemented economic policies that leaned towardsocial democracy, utilizing oil revenues to fund social programs. These policies increased Venezuela's economic reliance on highoil prices.
During the first four years of Chávez's presidency, the economy initially grew between 1999 and 2001 but contracted from 2001 to 2003, returning to GDP levels similar to those of 1997. The early decline was influenced by low oil prices and later exacerbated by the events surrounding the2002 coup attemptand the2002–2003 general strike. Additional contributing factors includedcapital flightand reducedforeign investment. GDP decreased from 50.0 trillion bolívares in 1998 to 42.4 trillion bolívares in 2003 (measured in constant 1998 bolívares).
The hardest-hit sectors in the worst recession years (2002–2003) wereconstruction(−55.9%),petroleum(−26.5%),commerce(−23.6%) andmanufacturing(−22.5%). The drop in the petroleum sector was caused by adherence to the OPECquotaestablished in 2002 and the virtual cessation of exports during the PdVSA-led general strike of 2002–2003. The non-petroleum sector of the economy contracted by 6.5% in 2002. The bolívar, which had been suffering from serious inflation and devaluation relative to international standards since the late 1980s,stabilized around 20% inflation.
DuringChávez's presidency,inflationwas significantly reduced and maintained at an average of around 20%, marking a substantial improvement compared to the late 1980s and the turbulent 1990s, when inflation reached its highest point at 100% in 1996. The inflation rate, as measured by theconsumer price index, stood at 35.8% in 1998, dropped to a low of 12.5% in 2001, and rose to 31.1% in 2003.In response to pressures on thebolívar, declininginternational reserves, and the economic impact of the oil industry work stoppage, theMinistry of Financeand thecentral banksuspended foreign exchange trading on January 23, 2003. Shortly afterward, the government establishedCADIVI, a currency control board, on February 6, 2003. CADIVI regulated foreign exchange procedures and set the exchange rate at 1,596 bolívares per US dollar for purchases and 1,600 bolívares per US dollar for sales.
Thehousing marketin Venezuela shrunk significantly with developers avoiding Venezuela due to the massive number of companies who have had their property expropriated by the government.According toThe Heritage FoundationandThe Wall Street Journal, Venezuela had the weakest property rights in the world, scoring only 5.0 on a scale of 100, with expropriation without compensation being common.The housing shortage in Venezuela was significant enough that, in 2007, a group of squatters occupied theCentro Financiero Confinanzas, an unfinished economic complex originally intended to represent the country's economic growth.
The Venezuelan economy contracted by 5.8% in the first quarter of 2010 compared to the same period in 2009and recorded the highest inflation rate inLatin Americaat 30.5%.President Chávez expressed optimism about Venezuela's recovery,although theInternational Monetary Fund(IMF) projected that Venezuela would be the only country in the region to remain in recession that year.The IMF described Venezuela's economic recovery as "delayed and weak" compared to other countries in the region.
Nevertheless, the Venezuelan economy resumed a growth trend in subsequent years, continuing until 2012.The economic downturn began duringNicolás Maduro's leadership, as Chávez’s health declined and he became increasingly unable to govern effectively.
According to themisery indexin 2013, Venezuela ranked as the top spot globally with the highest misery index score.TheInternational Finance Corporationranked Venezuela one of the lowest countries for doing business with, ranking it 180 of 185 countries for itsDoing Business 2013report with protecting investors and taxes being its worst rankings.In early 2013, the bolívar fuerte was devalued due to growingshortages in Venezuela.The shortages included necessities such as toilet paper, milk and flour.Shortages also affected healthcare in Venezuela, with theUniversity of Caracas Medical Hospitalceasing to perform surgeries due to the lack of supplies in 2014.The Bolivarian government's policies also made it difficult to import drugs and other medical supplies.Due to such complications, many Venezuelans died avoidable deaths with medical professionals having to use limited resources using methods that were replaced decades ago.
In 2014, Venezuela entered an economic recession having its GDP growth decline to −3.0%.Venezuela was placed at the top of the misery index for the second year in a row.The Economistsaid Venezuela was "probably the world's worst-managed economy".Citibankbelieved that "the economy has little prospect of improvement" and that the state of the Venezuelan economy was a "disaster".TheDoing Business 2014report by the International Finance Corporation and theWorld Bankranked Venezuela one score lower than the previous year, then 181 out of 185.The Heritage Foundation ranked Venezuela 175th out of 178 countries in economic freedom for 2014, classifying it as a "repressed" economy according to the principles the foundation advocates.According toForeign Policy, Venezuela was ranked last in the world on its Base Yield Index due to low returns that investors receive when investing in Venezuela.In a 2014 report titledScariest Places on the Business FrontiersbyZurich Financial Servicesand reported byBloomberg, Venezuela was ranked as theriskiestemerging marketin the world.Many companies such asToyota,Ford Motor Co.,General Motors Company,Air Canada,Air Europa,American Airlines,Copa Airlines,TAME,TAP AirlinesandUnited Airlinesslowed or stopped operation due to the lack of hard currency in the country,with Venezuela owing such foreign companies billions of dollars.Venezuela also dismantled CADIVI, a government body in charge of currency exchange. CADIVI was known for holding money from the private sector and was suspected to be corrupt.
Venezuela again topped the misery index according to the World Bank in 2015.The IMF predicted in October 2015 an inflation rate of 159% for the year 2015—the highest rate in Venezuelan history and the highest rate in the world—and that the economy would contract by 10%.According to leaked documents from the Central Bank of Venezuela, the country ended 2015 with an inflation rate of 270% and a shortage rate of goods over 70%.
PresidentNicolás Maduroreorganized his economic cabinet in 2016 with the group mainly consisting of leftist Venezuelan academics.According to Bank of America's investment divisionMerrill Lynch, Maduro's new cabinet was expected to tighten currency and price controls in the country.Alejandro Werner, the head of IMF's Latin American Department, stated that 2015 figures released by the Central Bank of Venezuela were not accurate and that Venezuela's inflation for 2015 was 275%. Other forecast inflation figures by IMF and Bank of America were 720%and 1,000% in 2016,Analysts believed that the Venezuelan government has been manipulating economic statistics, especially since they did not report adequate data since late 2014.According to economistSteve HankeofJohns Hopkins University, the Central Bank of Venezuela delayed the release of statistics and lied about figures much like theSoviet Uniondid, with Hanke saying that a lie coefficient had to be used to observe Venezuela's economic data.
By 2016, media outlets said thatVenezuela was suffering an economic collapsewith the IMF saying that it expected it to reach a 500% inflation rate and 10% contraction in the GDP.In December 2016, monthly inflation exceeded 50 percent for the 30th consecutive day, meaning the Venezuelan economy was officially experiencinghyperinflation, making it the 57th country to be added to the Hanke-Krus World Hyperinflation Table.
On 25 August 2017, it was reported that new United States sanctions against Venezuela did not ban trading of the country's existing non-government bonds, with the sanctions instead including restrictions intended to block the government's ability to fund itself.
On 26 January 2018, the government ended the protected, subsidized fixed exchange rate mechanism that was highly overvalued as a result of rampant inflation.TheNational Assembly(led by the opposition) said inflation in 2017 was over 4,000%, a level other independent economists also agreed with.In February, the government launched an oil-backedcryptocurrencycalled thepetro.
Bloomberg'sCafe Con Leche Indexcalculated the price increase for a cup of coffee to have increased by 718% in the 12 weeks before 18 January 2018, an annualized inflation rate of 448,000%.The finance commission of the National Assembly noted in July 2018 that prices were doubling every 28 days with an annualized inflation rate of 25,000%.
The country was heading for aselective defaultin 2017.In early 2018, the country was indefault, meaning it could not pay its lenders.
On 24 August 2017 President Trump imposed sanctions on the state debt of Venezuela which ban to make transactions with state debt of Venezuela including the participation in debt restructuring.
On 13 November 2017 the technical default period ended and Venezuela did not pay coupons on its dollar eurobonds. This caused a cross default on other dollar bonds. On 30 November ISDA committee consisting of 15 biggest banks admitted default on state debt obligations what in its turn entailed payments on CDS.According toCbonds, nowadays there are 20 international Venezuelan bonds which are recognized in default. The overall amount of defaulted obligations is equal to 36 billion dollars.
Under the tenures of Hugo Chávez and his successor Nicolás Maduro, many businesses abandoned Venezuela. In 1999, there were 13,000 companies in the country. By 2016, less than a third of companies remained in Venezuela, with only 4,000 companies operating in the nation.
Venezuela has the world's largest proven oil reserves, totaling 302.81 billion barrels at the end of 2017.The country is a major producer ofpetroleumproducts, which remain the keystone of the Venezuelan economy. The International Energy Agency shows how Venezuela's oil production has fallen in the last years, producing only 2,300,000 barrels (370,000 m) daily, down from 3.5 million in 1998. However, the oil incomes will double its value in local currency with the recent currency devaluation.Venezuela has largeenergy subsidies. In 2015, the cost ofpetrolwas just US$0.06 per gallon, costing 23% of government revenues.In February 2016, the government finally decided to raise the price, but only to 6bolívar(about 60¢ at the official rate of exchange) per litre for premium and just 1 bolívar (10¢) for lower-grade petrol.
A range of other natural resources, includingiron ore,coal,bauxite,gold,nickelanddiamonds, are in various stages of development and production. In April 2000, Venezuela's president decreed a newmininglawand regulations were adopted to encourage greater private sector participation in mineral extraction. During Venezuela's economic crisis, the rate of gold excavated fell 64.1% between February 2013 and February 2014 and iron production dropped 49.8%.In the production ofgold, until 2009 the country produced an annual average between 11 and 12 tons per year. After that, due to the political and economic problems, mining activity plummeted: in 2017 the country only extracted 0.48 ton.
Venezuela mostly utilizeshydropowerresources to supply power to the nation's industries, accounting for 57% of total consumption at the end of 2016.However, persistent drought has severely reduced energy production from hydropower resources.The national electricity law is designed to provide a legal framework and to encourage competition and new investment in the sector.After a two-year delay, the government is proceeding with plans to privatize the various state-ownedelectricitysystems under a different scheme than previously envisioned.
Manufacturing contributed 12% of GDP in 2014.The manufacturing sector is experiencing severe difficulties, amidst lack of investment and accusations of mismanagement.Venezuela manufactures and exportssteel,aluminum, transport equipment,textiles,apparel,beveragesandfoodstuffs. It producescement,tires,paper,fertilizerand assembles cars both for domestic andexportmarkets.
In 2014, General Motors Venezolana stopped automotive production after 65 years of service due to a lack of supplieswhile the Central Bank of Venezuela announced that the shortage rate of new automobiles was at 100%.By the first half of 2016, only 10 vehicles were manufactured per day in Venezuela with production dropping 86%.
In 2017, estimates showed that Venezuela's industrial production fell about 2%.
Agriculture in Venezuelaaccounts for approximately 3% of GDP, 10% of the labor force, and at least a quarter of Venezuela's land area. Venezuela exportsrice,corn,fish, tropicalfruit,coffee,beefandpork. The country is not self-sufficient in most areas ofagriculture. Venezuela imports about two-thirds of its food needs. In 2002, American firms exported $347 million worth of agricultural products, includingwheat,corn,soybeans,soybean meal,cotton,animal fats,vegetable oilsand other items to make Venezuela one of the top two American markets in South America. The United States supplies more than one-third of Venezuela's food imports. Recent government policies have led to problems with food shortages. During times of high oil revenues domestic agriculture was neglected in favor of imported products, but when oil revenues fell and the currency experienced hyperinflation, the cost of acquiring those imported goods became prohibitive for most Venezuelans.
Venezuela produced in 2019:
In addition to smaller productions of other agricultural products. Due to internal economic and political problems, sugar cane production dropped from 7.3 million tons in 2012 to 3.6 million in 2016. Corn production dropped from 2.3 million tons in 2014 to 1.2 million in 2017. Rice fell from 1.15 million tons in 2014 to 498 thousand tons in 2016.
In livestock, Venezuela produced, in 2019: 470 thousand tons ofbeef, 454 thousand tons ofchicken meat, 129 thousand tons ofpork, 1.7 billion liters ofcow's milk, among others. The production of chicken meat decreased progressively, from year to year, from 1.1 million tons in 2011 to 448 thousand tons in 2017. The production of pork fell from 219 thousand tons in 2011 to 124 thousand tons in 2018. The production of cow's milk dropped from 2.4 billion liters in 2011 to 1.7 billion in 2019.
Venezuela is a founding member of theOrganization of the Petroleum Exporting Countries(OPEC), the Organization of Gas Exporting Countries (GECF), theBolivarian Alliancefor the Peoples of Our America (ALBA) and theCommunity of Latin American and Caribbean States(CELAC).Petroleumconstitutes 80% of Venezuela's exports with a value of $22.2 billion in 2017.Thanks to petroleum exports, Venezuela usually posts atrade surplus. From 2005, nontraditional (i.e. nonpetroleum) private sector exports have been declining rapidly. By 2015, they constitute 8% of total exports.The United States is Venezuela's leading trade partner.During 2002, the United States exported $4.4 billion in goods to Venezuela, making it the 25th-largest market for the United States Including petroleum products, Venezuela exported $15.1 billion in goods to the United States, making it its 14th-largest source of goods. Venezuela opposes the proposedFree Trade Area of the Americas.
Since 1998,China–Venezuela relationshave seen an increasing partnership between the government of the Venezuelan President Hugo Chávez and thePeople's Republic of China. Sino-Venezuelan trade was less than $500m per year before 1999 and reached $7.5bn in 2009, making China Venezuela's second-largest trade partner and Venezuela China's biggest investment destination in Latin America. Various bilateral deals have seen China invest billions in Venezuela and Venezuela increase exports of oil and other resources to China. China has demanded payment in oil for its exports to Venezuela because of its unwillingness to accept Venezuelan currency and the inability of Venezuela to pay in dollars or gold.
Under Chávez, Venezuela has also instituted worker-run "co-management" initiatives in whichworkers' councilsplay a key role in the management of a plant or factory. In experimental co-managed enterprises, such as the state-owned Alcasa factory, workers develop budgets and elect both managers and departmental delegates who work together with company executives on technical issues related to production.
In November 2010, workers spent a week protesting outside factories in Valera and Valencia following the expropriation of the American bottle-maker Owens-Illinois.
Labor disputes have continued to increase since the financial crisis in 2008. According to theWorld Economic Forum, Venezuela is ranked as 134th of the 148 countries for economic competitiveness. Many in the private sector attribute these findings to theinflexible labor market.
In recent years, a barrage of pro-worker decrees have been passed. The most significant could be the 2012 labor laws known as the LOTTT. These laws included the virtual ban on dismissal, shorter work week, improved holidays and enhanced maternity benefits. The LOTTT offers job security to most workers after the first month. Employers have reported an absenteeism rate of up to 40% which they blame on the leniency of these labor laws. As expected, employers have been less willing to recruit.
On 17 November 2014, President Maduro issued a decree to increase the minimum salary for all workers by 15%. The decree became effective on 1 December 2014.As part of the May Day celebrations in honor of workers' day, President Maduro announced on 28 April 2015 that the minimum wage would increase 30%; 20% in May and 10% in July, with the newly announced minimum wage for Venezuelans being only about $30 per month at the widely used black market rate.
In September 2017, the National Union of Workers (UNETE) announced that Venezuela had lost 3,345,000 jobs since the election of President Maduro.By December 2017, the number of lost jobs increased by 400,000 to over 3,850,000 lost jobs since the start of Maduro's tenure.
In the 20th century when Venezuela benefitted from oil sales, infrastructure flourished in Venezuela.However, in recent years Venezuela's public services and infrastructure has suffered, especially utilities such as electricity and water.
Venezuela has an extensive road system that was initially created in the 1960s helped aid the oil and aluminum industries.The capitalCaracashad a modern subway system designed by the French that was finished in 1995, with the subway tunneling more than 31.6 mi (50.9 km).
In 1870,Antonio Guzmán Blancohelped createVenezuela's railway system.
The Chavez government launched a National Railway Development Plan designed to create 15 railway lines across the country, with 13,700 kilometres (8,500 mi) of track by 2030. The network is being built in cooperation with China Railways, which is also cooperating with Venezuela to create factories for tracks, railway cars and eventually locomotives. However, Venezuela's rail project is being put on hold due to Venezuela not being able to pay the $7.5 billion and owingChina Railwaynearly $500 million.
Lufthansasaid it would stop all flights to Venezuela on 18 June 2016, citing difficulties with currency controls.Other airlines also cut back on flights and required that passengers pay fares in US$.
The Venezuelan electrical grid is plagued with occasional blackouts in various districts of the country. In 2011, it had so many problems thatrations on electricitywere put in place to help ease blackouts.On 3 September 2013, 70% of the country plunged into darkness with 14 of 23 states of Venezuela stating they did not have electricity for most of the day.Another power outage on 2 December 2013 left most of Venezuela in the dark again and happened just days before elections.
The Macroeconomic Stabilization Fund (FIEM) decreased from US$2.59 billion in January 2003 to US$700 million in October, but central bank-held international reserves actually increased from US$11.31 billion in January to US$19.67 billion in October 2003. On theblack market, the bolívar fell 28% in 2007 to Bs. 4,750 per US$and declined to around VEF 5.5 (Bs 5500) per US$ in early 2009.
The economy recovered and grew by 16.8% in 2004. This growth occurred across a wide range of sectors—the oil industry directly provides only a small percentage of employment in the country. International reserves grew to US$27 billion. Polling firmDatanalysisnoted that real income in the poorest sectors of society grew by 33% in 2004.
On 7 March 2007, the government announced that the Venezuelan bolívar would be redenominated at a ratio of 1 to 1,000 at the beginning of 2008 and renamed thebolívar fuerte("strong bolivar") to ease accounting and transactions. This was carried out on 1 January 2008, at which time the exchange rate was 2.15bolívar fuerteper US$.TheISO 4217code for thebolívar fuerteis VEF.
Government spending as a percentage of GDP in Venezuela in 2007 was 30%, smaller than other mixed economies such as France (49%) and Sweden (52%).According to official sources from theUnited Nations, the percentage of people below the national poverty line has decreased during thepresidency of Hugo Chávez, from 48.1% in 2002 to 28% in 2008.
With the 2007 rise in oil prices and rising government expenditures, Venezuela's economy grew by 9% in 2007. Oil prices fell starting in July 2008, resulting in a major loss of income. Hit by a global recession, the economy contracted by 2% in the second quarter of 2009,contracting a further 4.5% in the third quarter of 2009. Chavez's response has been that these standards mis-state economic fact and that the economy should be measured by socialistic standards.On 17 November, the Central Bank reported that private sector activity declined by 4.5% and that inflation was averaging 26.7%. Compounding such problems is a drought which the government says was caused byEl Niño, resulting in rationing of water and electricity and a short supply of food.
The year 2010 saw Venezuela still in recession as GDP has fallen by 5.8% in the first quarter of 2010.The Central Bank of Venezuela has stated that the recession is due largely "to restricted access to foreign currency for imports, lower internal demand and electricity rationing". The oil sector's performance was also particularly troubling, with oil GDP shrinking by 5%. More importantly, the Central Bank hints at the root cause of the oil contraction, saying that "the bank said it was due to falls in production, "operative problems", maintenance stoppages and the channeling of diesel to run thermal generators during a power crisis".While the public sector of the economy has fallen 2.8%, the private sector has dropped off 6%.
The year 2013 proved to be difficult for Venezuela as shortages of necessities and extreme inflation attacked the nation's economy. Items became so scarce that nearly one quarter of items were not in stock.The bolívar was devalued to 6.3 per US$ in early 2013 taking one third of its value away.However, inflation still continued to rise drastically in the country to the point President Maduro forced stores to sell their items just days before elections. Maduro said that the stores were charging unreasonable prices even though the owners were only charging so much due to the actual devaluation of the bolívar.
In 2014 The Central Bank of Venezuela stopped releasing statistics for the first time in its history as a way to possibly manipulate the image of the economy.Venezuela has also dismantled CADIVI, a government body in charge of currency exchange.
In May 2019, theCentral Bank of Venezuelareleased economic data for the first time since 2015. According to this release, the inflation of Venezuela was 274% in 2016, 863% in 2017 and 130,060% in 2018.The new reports imply a contraction of more than half of the economy in five years, according to theFinancial Times"one of the biggest contractions in Latin American history".According two undisclosed sources fromReuters,the release of this numbers was due to pressure from China, a Maduro ally. One of this sources claims that the disclosure of economic numbers may bring Venezuela into compliance with the IMF, making it harder to supportJuan Guaidóduringthe presidential crisis.At the time, the IMF was not able to support the validity of the data as they had not been able to contact the authorities.
The following table shows the main economic indicators in 1980–2023.Inflation below 10% is in green.
The parallel exchange rate is what Venezuelans believe the Venezuelan currency is worth compared to the US$.In the first few years of Chávez's office, his newly created social programs required large payments in order to make the desired changes. On 5 February 2003, the government created CADIVI, a currency control board charged with handling foreign exchange procedures. Its creation was to controlcapital flightby placing limits on individuals and only offering them so much of a foreign currency.This limit to foreign currency led to a creation of a currencyblack marketeconomy since Venezuelan merchants rely on foreign goods that require payments with reliable foreign currencies. As Venezuela printed more money for their social programs, the Bolívar continued to devalue for Venezuelan citizens and merchants since the government held the majority of the more reliable currencies.
As of January 2018, the strongest official exchange rate was 1 US$ to 10VEFwhile the free market exchange rate was over 200,000 VEF to 1 US$.Since merchants can only receive so much necessary foreign currency from the government, they must resort to the black market which in turn raises the merchant's prices onconsumers.The high rates in the black market make it difficult for businesses to purchase necessary goods since the government often forces these businesses to make price cuts. This leads to businesses selling their goods and making a low profit, such as VenezuelanMcDonald'sfranchises offering a Big Mac meal for only $1.Since businesses make low profits, this leads to shortages since they are unable to import the goods that Venezuela is reliant on. Venezuela's largest food producing company,Empresas Polar, has stated that they may need to suspend some production for nearly the entire year of 2014 since they owe foreign suppliers $463 million.The last report of shortages in Venezuela showed that 22.4% of necessary goods are not in stock.This was the last report by the government since the central bank no longer posts the scarcity index. This has led to speculation that the government is hiding its inability to control the economy which may create doubt about future economic data released.
Like most Latin American countries, Venezuela has an unequal distribution of wealth. Although distribution improved when the surplus of rural labor started to diminish and the educational system improved in the middle of the 20th century,equality is far from coinciding with western standards. The rich tend to be very rich and the poor very poor. In 1970, the poorest fifth of the population had 3% of national income while the wealthiest fifth had 54%.For comparison, the United Kingdom 1973 figures were 6.3% and 38.8% and the United States in 1972, 4.5% and 42.8%.Inequality declined during the early 2000s as the government spent heavily on social programs to improve the well-being of the poor. The economic crisis since 2013 has greatly increased inequality since the heavily subsidized services that the poor rely on, such as public hospitals and food distribution, have experienced severe shortages of essential imported goods. Hyperinflation has destroyed the value of savings, plunging many formerly stable, middle-class Venezuelans into extreme poverty. Conversely, the very wealthy are more likely to have access to overseas financial services allowing them to store their wealth in stable foreign currencies and escape the catastrophic collapse of the Venezuelan currency.
The more recentincome distributiondata available is for distribution per capita, not per household. The two are not strictly comparable because poor households tend to have more members than rich households, thus the per household data tends to show less inequality than the per capita data. The table below shows the available per capita data for recent years from the World Bank.
Poverty in Venezuela increased during the 1980s and early 1990s, but it decreased greatly in the mid to late 1990s. The decreasing trend continued through the Chávez presidency, with the exception of the troubled years 2002 and 2003. Under the Bolivarian government, poverty decreased initially when Venezuela acquired oil funds, though poverty began to increase to its highest level in decades in the 2010s.Throughout its modern history, inequality and poverty rates have wildly fluctuated from year to year, owing to the government's dependence on unreliable oil revenues which send the economy into alternating periods of rapid growth and catastrophic recession. The poverty rate decreased from 55% to 27% in the 5-year period between 2003 and 2008, only to then skyrocket to over 80% in the 5 years between 2012 and 2017.
The table below shows the percentage of people and the percentage of households whose income is below a poverty line which is equal to the price of a market basket of necessities such as food.
In the early 2000s, when oil prices soared and offered Chávez funds not seen since the beginning of Venezuela's economic collapse in the 1980s, Chávez's government became "semi-authoritarian and hyper-populist" and consolidated its power over the economy in order to gain control of large amounts of resources.Domestically, Chávez used such oil funds forpopulistpolicies, creating theBolivarian missions, aimed at providing public services to improve economic, cultural and social conditions.Despite warnings near the beginning of Chávez's tenure in the early 2000s,Chávez's government continuously overspent in social spending and did not save enough money for any future economic turmoil, which Venezuela faced shortly before and after his death.On the year of Chávez's death, Venezuela was still categorized as having high human development on itsHuman Development Indexin 2013 according to theUnited Nations Development Programme, although human development began to decline in Venezuela within a year, with the country dropping 10 ranks by 2014.
Extreme poverty and lack of food and medicines has pushed more than three million Venezuelans to leave the country in recent years.Andres Bello Catholic Universityconducted a study of poverty that found the poorest 20% of Venezuelans had 1.4% of the nation's wealth, down from 3.4% in 2014, while the richest 10% had 61% of the nation's wealth, up from 30%.
According to government figures released in April 2017, 1,446 children under the age of 1 died in 2016, representing a 30 percent increase in one year.As of August 2017, 31 million people suffered from severe food shortages.The ENCOVI universities survey found that 73% of Venezuelans said they had lost 9 kg (20 lb) of body weight in 2016and 64% had lost 11 kg (24 lb) in 2017.
When the country's economy collapsed in 2014, hunger and malnutrition became a severe problem.In 2015, close to 45% of Venezuelans said they were unable to afford food at times. In 2018, this figure rose to 79%, one of the highest rates in the world.
Although poverty initially declined under Chávez, Venezuela's poverty rate increased to 28% by 2013, with extreme poverty rates increasing 4.4% to 10% according to the Venezuelan government's INE.Estimates of poverty by theUnited Nations Economic Commission for Latin America and the Caribbean(ECLAC) andLuis Pedro España, a sociologist at theUniversidad Católica Andrés Bello, showed an increase of poverty in Venezuela.ECLAC showed a 2013 poverty rate of 32% while Pedro España calculated a 2015 rate of 48%.The Venezuelan government estimated that 33% were in poverty in the first half of 2015 and then stopped producing statistics.According to Venezuelan NGOPROVEA, by the end of 2015 there would be the same number of Venezuelans living in poverty as there was in 2000, reversing the advancements against poverty by Chávez.The ENCOVI annual survey by three universities estimated poverty at 48% in 2014, 82% in 2016 and 87% in 2017.
In relation tohunger, under-nutrition, undernourishment and the percentage of children under the age of five who are moderately or severely underweight decreased earlier in Chávez's tenure.However,shortages in Venezuelaas a result ofprice controlpolicies and heavy import dependence left the majority of Venezuelans without adequate products after his death.
The total net enrollment ratio in primary education for both sexes increased from 87% in 1999 to 93.9% in 2009.The primary completion rate for both sexes reached 95.1% in 2009 as compared to 80.8% in 1991.The literacy rates of 15- to 24-year-olds in 2007, for men and women, were 98% and 98.8%, respectively.Among the first migrants the left Venezuela during theBolivarian Revolution, a large percentage of the millions of Venezuelans who left the country were highly educated, resulting in abrain drainin the country.
In 2008, Francisco Rodríguez ofWesleyan Universityin Connecticut and Daniel Ortega ofIESAstated that there was "little evidence" of "statistically distinguishable effect on Venezuelan illiteracy" during the Chávez administration.The Venezuelan government claimed that it had taught 1.5 million Venezuelans to read,but the study found that "only 1.1m were illiterate to begin with" and that the illiteracy reduction of less than 100,000 can be attributed to adults that were elderly and died.
Following the Bolivarian Revolution and the establishment of the Bolivarian government, initial healthcare practices were promising with the installation of a free healthcare system parallel to the existing national public health system, with the assistance received from Cuban medical professionals providing aid. The Bolivarian government's failure to concentrate on healthcare for Venezuelans, the reduction of healthcare spending and government corruption eventually affected medical practices in Venezuela, causing avoidable deaths along with an emigration of medical professionals to other countries.
Venezuela's reliance on imported goods and its complicated exchange rates initiated under Chávez led to increasing shortages during the late-2000s and into the 2010s that affected the availability of medicines and medical equipment in the country.The United Nations reported an increase in the maternal mortality ratio, which increased from 93 per 100,000 in 1990 to 110 per 100,000 in 2013.Following shortages of many medical and common goods in 2014, Venezuelan women have had difficulties accessing contraceptives and were forced to change prescriptions or search several stores and the Internet for their medications.Shortage of antiretroviral medicines to treat HIV/AIDS affected about 50,000 Venezuelans in 2014 as well, potentially causing thousands of Venezuelans with HIV to develop AIDS.
Venezuela is also the only country in Latin America where the incidence ofmalariais increasing, allegedly due to illegal mining. In 2013, Venezuela registered the highest number of cases of malaria in the past 50 years, with 300 of 100,000 Venezuelans being infected with the disease.
In 1990, the number ofInternet users in Venezuelawas minimal, but 35.63% of Venezuelans were Internet users by 2010.In fact, the number of Internet subscribers has increased sixfold.Programs such as the National Technological Literacy Plan, which provides free software and computers to schools, have assisted Venezuela in meeting this goal.However, several experts state that the poor infrastructure in Venezuela had created a poor quality of Internet in Venezuela, which has one of the slowest Internet speeds in the world.The lack of US$ due to the Venezuelan governments currency controls has also damaged Internet services because technological equipment must be imported into Venezuela.
The number offixed telephone linesper 100 inhabitants was 7.56 in 1990. The number increased to 24.44 in 2010.In 2000, 2,535,966 Venezuelans hadlandline telephones. By 2009, this had increased to 6,866,626.
The Bolivarian government has also launched an aerospace program in cooperation with the People's Republic of China who built and launched two satellites that are currently in orbit—a communications satellite calledSimón Bolívarand a remote sensing satellite calledMiranda. In July 2014, President Maduro announced that a third satellite would be built by Chinese–Venezuelan bilateral cooperation.
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