Venezuela Economy


Social tensions worsened in the 1980s, when the fall in crude oil prices highlighted the country’s excessive dependence on oil revenues, which accounted for 75% of exports. Agriculture, despite some multi-year development plans had been targeted on it (in particular the 6th, relating to the period 1981-85), remained increasingly backward and unable to satisfy the internal food demand. Even the steel industry, located in the Orinoco basin due to the presence of considerable iron ore deposits, was struggling to take off, failing to realize the prospects for diversification of the productive apparatus which, initially, it seemed to have opened. They grew, as a result, unemployment, inflation and external indebtedness (up to 55% of GDP in the mid-1990s): a disconcerting figure, the latter, considering the surplus of the trade balance, mostly in hard currency, again thanks to oil exports. In 1989 the state undertook to dismantle the heavy administrative apparatus and support a market economy. Faced with an unsustainable situation, the Venezuelan governments resolved in 1995 to undertake a macroeconomic reorganization program based essentially on the privatization of key sectors.

This process met, however, further resistance from a political class accustomed to using public enterprises as sources of financing and the results were struggling to show themselves. The austerity measures adopted allowed for a resumption of growth and a significant drop in inflation, while the sale of public companies encountered obstacles due to economic demands, considered excessive by potential buyers. Thus, metallurgical, electrical, telephone companies and some banks remained on the market, while the sale of more than a dozen oil fields gave much better results than expected. However, the new fall in oil prices triggered, in 1998, according to Businesscarriers, a monetary and financial crisis that had a heavy impact on productive activities: an increase in the unemployment rate rekindled social and political tensions. After the the election of Hugo Chávez and the new Constitution of 1999 were launched various economic reforms aimed at making changes in every sector of the economy (they generated discontent among the middle classes and the bourgeoisie). In 2002 an attempted coup d’état culminated in the strike in the oil sector, which blocked the country for more than two months, with serious consequences for the economy, worsened by a new strike in 2003. At the beginning of 2006 the government amended the contracts signed with international oil companies to increase the participation of the state-owned company for the management of hydrocarbons (PDVSA), nationalizing 32 fields and introducing a new extraction tax for companies operating in the Orinoco area. Another measure adopted was that of signing a strategic agreement with Cuba and Bolivia. In 2008 the GDP per capita was US $ 11,388 (with a GDP of US $ 319,443 million), one of the highest in South America, yet the distribution of wealth remains uneven and a large number of people live below the poverty line. The poor diversification of the economy and the dependence on the sole resource of oil continue to make the country vulnerable to changes in prices on the international market. The attempts to diversify the economy (favoring agriculture, the exploitation of forest resources and livestock) carried out since the 1950s have not had the desired results, and the situation has worsened also due to corruption and growing unemployment. and illegal immigration.


Agriculture in 2007 employed almost 9% of the active population and participated to a modest extent (4.1%) in the formation of the GDP; on the other hand, arable land and arborescent crops occupy less than 4% of the territorial surface. As mentioned, this is a rather backward sector; the abolition of the large estates established in colonial times was not followed by an incisive land reform and in practice gave rise for the most part to agrarian crushing in microfunds; yet for some time governments have allocated a conspicuous part of the proceeds derived from oil to support agriculture, both to strengthen the productive structures and to improve the living conditions of the peasants, so as to put a stop to the continuous exodus from the countryside. The main food crops, llanos; follow the cassava, potatoes and sweet potatoes (sweet potatoes); good quantities of vegetables such as tomatoes, beans, etc. are also produced, and fruit: bananas, citrus fruits, pineapples, papayas, mangoes, etc. Among the fairly diversified industrial crops, coffee is of particular importance, widespread on the Andean slopes in the tierras templadas belt and, in the district of Mérida, sugar cane, around Lake Maracaibo, cocoa on the lower, warm and humid slopes of the Antillean Sea. A decent production also gives tobacco (in the northern Caribbean areas, in Coro, Cumaná, Maturín, Puerto Cabello, Valencia and Maracay), to which are added some textile plants, such as cotton (in Aragua, Carabobo, Portuguesa and Falcón) and – less important – the agave sisalana. Finally, along the coastal strip there are extensive crops of coconut palms. The cultivation of sesame and peanuts also has some importance. § The forest heritage is very important (woods and forests are extended on the wetter Andean slopes, in the Guayana massif and in the Orinoco basin), rich in numerous and precious essences such as mahogany, cedar, samán, blackberry, apamate and other hardwood plants. Tanning plants such as the divi-divi, the resinous ones such as copaiba, medicinal plants (china in the first place) and rubber (caucciù, balata and chicle) are also exploited. § Like the agricultural sector, the livestock sector also denounces serious delays, even though it could be a source of considerable wealth for the country. Cattle breeding, practiced extensively and mainly intended for meat production, mainly exploits the grassy surfaces of the llanos, for whose population it represents a significant activity. However, the herds are partly forced to practice seasonal transhumance, because during the rainy season large areas are flooded, making it necessary to move to the higher areas, the upper llano, where mostly the houses of the breeders are located, the ranchos. Alongside cattle breeding, pig breeding is experiencing a certain development; there are also sheep, goats, donkeys and horses and above all poultry, common in all rural areas; the zootechnical patrimony, however, fails to completely satisfy internal needs. § Fishing, in the past, was not particularly important; only since 1980 has the government encouraged its development, to the point that at the beginning of the 2000s it contributes both to local consumption and, in part, to exports (mainly of shrimps). The main fishing areas are the peninsula of Paria and the island of Margarita, where the collection of natural pearls is also carried out.

Venezuela Economy