Venezuela`s 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.