Venezuela: Economic and Political Overview

Economic Indicators

Endowed with the largest oil reserves in the world, Venezuela is largely dependent on fluctuations in oil prices. The country experienced a 6% GDP growth in 2022 due to the increase in oil prices and the recovery in remittances sent to the country by Venezuelans abroad, followed by an estimated growth of 4% in 2023. Despite the recent recovery, GDP remains only one-fourth of the pre-crisis level in 2013. Venezuela has been in a deep recession since 2013, and according to the IMF, its GDP contracted more between 2013 and 2018 than the United States did during the Great Depression of 1929-1933. For 2024, the IMF forecasts growth at 4.5%.

The country's industrial activity continues to suffer from insufficient diversification and difficulties in importing intermediate products. The policy of redistributing petroleum through social measures was hindered by the weakness of oil prices, which have been in sharp decline since 2012, only recently recovering. This has reinforced the macro-economic imbalances that Venezuela suffers from. The consumer price index in Venezuela settled at 193% during 2023, slightly lower than expected, according to figures provided by the Venezuelan Observatory of Finance. Although this is the highest rate in the world, it is much lower than the level recorded the previous year when inflation stood at 305%. The hyperinflationary climate was created by several years of monetizing the public deficit, a free-falling currency that makes imports more expensive, a strong depreciation of the currency in both the official and black markets, and dramatic shortages of basic goods. The central bank’s policy of reducing the money supply is not expected to help reduce hyperinflation sustainably, as it does not address the economy’s key imbalances.Despite multiple minimum wage hikes decided by the government, real wages have continuously decreased, and household consumption is highly dependent on remittances from expatriates. Venezuela's government anticipates a 27% rise in revenue from the state-operated oil company PDVSA in 2024, following a loosening of U.S. sanctions amidst planned presidential elections and stagnant production. President Nicolas Maduro's administration projects total expenditure for the year to reach USD 20.5 billion, representing a 39% increase on 2023 spending. The temporary easing of sanctions, scheduled to remain in effect until April 2024 unless reversed by the U.S., has caused a surge in prices for Venezuelan crude. Analysts anticipate that this increase in revenue will prompt additional social spending by the government, aiming to secure support in the upcoming presidential election, in which Maduro is likely to seek reelection. According to the latest available data from the IMF, public debt stood at 159.5% of GDP in 2022 (down from 248.4% one year earlier).

In Venezuela, even though the minimum wage has been increased numerous times over the past few years, wage increases have not kept up with inflation. Therefore, purchasing power is weak and has greatly decreased in recent years; poverty has increased, and the health system is in a critical state. The unemployment rate has been rising for years, and the IMF estimated that this rate has surpassed half of the Venezuelan workforce. Nevertheless, the state has not released an official unemployment figure since 2021, when it claimed it was 7.9%. Furthermore, the country also faces a rise in insecurity, with the highest homicide rate in South America. Because of the country's current economic situation, there are severe shortages of basic goods, such as food and medicine - with Venezuela being among the countries with the highest rates of food insecurity in the world. As such, neighboring countries have been receiving a large number of Venezuelan migrants and refugees in recent years, with estimates suggesting that over 6 million people have left the country so far.

Main Sectors of Industry

Compared to other Latin nations, agriculture has a smaller contribution to Venezuela's economy. The agricultural sector represents 5% of the Venezuelan GDP and employs 12% of the active population (World Bank, latest data available). The main agricultural products of the country are corn, soy, sugar cane, rice, cotton, bananas, vegetables, coffee, cocoa, beef, and pork meat, milk, eggs, and fish. However, Venezuela enjoys important natural resources, such as petroleum (their main natural resource), gas, gold, and silver mines, bauxite, and diamonds.

The industrial sector represents 37.2% of the GDP and employs 18% of the active population. The main industrial activities revolve around the petroleum sector - which is controlled by a State company and represents the first natural wealth of the country. According to OPEC, the country’s proved resources in petroleum stood at 303.22 billion barrels as of end-2022, which puts it in first place in the world ahead of Saudi Arabia. Actually, despite a continuous decline in petroleum production for the past few years, Venezuela remains largely dependent on revenue from petroleum, which accounts for nearly all of its earnings from exportation and for almost half of the government’s revenue. Additionally, other important industries are construction equipment, food, textile, iron, steel, aluminum, and engine parts assembly. However, due to the State control over the country's currency and prices, local industries have encountered difficulties acquiring the necessary goods to maintain operations or selling goods with profit on the local market. Overall, the manufacturing sector is estimated to account for 12% of GDP (World Bank). The private industrial production of Venezuela decreased by 4.3% in 2023 compared to the previous year, according to preliminary figures from the Confederation of Industrialists (Conindustria).

The service sector represents 51.7% of the GDP and employs 71% of the active population, making it a major source of revenue and jobs. The sector includes banking and finance, real estate, education, medicine, governmental agencies, hotels and restaurants, as well as entertainment. Together, these activities represent more than two-thirds of the total employment in Venezuela.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	10.6	18.5	70.9
Value Added (in % of GDP)	5.0	37.2	51.7
Value Added (Annual % Change)	-4.6	-5.8	-0.4

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Venezuelan Bolivar (VEF) - Average Annual Exchange Rate For 1 MUR	n/a	n/a	n/a	n/a	n/a

- Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

24,7/100

World Rank:

177

Regional Rank:

32

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

3.09/10

World Rank:

82/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Foreign Trade in Figures

According to the latest available data, Venezuela’s foreign trade represented 67.2% of the GDP in 2017. The country’s economy strongly depends on hydrocarbons, as well as on loans from China and Russia. Traditionally, petroleum represents more than 75% of Venezuela’s exports. Manufactured products accounted for 16% of goods’ exports in 2021, and agricultural products for only 1.6% (data WTO). As per imports, the structure is as follows: agricultural products (34.7%), fuels and mining products (4.6%), manufactures (59.2%), and other (1.6% - data WTO, 2022).

According to the latest figures from OEC, Venezuela’s main export partners in 2022 were China (16.3%), Turkey (13.9%), Spain (12%), the U.S. (10.2%), and Brazil (8.3%). As per imports, China was the main source (31.4%), followed by the U.S. (23%), Brazil (13.8%), and Colombia (6.6%). Venezuela is a member of the Latin American Integration Association as well as the Global System of Trade Preferences among Developing Countries, and is looking to improve and increase its trade relations with the South-American zone, the EU, and China. However, even though Venezuela entered Mercosur in 2012 to develop trade with its neighbors, its membership was indefinitely suspended in 2017 because the country was infringing on the democratic clauses of the treaty.

According to the WTO, the country imported USD 10.1 billion of goods in 2022 and exported USD 4.7 billion of goods over the same period, marking increases of 30.7% and 33.2% year-on-year, respectively. Venezuela's foreign trade policy has been heavily impacted by international sanctions, particularly those imposed by the United States and other Western countries. These sanctions have targeted key sectors of Venezuela's economy, including oil exports, which historically formed the backbone of its foreign trade. As a result, Venezuela has faced significant challenges in accessing international markets and obtaining necessary imports, leading to shortages of essential goods and exacerbating economic instability. Additionally, the sanctions have constrained Venezuela's ability to engage in normal trade relations, forcing the country to seek alternative partners, often with limited success. The restrictions have also hindered foreign investment, further complicating efforts to diversify the economy and stimulate growth. Despite attempts by the Venezuelan government to navigate these challenges through various strategies, including increasing cooperation with countries like Russia and China, the impact of the sanctions continues to pose formidable obstacles to the country's economic recovery and stability.

Sources of General Economic Information

Ministries

Ministry of Economy, Finance and Foreign Trade
Ministry of Foreign Affairs
Ministry of Industries and National Production

Statistical Office

National Institute of Statistics (in Spanish)

Central Bank

Central Bank of Venezuela (in Spanish)

Stock Exchange

Caracas Stock Exchange (in Spanish)

Search Engines

Terra

Economic Portals

Business News Americas

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