Venezuela Overview: Economy
About 13% of Venezuelans are engaged in farming. The chief crops are corn, sorghum, sugarcane, rice, bananas, vegetables, and coffee. There is also extensive livestock raising and fishing. Venezuela's mountains long impeded the nation's economic development because of the communications problems they presented. The country has developed a fine highway system, but goods are still carried primarily by ship. Venezuela has petroleum reserves that are by some estimates the second largest in the world, and oil has accounted for about 90% of the export income, 50% of government earnings, and 30% of the gross domestic product. A lack of investment and other issues led to a significant drop in petroleum production in the 21st cent., which contributed to the country's accelerating economic problems in the mid-2010s. Venezuela is the largest foreign supplier of oil to the United States. Other exports are bauxite, aluminum, steel, chemicals, iron ore, coffee, cocoa, rice, and cotton. Imports include raw materials, machinery, transportation equipment, and construction materials. The main trading partners are the United States, Colombia, and Brazil. A large amount of oil is exported to the Netherlands Antilles and Aruba for refining. Maracaibo , Puerto Cabello , La Guaira , and Cumaná are the important ports.
The government has used oil revenues to stimulate manufacturing industries. Food processing, automobile assembly, and the manufacture of construction materials, textiles, steel, and aluminum have become well established. Heavy-metalworks have been built on the Orinoco near Ciudad Guayana. Venezuela also uses its rivers to great advantage as sources of hydroelectric power. Despite government reform programs, Venezuela's wealth remains in the hands of a small minority. A disproportionately high percentage of the population lives in poverty; after the end of the oil boom in the early 1980s, the percentage of poor Venezuelans increased dramatically, from 28% to 68% in 2003. Many cities have squalid shanty towns, and in the countryside many people are still tenant farmers.
Under Presidents Hugo Chávez and Nicolás Maduro, the government has held down the price of staples with price controls (since 2003; other items were added in 2011), and has increased state control over and participation in the economy generally. The government has also emphasized the use of microloans to develop small businesses and the formation of cooperatives in an attempt to improve the lives of poorer Venezuelans, has seized factories, farmland, and other assets it has determined to be
unproductive, and has forced multinational oil companies to cede a controlling stake in their Venezuelan ventures to the government. Beginning in late 2005, price pressures on wholesalers and other middlemen due to inflation and price controls led to shortages of many staples in retail stores. In Aug., 2008, the government raised prices significantly on many staples and ended price controls on others in an attempt to end food shortages. Meanwhile, oil production has decreased as the government has diverted money from the development and maintenance of the oil industry in order to fund social programs.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
See more Encyclopedia articles on: South American Political Geography