Venezuela’s Economy: Oil, Political Instability, and Social Challenges

With an economy dominated by the production of oil, Venezuela has enjoyed the highest standard of living in Latin America. In spite of its success in the oil industry, agriculture and manufacturing also play important roles in Venezuela’s economy. With this in mind, it would seem as though Venezuela’s economic state has flourished. Rather, it has suffered from the effects of political influence, corruption, and poor economic management. The distribution of wealth across Venezuela has caused the elite to benefit at the cost of the working people. This is mainly due to the economic and political structure of the country. Even with the plentiful resources Venezuela possesses, it is constantly being threatened by political instability, changing global markets, and social challenges.

Accounting for 90 percent of export earnings, about 50 percent of federal budget revenues, and around 30 percent of GDP, oil has had quite a substantial impact on Venezuela’s economy. This is no surprise, considering Venezuela has the largest oil reserves outside of the Middle East. From 1929 to 1970, Venezuela was the world’s largest exporter of petroleum. Out of this, about 54 percent was exported to the United States. With all the success the oil industry brought, the government wanted to increase their control and in 1975 the oil industry was nationalized. PDVSA, the holding company for four major petroleum-producing members, was created in 1977 as a result of the new nationalized oil industry. During the 1980s, fluxuating oil prices and Venezuela’s deteriorating internal financial situation triggered the seizure of 6 billion dollars of oil company earnings to help offset the debt problems. This action virtually eliminated the sovereignt...

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...ing greater attempts to address and resolve these issues, they still have a great impact on Venezuela’s economy.

From 1960 until 2008, Venezuela’s GDP has increased overall as shown by Figure 4. This increase can be used to measure the general standard of living in the country. Major improvements in Venezuela’s economy have allowed them to diversify many of their industries. However, the economic potential of this country is still hindered by political instability, changing global markets, and social challenges. With an effective stimulus package implemented within the next few years, the economy of Venezuela may still see some major improvements. Even this though will not help solve the distrust Venezuela has created throughout the world in an attempt to attain a better economic system. That is something that can only be solved by the generations to come.