The economy of Venezuela is built upon the nation's rich petroleum and mineral resources. While resource extraction has assisted in developing an industrial economy, the nation is vulnerable to fluctuations in world markets.

High petroleum prices in the early 1980s gave the country the highest annual per capita income in South America, but in the early 1990s a weak global oil market, coupled with political instability and a crisis in the banking system, produced a series of economic shocks for the country. The gross domestic product (GDP), after rising throughout the 1980s, began to fall in the 1990s as the inflation rate rose.

The government responded by reducing spending, improving tax collections and accelerating privatization of state-owned firms, all intended to reduce inflation and the national deficit. The national budget in 1997 included revenues of $21 billion and expenditures of $18.2 billion. The GDP in 1998 was $95 billion.

ECONOMIC INDICATORS (charts and tables)

Agriculture; Forestry and Fishing; Mining; Manufacture; Energy
Currency and Banking; Foreign Trade; Transportation; Communications

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The Venezuelan government passed the Agrarian Reform Law in 1960, which is aimed at expanding and diversifying agricultural production. Agriculture, including forestry and fishing, employed 13 percent of the workforce; in 1998 it contributed 5 percent of the GDP. The main crops include sugarcane (7.1 million metric tons in 1999); fruits such as bananas, plantains and oranges (2.8 million); maize (1 million); rice (722,000); cassava (487,685); and coffee (78,000). Livestock raising is carried on chiefly on the Llanos and east of Lake Maracaibo. In 1999 the livestock population numbered 12.7 million head of cattle, 3.2 million hogs, 4 million goats, 0.8 million sheep and 100 million poultry.

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Although forests cover much of Venezuela, the timber industry is underdeveloped largely because of the inaccessibility of the forest areas. Timber is used mainly as fuel and by the building, furniture manufacturing and paper industries. In 1998, 2.2 million cubic meters (76 million cubic feet) of timber were produced.

The rich fishery resources of Venezuela include a wide variety of marine life. The most important commercial catch is shrimp, followed by tuna and sardines. Important pearl fisheries are located off Margarita Island. The fish catch in 1997 was 502,728 metric tons.

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Petroleum, located in the Maracaibo Basin and in the eastern part of the country, dominates the Venezuelan economy. Crude and refined oil are the main source of government revenue and account for about one-quarter of the GDP. In 1997 Venezuela produced 1.16 billion barrels. Much of its oil is exported to the Netherlands Antilles for refining. Venezuela is a founding member of the Organization of Petroleum Exporting Countries (OPEC). The Venezuelan government nationalized the petroleum industry in 1976, although private investment and foreign participation has been permitted since 1992. The country has petroleum reserves estimated at 78 billion barrels, including those in an oil field discovered in 1989, which increased known reserves by at least one-third. The country also is a major producer of natural gas; output in 1998 was 28.3 billion cubic meters (0.99 trillion cubic feet). Venezuela has tapped its vast reserves of bitumen to produce liquid coal, an emulsion of bitumen and water mainly for use in power plants.

Other commercially exploited minerals include bauxite, diamonds, gold, silver, platinum, coal, salt, copper, tin, asbestos, phosphates, titanium and mica. Iron ore, in extensive deposits, was discovered near the Orinoco River in the 1940s. In 1998, 10.4 million metric tons of iron ore were mined, most of which was exported. Margarita Island, off the northern coast, has substantial magnesite reserves.

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Since the early 1960s the government of Venezuela has given high priority to the development of the manufacturing sector of the economy. Founded in 1961 in an area rich in natural resources, Ciudad Guayana is now a major center for industrial development. The leading manufactures of Venezuela include refined petroleum and petroleum products, steel, aluminum, fertilizer, cement, tires, motor vehicles, processed food, beverages, clothing and wood items.

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Much of Venezuela's electricity is produced in hydroelectric facilities, particularly at the Guri Dam, a major installation on the Caron� River. Venezuela generated 70 billion kilowatt-hours of electricity in 1998.

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The basic unit of currency is the bolivar, consisting of 100 centimos. The Central Bank of Venezuela, founded in 1940, is the government banking agent, the sole bank of issue and the clearinghouse for commercial banks. The country's main stock exchange is in Caracas.

In 1994 the government assumed control of 13 banks, including some of the largest institutions in the country, in a banking crisis precipitated by the collapse of Banco Latino, Venezuela's second largest bank. The bank, which had enjoyed loose government supervision, failed due to poor credit decisions and possible corruption. This failure spurred a loss of confidence in other domestic banks and government attempts to rescue the national banking system cost an estimated one-half of the annual budget. By early 1995 the government had provided financial assistance to more than half the country's commercial banks. Sixteen banks were nationalized or forced to shut down. In an attempt to recover some of the costs of the bailout, Venezuela sold three of the largest banks to foreign investors in December 1996.

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The main exports of Venezuela are petroleum and petroleum products, which together account for 79 percent of foreign sales. Other exports include bauxite and aluminum, steel, chemicals, agricultural products and basic manufactures. Total exports were estimated at $17.5 billion in 1998. Main imports include raw materials, machinery, transportation equipment, chemicals, foodstuffs and basic manufactures. Imports were estimated at $16.8 billion in 1998. Major trading partners for exports are the United States, Japan, The Netherlands (primarily petroleum to the Netherlands Antilles for refining) and Italy. Chief sources of imports are the United States (which represents 50 percent of the total sales), Germany, Japan, The Netherlands and Canada. Venezuela is a member of four international trade organizations, the Andean Group, Latin American Integration Association (LAIA), Group of Three and the Association of Caribbean States (ACS). These organizations work toward improving conditions within member countries by increasing economic integration and international trade.

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In 1998 Venezuela had 96,155 km (59,748 mi) of roads, of which 34 percent were paved. Highway density was greatest in the north central area, with an extensive highway system under construction to connect major urban centers and remote rural areas. In 1997 the country had only 396 km (246 mi) of operated railroad track, mainly a line from Puerto Cabello to Barquisimeto. The leading seaports of Venezuela include La Guaira, Puerto Cabello and Maracaibo. Transport on interior waterways, particularly the Orinoco River is also important.

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In 1998 Venezuela had some 117 telephone lines for every 1,000 people. The country's phone system was privatized in 1991, leading to a substantial increase in service. An estimated 180 television sets and 472 radios were in use for every 1,000 residents. Influential daily newspapers included El Nacional and El Universal, published in Caracas.

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