The economy of Venezuela is based largely on the petroleum and manufacturing sectors and has been in a state of total economic collapse since the mid-2010s. Venezuela is the sixth largest member of OPEC by oil production. Since the 1920s, Venezuela has been a rentier state, offering oil as its main export. The nation has experienced hyperinflation since 2015.
In 2014, total trade amounted to 48.1% of the country’s GDP. Exports accounted for 16.7% of GDP and petroleum products accounted for about 95% of those exports. From the 1950s to the early 1980s, the Venezuelan economy experienced a steady growth that attracted many immigrants, with the nation enjoying the highest standard of living in Latin America.
During the collapse of oil prices in the 1980s the economy contracted, the currency commenced a progressive devaluation and inflation skyrocketed to reach peaks of 84% in 1989 and 99% in 1996, three years prior to Hugo Chávez taking office.
Venezuela manufactures and exports heavy industry products such as steel, aluminum and cement. Production is concentrated around Ciudad Guayana, near the Guri Dam, one of the largest dams in the world and the provider of about three-quarters of Venezuela’s electricity. Other notable manufacturing includes electronics and automobiles as well as beverages and foodstuffs.
Other Exports
Agriculture in Venezuela accounts for approximately 4.7% of GDP, 7.3% of the labor force and at least one-fourth of Venezuela’s land area. Venezuela exports rice, corn, fish, tropical fruit, coffee, pork and beef. Venezuela has an estimated at USD$14.3 trillion worth of natural resources and is not self-sufficient in most areas of agriculture.
In spite of strained relations between the two countries, the United States has been Venezuela’s most important trading partner. American exports to Venezuela have included machinery, agricultural products, medical instruments and cars. Venezuela is one of the top four suppliers of foreign oil to the United States. About 500 American companies are represented in Venezuela.
According to the Central Bank of Venezuela, between 1998 and 2008 the government received around US$325 billion through oil production and exports in general. According to the International Energy Agency (as of August 2015), the production of 2.4 million barrels per day supplied 500,000 barrels to the United States.
Further Decline
Since the Bolivarian Revolution half-dismantled its PDVSA oil giant corporation in 2002 by firing most of its 20,000-strong dissident professional human capital and imposed stringent currency controls in 2003 in an attempt to prevent capital flight, there has been a decline in oil production and exports and a series of stern currency devaluations.
Further yet, price controls, expropriation of numerous farmlands and various industries, among other disputable government policies including a near-total freeze on any access to foreign currency at reasonable “official” exchange rates, have resulted in severe shortages in Venezuela and steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country as has been the case with several technological firms and most automobile makers.
In 2015, Venezuela had over 100% inflation—the highest in the world and the highest in the country’s history at that time. According to independent sources, the rate increased to 80,000% at the end of 2018 with Venezuela spiraling into hyperinflation while the poverty rate was nearly 90% of the population. On November 14, 2017, credit rating agencies declared that Venezuela was in default with its debt payments, with Standard & Poor’s categorizing Venezuela as being in “selective default.”
