Venezuela Economy

By: EconomyWatch Content   Date: 30 March 2010

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 Venezuela is an insular country with numerous islands in the Caribbean Sea. It is bordered by Guyana, Brazil, Columbia, Trinidad and Tobago, Grenada, St Lucia, Barbados and Aruba, amongst many other neighboring countries. The land area of the country is 916,445 square km and is inhabited by approximately 26,814,843 people.

Venezuela has a 2,800 km coastline and a mountainous landscape. For this reason, transportation and general productive are hampered. Petroleum is abundant and dominates the Venezuelan economic structure. It accounts for about a third of the nation’s GDP, 90% of its export and over half its government operating revenues. The nation is also the fifth largest member of the OPEC, in terms of production. As a result of its bountiful natural resources, Venezuela’s economy has been one of the most thriving economies in South America. The economy has, however, steadily contracted, following the decline in oil prices in the 1980s. The economy is, nevertheless, prospering steadily now, particularly under President Hugo Chavez’s leadership. In fact, in the face of rising oil prices, paired with higher government expenditures, Venezuela economy grew by 9% in 2007.

Venezuela Economy: Profile

The US is a significant contributor of foreign exchange to the Venezuelan economy, accounting for about 40% of the nation’s exports, according to 2009 reports by CIA World Factsheet. Other key trading partners of the Venezuela are Brazil and China, Columbia and Mexico. Major products of Venezuela’s trade, besides petroleum and gas, are chemicals, steel and agricultural products. In fact, the agricultural sector contributes about 4% of the nation’s GDP and employs 13% of the population.

Chief crops cultivated in Venezuela are:

 

  • Bananas

  • Corn

  • Coffee

  • Rice

  • Sorghum,

  • Sugarcane

Venezuela Economy and Infrastructure

While the nation has abundant natural resources, its economic development has been slow due to the communications and transportation problems presented by Venezuela's mountain ranges. The nation has, however, developed a sophisticated highway system; although goods continue to be predominantly transported by ship. To strengthen the transportation system, the Chavez government has announced a National Railway Development Plan, which entails 15 railway lines through the nation. The plan, inaugurated in March 2009, is estimated to cover 8500 miles by 2030.

Venezuela Economy: Impact of Nationalization

Under President Hugo Chavez’s government, several industries in Venezuela were nationalized, including electricity, communications and even the oil industry. The move was intended to exert more control over these key public sectors of the Venezuelan economy. The move drew a general outcry by oil giants, including Chevron, BP and ExxonMobil, whose stake in the lucrative Venezuelan oil industry declined significantly. In fact, several oil companies have become hesitant to continue their investment in Venezuelan economy.

 

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