Overview of the Economy of Venezuela
Venezuela has a mixed economy, which means there are both privately-owned and state-owned businesses. Some of the state-owned organizations are run by employees under a co-management plan started by Hugo Chavez. With this work plan, employees develop management policies and annual budgets. These employees also vote for managers and department heads.
Its nominal gross domestic product (GDP) for 2015 was $131.9 billion. The nominal GDP per capita is approximately $4,262 annually. The labor force is made up of 14.34 million people. The largest percentage of these individuals work in social and personal services (31.4%). This is followed by the service industry (23.4%), manufacturing (11.6%), and construction (9%).
Leading Industries in Venezuela
The economy of Venezuela is mainly based on petroleum exploitation and manufacturing. Petroleum alone makes up more than 50% of the country’s total GDP. The most common products from the manufacturing sector include aluminum, cement, steel, electronics, automobiles, and food and drinks. Agriculture, which is 3% of the economy, focuses on cultivation of rice, corn, fruit, beef, and pork.
Top Export Goods, Import Goods, and Trade Partners
In 2014, this country exported $63 billion worth of goods, making Venezuela the 51st largest export economy in the world. Its primary exported goods include crude petroleum ($47.8 billion), refined petroleum ($10.9 billion), acyclic alcohols ($606 million), gold ($580 million), and petroleum coke ($425 million). Most of the exports from Venezuela are imported by such countries as the US ($27.5 billion), India ($11.7 billion), China ($10.1 billion), Singapore ($3.86 billion), and Spain ($1.55 billion).
Venezuela imported $36.6 billion of goods, giving the country a positive trade balance of $26.3 billion. The majority of its imported goods are refined petroleum ($2.94 billion), packaged medicines ($1.71 billion), frozen beef ($1.07 billion), concentrated milk ($776 million), and corn ($726 million). Its major import partners include the US ($10.1 billion), China ($5.62 billion), Brazil ($4.63 billion), Argentina ($1.98 billion), and Colombia ($1.88 billion).
Challenges Faced by the Economy of Venezuela
Venezuela once had a strong and growing economy due to its large-scale petroleum production. Currently, however, it is facing an economic disaster. Basic necessities such as food, electricity, and medicine are scarce and insufficient for its residents. In addition, this country has experienced extreme inflation. For example, the cost of a bag of groceries today is 524% more expensive than in 2015. One of the reasons for this crisis is that the country has overly depended on petroleum rather than focusing on diversifying its economy. Between 2014 and 2015, the price of oil dropped by 50%, cutting earnings by around $60 billion.
Future Economic Plans
The Minister of Oil has been in negotiations with the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member. These discussions have centered around reducing the oil production of other OPEC members in an attempt to drive up oil prices. So far, the talks have been unsuccessful although, there has been a slight increase in prices. The government has also been working to form a strategic partnership with China. This partnership will provide ownership rights of Venezuela’s natural resources to China in exchange for bailout loans. Other countries have offered humanitarian assistance to Venezuela, although the government has generally declined to accept this aid.
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