VENEZUELA: KEY FACTS

Overview:

  • Venezuelan politics have been dominated by the political left over the past two decades following the rise to power of Hugo Chavez and the political left in Venezuela.
  • President Chavez’s death in 2013 was a massive event and is likely to result in major changes in Venezuela in the coming years.
  • Since then, President Nicolas Maduro and his government have presided over an increasingly desperate economic situation.
  • Venezuela has some of the largest oil reserves outside of the Middle East and is a major source of oil for the United States and the rest of the Americas. Ethanol is its most precious commodity.

 

Key Facts and Data:

  • Official Name – Bolivarian Republic of Venezuela
  • Capital – Caracas • Government Type – Federal republic
  • Head of State and Government – President Nicolas Maduro (since 2013)
  • Population – 30,912,000
  • Land Area – 882,050 sq. km • Total GDP (US$) – $125 billion
  • Per Capita GDP at PPP (US$) – $14,544
  • Currency – Venezuelan Bolivar fuerte

Table of Contents

Current Events:

  • Recent Political Events
  • Recent Economic Events
  • Other Recent Events

Political Outlook

  • Overview of the Current Government
  • Leadership Profile
  • Summary of the Most Recent Elections
  • Leading Political Parties
  • Forecast for the Next Elections
  • International Relations Outlook
  • Potential Conflicts
  • Military Capabilities
  • Key Political Issues
  • Political Risk Outlook

Economic Outlook:

  • Economic Overview
  • GDP Growth Forecasts
  • Key Sector Forecasts
  • Inflation Forecasts
  • Foreign Trade Forecasts
  • Foreign Investment Forecasts
  • Exchange Rate Forecasts
  • Outlook for Key Sector
  • Key Economic Issues
  • Economic Risk Outlook

Demographic & Environmental Outlook:

  • Population Overview
  • Population Characteristics
  • Development of Leading Urban Centers
  • Key Demographic Issue
  • Topography and Climate Overview
  • Environmental Threat Summary
  • Key Environmental Issues
  • Demographic and Environmental Risk Outlook

Current Events and Recent Changes Overview

Venezuela: Recent Political Events and Changes

Key Political Events and Changes:

  • Three of Venezuela’s leading opposition political parties (the Justice First, Popular Will and Democratic Action parties) boycotted December 2017’s local elections. As a result, the ruling Socialists were able to win control of nearly all municipal governments in these elections.
  • Afterwards, the government announced that the three opposition parties that boycotted these elections would be barred from contesting 2018’s presidential election.
  • In December 2017, Brazil and Venezuela expelled one another’s diplomats after Venezuela accused Brazil of illegally impeaching former President Dilma Rousseff.
  • Venezuela and Canada also expelled one another’s ambassadors in December 2017. This followed accusations from Venezuela’s government that Canada was meddling in its affairs.

Venezuela: Recent Economic Events and Changes

Key Economic Events and Changes:

  • Oil prices rose to $70 a barrel (Brent Crude), or $64 (West Texas Intermediate), in early 2018, their highest level in more than three years. Oil prices were boosted by the recent political unrest in Iran.
  • The threat of default continued to hang over Venezuela as it struggled to finance its mounting pile of debt, which by some estimates now stands at more than $140 billion.
  • In late 2017, Russia agreed to restructure $3.2 billion in debt that it is own by Venezuela, providing a little breathing space for the embattled Venezuelan economy.
  • In January 2018, President Maduro introduced the “petro”, a cryptocurrency backed by Venezuela’s oil wealth, in a bid to raise hard currency and to sidestep sanctions imposed on Venezuela by the United States.
  • Hyperinflationary pressures continued to worsen as the country’s actual inflation rate was likely near 1,000% or more in recent months.
  • President Maduro named Major General Manuel Quevado as the new head of that country’s state-owned oil firm, PDVSA.

Other Key Events and Changes:

  • A report from the country’s health ministry showed that the rate of infant mortality and of maternal death has soared in Venezuela in recent years. Over the past two years, the number of women dying during childbirth has risen by 65%, while the number of children dying at birth has risen by 30%.
  • On top of these problems, diseases such as malaria and diphtheria have spread rapidly across Venezuela in recent years as a result of the country’s worsening economic crisis.

Venezuela Political Outlook

Venezuela: Current Government

Overview:

  • Nicolas Maduro, the chosen successor of his predecessor, the late Hugo Chavez, was elected as the new president in a close fought election in April 2013.
  • In January 2014, President Maduro shook up his government’s economic leaders in a bid to revive Venezuela’s weakening economy. The biggest change was the replacement of Finance Minister Nelson Merentes with the country’s public banking minister, Rodolfo Torres.
  • In December 2014, President Maduro moved Foreign Minister Rafael Ramirez to the post of envoy to the United Nations. He was replaced by Delcy Rodriguez.
  • In January 2017, President Maduro carried out a major cabinet reshuffle, replacing many of the government’s economic policy makers.

Key Members of the Government:

  • Head of State and Government – President Nicolas Maduro
  • Vice President – Tareck El Aissami
  • Minister of Foreign Affairs – Delcy Rodriguez
  • Minister of Economy and Finance – Ramon Lobo
  • Minister of the Interior and Justice – Gustavo Enrique Gonzalez
  • Minister of Defense – Vladimir Padrino
  • Minister of Labor – Francisco Torrealba
  • Minister of Oil and Mining – Nelson Martinez

Most Recent Election in Venezuela

Parliamentary Elections – December 2015

Venezuela’s right-wing opposition won a large majority of the seats in December 2015’s highly

anticipated National Assembly elections, dealing a major blow to the left-wing government of President Maduro. 

  • Venezuela’s collapsing economy was the dominant issue in these elections and voters punished the government for the country’s chronic shortages of basic goods and for Venezuela’s runaway inflation.
  • After these elections, President Maduro admitted defeat, ending fears that these elections would be rigged.

In the end, the right-wing opposition won 112 of the 167 seats in the parliament, giving it a super-majority.

  • This will allow the opposition to overturn many of President Maduro’s legislation and could lead to a major standoff between the legislature and the presidency

2015’s parliamentary elections in Venezuela was the first major defeat for the country’s left-wing government since it took power in 1999.  Moreover, it showed just how much the country’s economic collapse had impacted the government’s support in the years before the election.

Venezuela: Most Recent Election

 Presidential Election – April 2013

Summary of the Last Elections:

Interim President Nicolas Maduro won a much closer than-expected victory in Venezuela’s presidential elections in April 2013 that were held following the death of President Hugo Chavez. 

  • The fact that this election was so close has led to a significant increase in political tensions in Venezuela.
  • Moreover, President Maduro’s inability to win a comprehensive victory such as those won by his predecessor suggests that he will struggle to assert his authority over his country and dominate the political left as President Chavez did for more than 15 years.

President Maduro managed to defeat the center-right candidate Henrique Capriles by a margin of just 50.8% to 49.0%, a much closer result than polls had suggested. 

  • Moreover, Mr. Capriles and his supporters rejected the result, claiming that the election was marred by widespread fraud and other irregularities.
  • This led to major protests by supporters of both candidates that led to violence in many areas of Venezuela.

Venezuela: Most Recent Elections

Presidential Election – October 2012

Summary of the Last Elections:

Despite facing a unified political opposition for the first time in years, President Chavez was able to win reelection for a fourth term in office, defeating his centerright rival Henrique Capriles by a healthy margin in October 2012’s presidential election. 

  • President Chavez won 2012’s presidential election by a margin of 55.3% to 44.1% over the candidate of the unified political opposition in that country, Henrique Capriles.
  • President Chavez was aided by a high voter turnout among poorer Venezuelans that pushed the overall voter turnout in this election to 81%.
  • Meanwhile, the election itself turned out to be peaceful, despite an acrimonious campaign that led to a number of violent clashes in the weeks before the election.

President Chavez’s health was a major issue in this election, as he battled cancer in the months leading up to the election.

  • After being out of the public eye for a long period of time, President Chavez actively campaigned in the weeks leading up to the election.
  • Nevertheless, the election took place amid growing concerns over the president’s ability to remain in office while battling cancer.

Venezuela’s Leading Political Forces:

United Socialist Party of Venezuela (PSUV)

History:

The United Socialist Party of Venezuela was created in 2007 as a merger of all of the leftist political movements in Venezuela that supported former President Hugo Chavez.

  • By merging the country’s disparate leftist groups, former President Chavez was able to create the largest leftist party in Latin America.

Key Policies and Stances:

  • The PSUV’s economic policies include major state intervention in the economy and an increase in economic self-reliance.
  • The party has close ties with left-wing governments such as Fidel Castro’s Cuba and rejects the domination of Latin America by the United States.
  • The PSUV believes in major wealth redistribution programs designed to benefit the poorest segments of society

Outlook:

The death of Hugo Chavez and the close presidential election in the wake of his death has called into question the future of the PSUV.

  • President Nicolas Maduro is likely to struggle to keep the unity of the party as he struggles to assert his authority over the party

Venezuela’s Leading Political Forces:

Democratic Unity Roundtable (MUD)

History:

The Democratic Unity Roundtable was created in 2008 to unify rightist and centrist political parties in Venezuela in order to compete with the increasingly unified political left.

  • The coalition’s candidate for the 2012 and 2013 presidential elections, Henrique Capriles, has unified the party under his leadership.

Key Policies and Stances:

  • The coalition consists of a wide range of political parties and movements and has thus struggled to form a coherent party platform.
  • In recent campaigns, the coalition has advocated maintaining many of the left-wing government’s social welfare programs in a bid to lure poorer voters.

Outlook:

The great challenge facing the Democratic Unity Roundtable will be to maintain its unity as a result of the diverse groups within the coalition. 

  • If the coalition can remain united, it is likely to pose a major threat to the political left in Venezuela in the years ahead.

Venezuela: International Relations Outlook

Key International Disputes:

  • Tensions between Venezuela and two of its neighbors (Colombia and Guyana) have risen again in recent years.
  • Venezuela does claim the western third of smaller Guyana and a future land grab is not out of the question.
  • In the west, relations with Colombia have been strained by the poor relations between the two countries’ governments.

International Relations Outlook:

  • The government will continue to develop closer ties with other left-wing governments in Latin America.
  • The United States will continue to keep a close eye on events in Venezuela in order to ensure continued oil supplies and to prevent Venezuela’s government from spreading its far-left message to other Latin American countries.

Potential Conflict: Guyana

Main Disputes:

  • Venezuela claims all of western Guyana, a region known as Essequibo.
  • The territory in question is potentially rich in natural resources, including uranium and gold.
  • The border between the two countries was settled by international arbitration in 1899.

Best- and Worst-Case Scenarios:

  • Best Case Scenario – Venezuela does not act upon its claim to the Essequibo region, allowing for peace between the two countries to remain in place.
  • Worst-Case Scenario – Venezuela makes a land grab for the disputed region, potentially bringing the US military into the equation.

Venezuela: Political Risk Outlook

  • The ongoing standoff between the left-wing government and its right-wing opponents is threatening to bring more unrest to Venezuela and as long as this dispute continues, political risk levels will remain among the highest in Latin America.
  • Moreover, the risk of full-blown civil war in Venezuela remains large.

Venezuela: Economic Overview

Economic Summary:

Venezuela’s economy has been battered by government mismanagement over the past 15 years and this has led to the country having some of the region’s lowest growth rates during that period.

  • Moreover, the political unrest that continues to destabilize the country is having a prolonged impact on the economy.

Venezuela’s economy is dominated by the oil and gas sector.

  • Venezuela has, by some measurements, the world’s largest known oil reserves.
  • Most other sectors are suffering terribly from the current economic and political situation.

What could be one of South America’s richest countries is instead one of its poorest thanks to decades of economic mismanagement. 

  • Even with guaranteed oil and gas revenues, the economy is set for a prolonged period of instability, with growth being jeopardized by the political standoff which is likely to continue at various levels.

 

Key Wealth-Related Issues and Trends

Venezuela was once one of the richest countries in Latin America.

However, economic mismanagement has resulted the country falling behind many countries in the region.

Moreover, Venezuela is home to great wealth disparities, leading to the current political split.

 

Venezuela has the potential to be one of the richest countries in South America, given its huge oil and gas reserves.  However, it will take more prudent economic management than the country has experienced in recent decades for significant gains in wealth levels to be achieved.

Venezuela still has one of the largest middle classes in Latin America, despite its poor economic performance over the past two decades.  Nevertheless, nearly 27% of the population continues to live in poverty and the government has made the reduction of poverty its leading goal.

Venezuela: GDP Growth Outlook

Current Outlook:

  • Venezuela’s economy fell back into a deep recession in over the past four as hyperinflationary pressures worsened at the same time as product shortages became more widespread.
  • Falling oil prices and output also have had a negative impact on Venezuela’s economy in recent years.

Future Outlook:

  • Venezuela’s economic collapse will accelerate over the near-term as hyperinflation destroys domestic demand and oil output continues to fall.
  • In the longer-term, political uncertainty will continue to prevent a return to growth during the forecast period.

Venezuela: Key Economic Sector

The Oil and Gas Industry

  • Venezuela’s economy fell back into a deep recession in over the past four as hyperinflationary pressures worsened at the same time as product shortages became more widespread.
  • Falling oil prices and output also have had a negative impact on Venezuela’s economy in recent years.

Future Outlook:

  • Venezuela’s economic collapse will accelerate over the near-term as hyperinflation destroys domestic demand and oil output continues to fall.
  • In the longer-term, political uncertainty will continue to prevent a return to growth during the forecast period.

Venezuela: Key Economic Sector

The Oil and Gas Industry

Venezuela: Inflation Outlook

Current Outlook:

  • Inflation remained dangerously high in recent years, with hyperinflationary pressures devastating the country’s economy in recent years.

Future Outlook:

  • The government’s price controls are failing to stem rising inflation and as a result, Venezuela will continue to suffer from hyperinflation for the foreseeable future.

Venezuela: Foreign Investment

Foreign Investment Climate:

 

Foreign investment levels in Venezuela have remained depressed in recent years as the government has moved to nationalize large segments of the Venezuelan economy.

  • The oil sector received the bulk of this foreign investment.
  • However, many oil companies have been critical of Venezuela’s demands for increased royalty payments and state involvement in the sector.

Investment levels remain far below those of the 1970s.

  • Investors have been concerned with the government’s increasing influence over the economy. • The government has moved to attract more foreign investment from countries such as China in recent years.

 

Outlook For Future Foreign Investment:

Foreign investors will remain wary of the risks in Venezuela, even as the country has one of the most attractive oil industries for foreign investment. 

  • In private, most investors will hope for a removal of the left-wing government, followed by political stability, but this is a highly unlikely scenario.

Venezuela: Labor Force

Labor Force Overview:

Venezuela’s labor movement has had close ties with the left-wing government in recent years.

  • However, relations between the government and workers in the oil industry has been highly contentious in recent years.

Venezuela’s unemployment rate has remained relatively high in recent years.

  • Moreover, some analysts have put the unemployment rate at more than 50%, given the unreliability of employment statistics in Venezuela.
  • Outside of the oil industry, foreign investment will remain small, curtailing potential job creation.

Outlook For the Labor Force:

The threat of a complete economic collapse in Venezuela is likely to lead to a major increase in the country’s unemployment rate in the years ahead.  • Moreover, many highly-skilled workers are likely to leave the country due to the lack of job opportunities.

 

Forecast Assumptions and Risk

Venezuela: Economic Risk Outlook

Political unrest has led to higher rates of economic risk, despite the higher oil prices of recent years.

    • The hyperinflation and product shortages in recent years have further raised economic risk levels in Venezuela.
    • As long as the political situation remains unstable, economic stability cannot be assured, maintaining the current high levels of risk.

Composition of Venezuela’s Population

Most Venezuelans can trace at least a part of their ancestry to Italy, Spain or Portugal.

  • However, Venezuela is not dominated by a European upper class as many of its neighbors are. Most black Venezuelans are descendants of slaves.
  • The Amerindian minority lives mostly in remote areas

Spanish is the official language of Venezuela and is spoken by nearly all of the population.

  • Only some of the more remote Amerindian groups in southern Venezuela do not speak Spanish.

Roman Catholicism is the dominant religion of Venezuela.

  • Some Protestant churches have made inroads into Venezuela

Venezuela: Leading Urban Centers

Summary:

  • Venezuela is one of the most urbanized countries in the Americas, with most of the population living near to the Caribbean coastline.
  • All major Venezuelan cities continue to experience rapid population growth, often resulting in large areas of slums on the edges of the major cities.

Key Demographic Issue in Venezuela Population Expansion

Population growth in northern South America will be among the fastest in the Western Hemisphere.

  • This will place increasing pressure on the region’s economy as oil, mineral and agricultural revenues will be spread more thinly.

Political stability will also be threatened by this population growth.

  • Emigration is likely to increase as the economy struggles.
  • Internal divisions based on wealth or ethnicity will continue to grow.

The region’s environment will be also be threatened.

The government of Venezuela, along with other government’s in the region, has been trying to promote a lower birth rate for the country.  Initial signs are that this is having an impact, but nevertheless, population growth will remain high over the coming two to three decades before it begins to stabilize.

Venezuela: Key Social Issue Crime

Much of the Caribbean Sea is polluted in areas along the coast of Venezuela

Current Outlook:

  • Venezuela easily has the highest murder rate in South America and one of the highest crime rates of any country in the world.
  • Despite the government’s extensive social programs, crime rates in Venezuela have soared since the political left came to power, with the murder rate increasing by 70% since 1999.             

Future Outlook:

  • The government needs to reverse its policy of ignoring crime in poorer neighborhoods where the government enjoys widespread support.
  • However, the potential for more political unrest could result in even higher crime rates in the coming years.

Venezuela: Topography and Climate

  • The Orinoco River drains the vast central plain, emptying into the Atlantic Ocean in the northeast of the country.
  • The tropical Guiana Highlands cover most of southern Venezuela.
  • North-western Venezuela has a relatively hot and dry climate, while the rest of the country is tropical and receives significant rainfall.
  • Highland areas experience milder temperatures

Key Environmental Issues:

Massive floods in 1999 resulted in thousands of fatalities along coastal areas of Venezuela. • Much of this is due to the overdevelopment of coastal regions.

Much of Venezuela’s tropical forests in the southern areas of the country have been cleared in recent decades.

  • Recent deforestation has proven to be higher than was initially expected. • Population growth and internal migration will add to the problem.

Pollution associated with Venezuela’s oil industry, including oil spills, harms Lake Maracaibo in western Venezuela.

Key Geographic Issue in Venezuela

Venezuela’ Rainforests

Venezuela is home to three percent of the world’s rainforests.

  • This includes some of the world’s richest areas for flora and fauna.

To date, Venezuela has lost 41% of its original rainforests.

  • Another 40% is currently under threat from the same forces.
  • Economic exploitation of these forested lands is a growing threat.
  • Logging, mining and oil exploration are the key threats to the rainforests in Venezuela.

In years past, most of the deforestation in Venezuela has occurred in northern areas of the country.  However, now it is the vast rainforests of southern Venezuela that are under threat from economic expansion into these remote regions.

Venezuela: Demographic and Environmental Risk Outlook

 

By | 2019-01-02T07:09:25+00:00 January 2nd, 2019|Uncategorized|0 Comments

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