Venezuela economy: background and development

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

Venezuela is one of the largest countries on the South American continent. It includes several islands in the Caribbean Sea, the largest of which is called Margarita. A country with an area of 916 thousand square meters. km borders with Brazil and Colombia. As of early 2017, the population was barely 31 million.

As part of a federal republic headed by President Nicolas Maduro, 21 states. The basis of the population are Venezuelans (descendants of Indians and Spaniards) - 67%, Europeans - 21%, blacks - 10%.

Climate and natural conditions

The central part is represented by a low-lying flat area with the Orinoco River. The Caribbean Andes stretch from north to west, the Cordillera de Mérida range, and part of the Guinean plateau rises in the southeast.

The climate is hot subequatorial. Most of the year, the north of the country suffers from drought, while the central regions often have rainy seasons.

Vegetation cover is rich and varied: mangroves, xerophytic-succulent woodlands, dry tall grass savannahs, deciduous rainforests, hylaea andetc.

Development of the Venezuelan economy

Few people know that the described Latin American country is the first oil exporter. In the 16th century, the first barrel of black gold crossed half the world on its way to Madrid. In the 17th-18th centuries, the main export items were indigo and sugar, and a little later - cocoa and coffee. In 1922, one of the largest oil fields was found near Lake Maracaibo in the village of Cabimas, which marked the beginning of the oil boom and brought about dramatic changes in the Venezuelan economy.

The location of fields in close proximity to the sea, the low standard of living of the population (cheap labor) and the high potential of wells provoked an active interest of oil companies. During the years of the Second World War, new deposits were found and put into operation, a few years later their total area reached 68 thousand square meters. km.

In the lower reaches of the Orinoco River, the largest deposits of iron ore were discovered, the development of which was immediately intercepted by American monopolists. As of 1970, the volume of foreign investment in the development of the Venezuelan economy amounted to $5.5 billion. 11% of this amount belonged to the United States.

From 1975-1980 the state occupied a leading position in economic development in Latin America. Infrastructure began to develop actively.

The nationalization of the oil and iron ore industries was a responsible step towards independence and national sovereignty. The basis of the Venezuelan economy was now completelystate control. In most industries, foreign companies were asked to transfer 80% of the shares to the citizens of the country within three years.

Import and export

Specialists say that 50% of the Venezuelan economy is foreign trade. The lion's share of sales falls on oil and related products, iron ore is in demand. The export list includes coffee, cocoa, asbestos, gold, sugar, bananas, rice, hides, livestock, timber.

Priority import items are high-tech equipment, vehicles and components, raw materials for oil pipelines, industrial consumer goods. Every year, food imports increase, because agriculture is in decline and is unable to meet the needs of the population. Most of the cost of procurement comes from the United States - more than 3.5 billion dollars a year.

Extractive industry

The main product of the mining industry is iron ore. In the large deposits of El Pao, San Isidro and Cerro Bolivar, the fossil is mined by open pit and contains up to 70% iron. Its annual production is 15-17 million tons, 90% of this amount is exported to America and Europe.

Manganese ore is mined in the Upata region (Guiana Plateau). In the Caribbean Andes, nickel, lead, zinc, asbestos, and silver are mined in small quantities. Phosphorite ores are being mined in the suburban area of San Cristobal.

Gold is mined in El Callao. Here it is actively gaining momentumdiamond production (700-800 thousand carats per year). A large deposit of precious stones was discovered in the Cuchivero river basin and was accompanied by a diamond rush. For several consecutive years, Venezuela has held the position of the largest supplier of diamonds among Latin American countries.

Manufacturing

According to general information on the Venezuelan economy until 2013, the oil refining, chemical and engineering industries developed at a rapid pace. Nevertheless, more than 50% of the value of the gross product comes from the textile, food, woodworking and leather and footwear industries.

The development of the largest iron ore deposits gave impetus to the development of the metallurgical industry. On the territory of the state there are several plants with a full cycle and electric blast furnaces, aluminum plants, etc.

Production

At the heart of the development of mechanical engineering is the car assembly industry. The Venezuelan economy can be briefly described as supported by factories for the production of agricultural implements, tractors, construction equipment, tools, etc. Companies that manufacture television and radio equipment are developing. Large-scale construction in the mining, oil and manufacturing industries stimulates the creation of production sites for the production of building materials.

Livestock

Cattle breeding determines the cost of agricultural products by 55%. Farming is concentrated in Llanos.

The territory of dairy farming is the valley of Caracas, the basins of the Valencia and Maracaibo rivers. In the same areas, poultry producers supply the cities with eggs and meat. The arid Caribbean coast (Lara state) is famous for its largest goat and sheep farms. Over the past 15 years, the livestock sector has significantly succeeded in comparison with the crop sector. The mass share of large farms using modern methods of raising and caring for animals has increased.

Fishing is developed in the northern part of the country (the coast of Venezuela, Lake Maracaibo). Today, tiger prawns, the most valuable and revered product among gourmets, have a positive impact on the Venezuelan economy.

Forestry is not given much importance. Harvesting of tannins, vanilla, guaiab resin and rubber used in perfumery and pharmacology is carried out in minimal quantities.

Crop production

The state has a record amount of arable land for Latin America. Only a third of them are processed. According to the latest data from the Venezuelan economy, crop production is recognized as the most backward industry.

45% of the cost of agricultural products comes from agriculture. 2/3 of arable land is concentrated in the north of the country. In Llanos, crop production is developed along the rivers and at the foot of the Andes. The problem of the region is severe droughts. In order to solve the problem, the government has developed a plan to create a water economy for the next 30 years with the construction of dams and the organization of an irrigation system on 2 million hectares of land.

A fifth of the area is occupied by the main export crops - cocoa and coffee. The raw material for the fragrant invigorating drink grows in the mountainous states in the northwest. The raw materials for most chocolates in the world are collected in the states of the Caribbean. Cotton, tobacco and sisal crops have grown in Llanos over the past 8-10 years.

Transportation

Across the territory of Venezuela, the lines of communication are unevenly distributed. The maximum concentration of highways and railways is in the north. The latter are short unconnected lines with a length of 1.4 thousand km. Passenger and ¾ of freight transportation is carried out by road.

The Orinoco River is the main inland waterway, steamboat traffic is maintained on the lakes of Maracaibo and Valencia. The lack and low quality of land routes is compensated by coastal transportation by sea. In terms of scale, the ocean merchant fleet is one of the three leaders in South America. 23 ports are equipped for the export of oil and related products, and another 8 ports for the export and import of other goods.

The organization of air communication with remote southern and eastern regions is of particular importance for the Venezuelan economy. Regular flights connect the capital with major cities, oil fields and mining centers.

Economic crisis

2013 was a fateful year for the Venezuelan economy. The crisis affected all spheres of the life of the state. Only high prices for the main exported commodity, oil, saved the country from default. At the beginning of the year before coming toMaduro authorities, the country's public debt was 70% of GDP with a budget deficit of 14%. At the end of 2013, inflation was 56.3%. In this situation, the parliament has endowed the new president with emergency powers. To meet the expectations of millions of voters, the guarantor launched an economic offensive that introduced a 30% cap on the profits of private enterprises. There was an acute shortage of essential goods - sugar, butter, toilet paper - in the country. Government representatives unanimously stated that the cause of the collapse of the Venezuelan economy was corruption, speculation, sabotage and the ongoing financial war against the state. Maduro initiated a program to combat profiteering. After a month of operation of the new service, the Daka trading network was nationalized. For setting a markup on goods at 100% instead of the allowable 30%, the property and management of supermarkets were arrested.

2015: falling oil prices

In 2014, the Venezuelan economy, which was successfully moving towards an exit from the crisis, was shaken by another blow. World oil prices fell sharply. In comparison with the previous year, the income from the export of black gold decreased by 1/3. In an attempt to reduce the budget deficit, the Central Bank issues more banknotes, which leads to inflation of 150% (official data as of September 2015). In another attempt to contain inflation, the government is developing a complex system of foreign exchange. A week later, the official dollar exchange rate exceeded the market rate by more than 100 times. Adhering to the ideology of Chavismo, the Parliament, headed bylimited the prices of food products as president, which provoked a total shortage of essential goods.

2016: things get worse

In January, left-wing socialist Luis Salas is appointed head of the Ministry of Economy. To match the other members of the administrative apparatus of Maduro, the official sees the cause of the problems of the Venezuelan economy in the conspiracy and financial war of Europe against his homeland.

According to IMF estimates, in 2016 the level of GDP decline is approaching 20%, unemployment is growing rapidly - 25%, the budget deficit is 18% of GDP. Inflation of 550%, combined with an external debt exceeding $130 billion, is pushing the Venezuelan economy towards default every day.

The banknote of the highest denomination - 100 bolivars costs 17 US cents. Hyperinflation nullifies the purchasing power of citizens. According to the local Center for Documentation and Analysis (Cendas), a basic food basket for a family costs eight times the minimum wage.

Our days: causes of the crisis

The main factors that provoked economic destabilization are structural and political foundations, in particular, dependence on imports, a sharp drop in the world oil price, as well as total state control over the production and distribution of food products.

Due to the deteriorating economic situation in Venezuela in the first decade of 2017 and the refusal of President Maduro to hold a referendum on changes in the political course of the statemass protests took place in major cities. More than a million citizens, dissatisfied with the actions of the authorities, took to the central streets demanding to bring essential products - flour, eggs, milk, medicines - to shops.

The opposition accuses the incumbent head of state of following the anti-social laws of dictator Hugo Chavez, which led to a deep crisis, which will be aggravated by the decline in oil prices. In turn, Nicolas Maduro accuses the country's aristocracy of boycotting the economy in order to achieve their goals through corrupt means.