Venezuela has the world's largest oil reserves
and was previously the most prosperous country in Latin
America. But in recent years, the economic downturn of
the Socialist government in combination with falling oil
prices has caused the worst crisis in the country's
history. Negative growth, hyperinflation and acute
commodity shortages have triggered a humanitarian
The collapse of Venezuela has few counterparts in the
world - the economy does not usually implode in
democratic states where peace can afford. The oil
normally accounts for over 95 percent of export revenue,
half of the state's revenues and a quarter of GDP.
During good economic times, the oil has given the state
money to invest in welfare and infrastructure, but the
dependence on oil makes Venezuela vulnerable. When the
oil price suddenly halved in 2014, the economy went from
an ongoing crunch to a free fall.
Major imports by Venezuela, covering a full list of top products imported by the country and trade value for each product category.
Oil production has fallen sharply and in early 2020
was around a quarter of what it was in 2008. In early
2020, a combination of corona pandemic and price war
between major oil states also led to a new fall in world
market prices. The fuel crisis in Venezuela was acute
and the country was forced to import gasoline from Iran
(see Calendar). In May 2020, oil production was down to
the lowest level in 77 years, according to statistics
Growth since 1999 has been below average in the
region and since 2014 it has been negative. The economy
has shrunk more and more every year. When the central
bank published figures for the first time in three years
in May 2019, estimates from the IMF confirmed that the
economy was halved in five years, between 2013 and 2018.
The decline has continued and is expected to reach 70
percent a few years later.
Inflation also galloped and is estimated by the IMF
to have exceeded 900,000 percent in 2018, while the
central bank stated it 130,000 percent. The pace then
slowed down, but data on the size still varied greatly:
according to the IMF, inflation in 2019 was about
200,000 percent, while the official figure in Venezuela
was 10,000 percent.
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including VZS which represents the country of Venezuela. Check findjobdescriptions to learn more about Venezuela.
Clearly, the rate of price increase has long been
problematic; it was an average of 23 percent annually in
1999–2011. The government took control of the exchange
rate in 2003 and the currency has been written down
several times. In an attempt to curb inflation, in 2008
a new currency, Bolívar Fuerte (VEF), was introduced.
But prices continued to rise and the commodity shortage
to rise. In 2018, it was time again: five zeros were
cleared and the currency now became bolívar soberano (VES).
The new currency was linked to a so-called
cryptocurrency, petro, which was introduced earlier in
the year but which did not receive any major impact. At
the same time as the new currency, minimum wages were
raised by more than 3,000 percent. Despite this, a new
increase came before the year was over.
In 2019, the government eased the regulations, which
in practice has led to a dollarization of the economy.
This has contributed to some stabilization and that the
supply of goods has improved again - for those who have
Attempts have been made to develop other industries
than the oil, but the country has failed to break its
dependence on "the black gold". In the 1960s, the
government tried to streamline agriculture, in the 1970s
the country invested in heavy industry and in the 1990s,
it sought to attract private investors through
deregulation and privatization. Hugo Chávez, who took
office in 1999, tried to make it easier for small and
medium-sized enterprises, cooperatives and small-scale
farmers with socialist indications. Together with social
initiatives, it provided new opportunities for
previously marginalized groups. But the programs are
characterized by inefficiencies and corruption and
dependence on oil revenues has increased rapidly.
Chávez also embarked on a comprehensive
nationalization of the economy - state ownership and
influence increased in the oil sector, agriculture,
banks, mining, telecommunications, electricity supply,
transport and tourism. Hundreds of foreign-owned
companies were nationalized. Economic policy scared away
investors, reduced productivity and shrunk exports of
anything other than oil.
When oil revenues were not enough to provide the
population with cheap basic goods, state price controls
were introduced on many goods. This led to a shortage of
goods, as prices were set so low that it did not pay to
sell in Venezuela. Instead, goods were smuggled out of
the country where they were sold on the black market at
a higher price. In order to secure food supply and
prevent smuggling, the state took over a number of
companies, including rice, coffee and sugar companies.
During the "Bolivarian Revolution", the country's
wide stock of peoples initially began to access the
income from the oil resources, to a greater extent than
before. This led to reduced poverty. But the state-owned
companies and the currency and price controls created
shortages of goods and capital flight. Twenty years
after Chávez's entry into power, Venezuelans' everyday
lives are marked by an acute lack of everything - food,
toilet paper, medicines, etc. At the same time,
electricity and water rationing have been introduced.
The state oil company PDVSA borrows millions of money
from the central bank to finance the social investments
while extremely low subsidized fuel prices cost the
state large sums. Oil production has fallen sharply,
partly because of backward investments. Problems with
refining capacity also mean that the oil giant Venezuela
is forced to import gasoline at market prices.
FACTS - FINANCE
GDP per person
US $ 16,054 (2014)
US $ 482 359 million (2014)
-3.9 percent (2014)
Agriculture's share of GDP
5.0 percent (2014)
Manufacturing industry's share of GDP
12.1 percent (2014)
The service sector's share of GDP
51.7 percent (2014)
200,000.0 percent (2019)
Government debt's share of GDP
182.4 percent (2018)
US $ 105,598 million (2017)
bolívar soberano 1
US $ 27,399 million (2016)
US $ 16 338 million (2016)
- US $ 3,870 million (2016)
Commodity trade's share of GDP
24 percent (2014)
Main export goods
crude oil and oil products
Largest trading partner
USA, China, Colombia, Brazil
- replaced in August 2018 bolívar fuerte,
which in turn replaced bolívar in January
No to constitutional change
In a referendum, voters say no to a proposal for amendments to the
constitution, which would have allowed unlimited re-election for a president.
President Hugo Chávez thus suffers his first defeat in an election since he took
office in 1999.
Chávez is allowed to govern by decree
The National Assembly gives President Hugo Chávez the right to adopt laws for
18 months without Parliament's involvement in eleven different areas. Chávez
wants, among other things, to nationalize the large electricity and
telecommunications companies. During the spring, the state oil company PDVSA
will take over four oil fields operated by foreign companies.
Sitting President Hugo Chávez is re-elected for a third term with 63 percent
of the vote against 37 percent for second, Manuel Rosales. Chávez then announces
that all parties supporting the "Bolivarian Revolution" will be merged into one
party, Venezuela's United Socialist Party (PSUV).