Economy of Venezuela

Economy of Venezuela

The volume of GDP in 2001 amounted to 124.9 billion US dollars, or 0.4% of the world’s GDP. GDP per capita – 5071 US dollars. Unemployment 15.8%, inflation – 31.2% (2002). According to businesscarriers, more than 1/4 of Venezuela’s GDP comes from the oil industry (see table), while the share of the entire extractive industry in the structure of employment is only 0.5%. Economically active population 11,369 thousand people. (2002). The structure of employment of the population: agriculture 9.7%, extractive industry (including oil) 0.5%, manufacturing industry 12.6%, construction 8.3%, electric power and gas supply 0.6%, transport, storage and communications 7.0%, trade and services 61.3%.

The oil and gas industry provided in 2002 72.6% of export revenues and 48.3% of central government revenues. The production of light and medium grades of oil is concentrated mainly in the region of Lake Maracaibo and in the states of Falcon and Apure. Heavy varieties are mined in the east of the country, mainly in the so-called. Orinoco oil belt. Oil reserves in Venezuela, amounting to 11.2 billion tons (77.7 billion barrels), are the largest in the Western Hemisphere and second only to the reserves of the 5 countries of the Persian Gulf. In 2001, Venezuela produced 176 Mt (3.4 Mb/d) of oil and was the world’s 6th largest producer of crude oil. Oil refining capacity is 3.3 million barrels per day (1.3 million domestically and 2.0 million abroad). The main oil refineries within the country are located in the coastal zone – in the states of Falcon on the Paraguana Peninsula (the largest complex of refineries in the cities of Amuay and Cardon with a total capacity of 0.94 million barrels per day), Cara-bobo (in the city of El- Palito – 0.13 million barrels per day) and Anso-ategui (in Puerto La Cruz – 0.2 million barrels per day). In terms of natural gas reserves – 4.18 billion m3 in 2001 – Venezuela ranks 1st in Latin America, 2nd in the Western Hemisphere and 8th in the world. Natural gas production in the same year amounted to 28.9 million m3 – 3rd place in Latin America. 18 billion m3 in 2001 – Venezuela ranks 1st in Latin America, 2nd in the Western Hemisphere and 8th in the world. Natural gas production in the same year amounted to 28.9 million m3 – 3rd place in Latin America. 18 billion m3 in 2001 – Venezuela ranks 1st in Latin America, 2nd in the Western Hemisphere and 8th in the world. Natural gas production in the same year amounted to 28.9 million m3 – 3rd place in Latin America.

The state considers the development of the manufacturing industry to be one of the main tools to reduce the dependence of the country’s economy on oil. In the structure of its production, more than 50% falls on the oil refining, chemical and petrochemical, rubber, pulp and paper industries, plastics, ferrous and non-ferrous metallurgy. OK. 33% of products are produced in the so-called. traditional industries – food, tobacco, textile and clothing, leather and footwear, woodworking and furniture industries. OK. 16% is accounted for by the metalworking industry, the production of machinery, equipment and vehicles (mainly assembly). The distribution of production facilities across the country is characterized by significant unevenness. OK. 75% of products are produced in the central and western parts of the country, including 37% – in the Central region (the main industrial centers are Valencia and Maracay), approx. 21% – in the Capital District (Caracas), 16% – in the Central-Western region (Barquisi-meto, Punto Fijo, Acarigua-Araure, Chivacoa). The metallurgical industry and power generation are concentrated in the state of Bolivar.

Venezuela plays a significant role in Latin America and the Western Hemisphere in the extraction of a number of minerals, incl. bauxite, iron ore, gold and diamonds. In terms of bauxite production – 4.4 million tons in 2001 – it is among the ten leading producers in the world. They are mined at the Los Pihiguaos deposit in the state of Bolivar, owned by the state corporation CVG. The country’s only Bauxilium bauxite mine has a capacity of 6.0 million tons per year. Almost the entire volume of bauxite produced is used for processing into alumina domestically. Aluminum is Venezuela’s second most important export product. In 2001, Venezuela produced 95 billion kWh of electricity, of which approx. 80% – at hydroelectric power plants. Thermal power plants operate mainly on oil and (a small percentage) on gas. The largest hydroelectric power plant is Guri on the Karoni River with an installed capacity of approx. 10 million watts second in the world only to the Brazilian-Paraguayan Itaipu hydroelectric power station. The Venezuelan energy system is connected to Colombian and Brazilian, which allows the export of electricity.

Agriculture is one of the most backward sectors of the economy. In 2001, it accounted for 9.7% of the economically active population and only 4.9% of GDP. Agricultural development is hampered by an inefficient land tenure system. According to the 1998 agricultural qualification, 5% of the largest owners own 75% of the land, while 75% of small owners own 6%. 84.3% of the land used in agriculture is pasture. About 1/2 of the country’s total agricultural production is accounted for by meat-producing livestock. In all types of meat, Venezuela has achieved self-sufficiency. In domestic milk consumption, the share of imports is 33.5% (2000). The main agricultural crops are (2002): corn (1.2 million tons), coffee (69 thousand tons), sorghum (390 thousand tons), sugar cane (8.9 million tons), rice (690 thousand tons). Imports play an important role in providing agricultural products. It accounts for 68.4% of domestic consumption of cereals, incl. 100% wheat and 63.9% corn. Import satisfies 68.9% of the demand for beans and 79.3% for vegetable oil.

Fisheries production amounted to 423 thousand tons in 2000, incl. freshwater fish catch – 84 thousand tons. Consumption of fish products per capita reached 16 kg, while 21.8% of consumption was provided by imports. A significant part of the catch falls on tuna and sardines. They are partially exported frozen or canned. The main export product is shrimp.

90% of passenger and 70% of freight traffic is carried out by road. The total length of trackless roads is 95,795 km, of which 32,800 km is paved. The country’s main highway links the cities of Barquisimeto, Valencia, Maracay, Caracas and Los Teques. The second most important is the Claririas-Barcelona-El Tigre motorway. 90% of foreign trade cargo is transported by sea. OK. 80% of Venezuela’s imports pass through three ports – La Guayro (the main port of Venezuela and the port of Caracas), Maracaibo and Puerto Cabello. There were 372 airports in the country in 2001, incl. 124 had a paved runway, 10 of them international. Major airports: Simon Bolivar in Maiquetia (20 km from Caracas), Arturo Michelena in Valencia, Jacinto Lara in Barquisimeto, La Chinita in Maracaibo. Rail transport is poorly developed and is used only for the transport of goods. The total length of railways in 2001 was 627 km, of which 248 km were private roads. Main lines: Puerto Cabello – Bar Quisimeto (173 km) and Yaritagua – Acarigua (75 km). Length of oil pipelines: 6370 km (crude oil), 480 km (petroleum products). The length of gas pipelines is 4010 km.

Among the most promising sectors of the economy is the telecommunications sector, which is undergoing a period of rapid development. In 1998-2001, its contribution to Venezuela’s GDP increased from 2.2% to 3.1%. To con. 2000, the privatization process was completed in the sector, and US companies took the leading positions in it. Significant growth opportunities exist in both wireline and wireless telephony. In 1999, there were 143 mobile phones per 1,000 inhabitants in Venezuela. This is more than in Argentina, Brazil, Mexico and Colombia, and somewhat less than in Chile. In terms of the specific number of radio receivers (470), Venezuela in the same year surpassed Chile, Mexico and Brazil, but was inferior to Argentina and Colombia.

Trade along with services is the sphere of the main employment of the population. In 2001, these two industries accounted for 39.6% of GDP and 61.3% of employees, incl. for trade, restaurants and hotels (in total) – 10.4% and 26.3%, respectively. In 2002, due to the political and economic crisis in the country, the GDP of trade decreased by 13.3%, and the share of trade in total GDP decreased compared to 2001 from 8.2 to 7.9%. The index of the physical volume of sales decreased from 136 to 71 (1997=100%), incl. in wholesale – from 115.7 to 49.9, in retail – from 154.4 to 89.6. Due to the fact that consumer prices rose by 31.2% in 2002 and another 9.4% in the 1st quarter. 2003, the government in 2003 began to implement a plan to directly supply the population with basic food through various government organizations, as well as the introduction of state control over prices for a number of products (national and imported) of prime necessity, incl. for flour, rice, sardines, sugar, milk and coffee.

In 2000 Venezuela was visited by approx. 604 thousand tourists, of which 134 thousand (22%) are cruise tourists. Of the 469 thousand tourists who stayed in hotels, approx. 42% from Western Europe, 16% from the USA and 6% each from Canada and South America. The total number of hotels amounted to 2.4 thousand.

The Venezuelan government sets the task of building a socially oriented market economy, in which the state will play an active role as a regulator and stimulator of private sector investment. It is supposed to increase the efficiency of economic activity, to move from an economy based on oil rent to a diversified economy. The development of small enterprises is stimulated.

In 2002, central government budget revenues were 20.1% and expenditures 23.1% of GDP. The oil and gas industry provided 48.3% of revenues. Current expenses accounted for 78.8% of all expenses, capital investments – 16.4%. Income tax is 34%, VAT – 16%, tax on the debit balance of banks – 1%. Domestic public debt in 2001 amounted to 13.8 billion US dollars, or 11.0% of GDP. External public debt 22.6 billion US dollars, or 18% of GDP.

In connection with what began in con. 2001 capital outflow from Venezuela, the central bank abandoned in February 2002 from the policy of the currency band and introduced a floating rate of the bolivar. At the same time, he began to raise the discount rate in order to remove excess liquidity from the market. In February 2003, due to the fall in gold and foreign exchange reserves and the depreciation of the national currency, a fixed bolivar exchange rate and currency control were introduced. The total volume of the loan portfolio of commercial and universal banks decreased in 2002 by 2.7%, while their investments in securities (mainly government securities) increased by 72.2%.

23% of the population spend less than $1 a day on consumption. In the structure of the final consumption of families in 2001, 38.5% accounted for food, clothing and footwear; 22.0% – to pay for housing, electricity, water, transport and communications. In 2002, the country had 52.8 thousand personal computers and the same number of Internet users. The Human Development Index was 0.77 in 2000 (69th in the world).

Foreign economic sphere. The situation in foreign trade, primarily oil exports, largely determines the state of the Venezuelan economy. In 2002, merchandise exports amounted to 26.2 billion US dollars, incl. $19.0 billion (72.6%) – oil exports. Aluminum is exported – 2.3%, chemicals – 1% (2001). Main export partners (2000): USA – 60%, Brazil – 5.5%, Colombia – 3.5%, Italy – 3.4%. Imports in 2002 amounted to 12.3 billion US dollars. In 2001, consumer goods accounted for 21.0% of imports, semi-finished products – 64.3%, equipment – 14.7%. 38.8% of imports came from the US, 6.7% from Colombia, 4.4% from Brazil, 3.8% from Italy. Venezuelan exports to the Russian Federation in 2001 – 30.1 million US dollars, imports from the Russian Federation – 20.6 million US dollars.

According to the Constitution, all sectors of the economy, with a few exceptions, are open to foreign investment. In 2001, the total amount of foreign direct investment in Venezuela was $30.3 billion. The largest investor is the United States, whose total direct investment in the Venezuelan economy in 2001 amounted to $10.7 billion; of these, 27.4% were in the oil industry and 14.4% in the manufacturing industry. One area where the position of foreign investors is particularly strong is the banking system: in 1999, foreign banks accounted for 47.7% of the total capital of the system. Currently, the most attractive sectors for foreign investment are the oil and gas industry, telecommunications, the banking sector, and the electric power industry.

Economy of Venezuela