Hola Dr.

Hernndez

Le mando algunos datos de Venezuela, por si le sirven, y las fuentes
Euromonitor International
Statistical Summary
2008 2009 2010 2011 2012 2013
Inflation (%
change) 31.4 27.2 28.2 26.1 21.3 36.6
Exchange rate
(per US$) 2.14 2.14 2.58 4.29 4.29 6.06
Lending rate 22.4 19.9 18.3 17.2 16.4 15.8
GDP (% real
growth) 5.3 -3.2 -1.5 4.2 5.6 1.3
GDP (national
currency
millions) 677,594.0 707,263.0 1,016,830.0 1,357,487.1 1,640,333.2 2,260,313.5
GDP (US$
millions) 315,953.6 329,787.8 394,348.2 316,482.2 382,424.5 373,033.1
Population,
mid-year
('000) 28,288.7 28,749.9 29,208.4 29,663.8 30,115.7 30,563.3
Birth rate (per
'000) 21.3 21.0 20.6 20.3 20.0 19.7
Death rate (per
'000) 5.1 5.1 5.1 5.1 5.2 5.2
No. of
households
('000) 6,516.3 6,727.0 6,944.6 7,169.0 7,390.9 7,614.0
Total exports
(US$ millions) 95,021.0 57,603.0 65,745.0 92,811.0 97,340.0 92,317.8
Total imports
(US$ millions) 50,971.0 39,646.0 38,613.0 46,813.0 59,339.0 52,746.7
Tourism
receipts (US$
millions) 1,029.0 990.0 739.0 777.0 1,498.3 2,094.2
Tourism
spending (US$
millions) 2,040.0 1,835.0 1,809.0 2,400.0 2,721.0 3,648.2
Urban
population
('000) 24,898.4 25,314.4 25,728.4 26,140.0 26,548.6 26,953.8
Urban
population (%) 88.7 88.8 88.8 88.8 88.8 88.8
Population
aged 0-14 (%) 30.2 29.8 29.5 29.1 28.8 28.5
Population
aged 15-64
(%) 64.5 64.8 64.9 65.1 65.2 65.3
Population
aged 65+ (%) 5.3 5.4 5.6 5.8 6.0 6.2
Male
population (%) 50.2 50.2 50.2 50.2 50.1 50.1
Female
population (%) 49.8 49.8 49.8 49.8 49.9 49.9
Life
expectancy
male (years) 70.9 71.0 71.2 71.4 71.6 71.7
Life
expectancy
female (years) 76.8 77.0 77.2 77.4 77.5 77.7
Infant
mortality
(deaths per
'000 live
births) 10.6 10.6 10.4 10.2 10.0 9.8
Adult literacy
(%) 95.3 95.5 95.8 96.0 96.2 96.4
Next

Imports and Exports
Major export destinations 2013 Share (%) Major import sources 2013 Share (%)
North America 39.7 North America 31.4
Asia-Pacific 31.9 Latin America 28.9
Latin America 12.2 Asia Pacific 19.6
Other countries 8.7 Europe 18.5
Europe 7.1 Other countries 0.7
Africa and the Middle East 0.5 Australasia 0.7

Fuente: Euromonitor International

OPERATING ENVIRONMENT
Venezuelan economy is the least competitive in the region
In the World Banks Ease of Doing Business 2014 report (Doing Business 2014), Venezuela ranked
181st out of 189 countries, slipping one place from 180th out of 185 economies in the 2013 report.
Venezuelas ranking in the Doing Business 2014 report reflects a highly challenging business climate
featuring excessive levels of red tape, scarce protection for investors and high barriers to foreign
trade. As a result, the country ranked 90th or lower in all 10 categories of Doing Business 2014.
Venezuela registered its worst performances in the Doing Business 2014 rankings in the Paying taxes
and Protecting investors categories, where it held the 187th and 182nd places at a global level
respectively ranking amongst the bottom 10 economies in the world in both of these categories.
Due to the lack of positive reforms to its business regulations, Venezuela lost places in seven out of
the 10 categories of Doing Business 2014 compared to the previous year. Moreover, in some
categories like Starting a business the country introduced reforms that made doing business more
difficult by increasing the companies registration fees, resulting in the cost of a business start-up
rising to 35.6% of income per capita from 25.7% of income per capita in the previous year. The
exception to this trend was the category Getting credit where Venezuela improved the depth of credit
information by starting to collect companies data from financial institutions. As a result, the country
gained 24 places to rank 130th at a global level in this category of Doing Business 2014.
After contracting for two consecutive years (by 3.2% in 2009 and 1.5% in 2010, both in real terms)
owing to the impact of the 2008-2009 global economic crisis, the Venezuelan economy posted positive
economic growth of 4.2% and 5.6% in 2011 and 2012 respectively in real terms, due to rising exports
and high levels of government expenditure. However, real GDP growth is expected to moderate to
1.3% in 2013 and 3.0% in 2014 due to the effects of the global economic slowdown and the fragile
situation of Venezuelas public finances, which would restrain levels of government spending.
High levels of public spending have fed persistent general government net budget deficits during the
period 2007-2012 that hiked to 18.9% of total GDP in 2012 (up from 2.8% of total GDP in 2007) and
soaring levels of inflation that reached 21.3% in the same year one of the highest in the world. This
has in turn fuelled a rise in public debt levels as a percentage of total GDP to 45.8% in 2012 from
30.8% in 2007. The countrys financial system shows relatively low levels of bank nonperforming
loans as a percentage of total gross loans at 1.2% in 2012 (unchanged from 2007), although the
banking system remains subject to risks deriving from high levels of state intervention, negative
interest rates and strict foreign exchange controls in the country.
Business confidence levels have remained depressed after the succession of President Nicols Maduro
(who took office in March 2013) from ex-President Hugo Chvez (who was in power from 1999 to
2013). This is due to the continuity of policies of President Maduro in relation to his predecessor,
implementing a socialist economic model and thwarting private sector participation in the economy.
This has led to a highly uncertain political, economic and regulatory environment for private
companies operating in the country, which has negatively impacted investment and employment
levels in Venezuela.
The political environment in the country is highly polarised between supporters and opponents of the
government, resulting in frequent protests and clashes between the two factions. In addition,
insecurity and crime levels in Venezuela continue to be high, as shown by the countrys rate of
homicides which stood at 44.4 per 100,000 people in the population in 2012, one of the highest in the
world. This is reflected in the Political stability and absence of violence index published by the World
Bank, where Venezuela held 167th position out of 203 economies in 2012, and second to last amongst
Latin American countries only ahead of Colombia (187th). The Political stability and absence of
violence index measures the perceptions of the likelihood that the government will be destabilised or
overthrown by unconstitutional or violent means.
Over the period 2007-2012, the Venezuelan government has continued to increase state intervention
in the economy through nationalisations of private companies, price controls and a heavier regulatory
burden. Seizures of private capital (including equity, land and inventories) by authorities are common,
and the government maintains a confrontational stance towards private businesses, on which it
imposes fair prices in order to curb excessive profits. In the World Banks Regulatory quality index
which measures the perceptions of the ability of the government to formulate and implement sound
policies that permit and promote private sector participation -, Venezuela ranked 192nd out of 202
economies in 2012.
Corruption levels in the country are perceived as pervasive especially amongst government officials,
security forces and the judiciary. In Transparency Internationals Corruption Perceptions Index 2013,
Venezuela ranked joint 160th (together with Cambodia and Eritrea) out of 177 countries, comparing
unfavourably to Uruguay (joint 19th) and Brazil (joint 72nd).


GOVERNMENT REGULATION AND TRADING ACROSS BORDERS
Government policies are unfavourable towards foreign investment
During the period 2007-2012, Venezuelas climate for foreign direct investment (FDI) became
extremely challenging owing to government policies to increase control over the economy. The current
investment regulatory framework imposes restrictions on foreign investment in sectors including
hydrocarbons, banking, mining and media, although in practice private investment across all economic
sectors is exposed to risks of nationalisation, price controls and state intervention. In addition,
stringent foreign exchange controls imposed by the government make it highly difficult to repatriate
capital, dividends and profits, while public procurement processes favour state-owned companies or
private companies associated with the government.
As a consequence of the governments stance towards private investment, FDI inflows into Venezuela
have averaged 0.5% of total GDP over 2007-2012 (0.8% in 2012 alone), one of the lowest in the
region. After recording negative FDI inflows (or repatriation of investment by foreign companies) of
BsF4.7 billion (US$2.2 billion) in 2009 due to the impact of the global economic crisis, Venezuela
registered positive FDI inflows over 2010-2012 that reached BsF13.8 billion (US$3.2 billion) in 2012.
On the other hand, FDI outflows (or investment abroad by Venezuelan companies) during the period
2007-2012 have been negligible, averaging just 0.3% of total GDP.
The country has an overall poor infrastructure network as a consequence of chronic underinvestment
on infrastructure by the government. In the World Economic Forums Global Competitiveness Report
2013, Venezuela ranked 137th out of 148 economies in the Quality of infrastructure sub-category. Its
lowest rankings for infrastructure components were in the sub-categories Quality of electricity supply
(the cause of frequent blackouts in the country) and Port infrastructure, where it held the 142nd and
141st places respectively at a global level, while the best performance was in the Available airline
seat km/week sub-category, where it ranked 55th.
Venezuela has been a member of the World Trade Organization (WTO) since 1995 and it joined the
Mercosur trade bloc (which includes partners Brazil, Argentina, Uruguay and Paraguay) in July 2012,
after which it will have a period of four years to implement Mercosurs common tariffs. For imports
from countries outside Mercosur, Venezuela applies tariffs generally of up to 40.0%. In addition,
imports into the country are taxed VAT at 12.0% (with the exception of some products like foodstuffs,
medicines and certain personal care products). Venezuela imposes numerous non-tariff barriers to
imports including permits, certificates and licences from one or several government bodies, as well as
inefficient and expensive port operations in the state-owned port system. One of the major barriers to
import into the country is the tight foreign exchange controls in place since 2003, which leave
importers with scarce access to foreign currency in a government-controlled foreign exchange market,
which also gives preference to state-owned and associated companies.
Exporting a container from Venezuela takes on average 8.0 documents, and in the case of importing
9.0 documents, according to Doing Business 2014. The average time required for exporting from
Venezuela is 56.0 days, while importing takes 82.0 days, compared to the regional averages of 17.0
days for exports and 19.0 days for imports. The cost to export from Venezuela is US$3,490 per
container while the import cost is US$3,695, considerably higher than the Latin American & Caribbean
averages of US$1,283 and US$1,676 respectively.
TAX ENVIRONMENT
Tax system does not favour business activity
Venezuela has an overly complex tax system with high total tax rates that are not conducive to
business activity. The standard top corporate income tax rate stands at 34.0% in 2013, although in
the case of oil companies this can be as high as 50.0%. The VAT rate stands at 12.0% in the same
year, with several VAT-exempt products including certain foodstuffs, medicines, books and exports. In
addition, companies operating in the country are subject to multiple fees and contributions including:
a 2.0% payroll tax (on top of the employers social security contributions); a tax on economic
activities (generally up to 18.0% on sales, depending on economic activity and district); a contribution
for science and technology (up to 2.0% of gross income, for companies with annual sales over
BsF76,000 or US$17,674); and a contribution for development of sports and physical education (1.0%
of annual profits, for companies with annual net profits over BsF15,200 or US$3,585).
According to Doing Business 2014, Venezuelas total tax rate as a percentage of total profits reaches
61.7% of total profits (compared to the regional average of 47.3% of total profits), as a result of the
countrys numerous taxes and contributions. Venezuelas total tax rate includes labour taxes and
contributions for an equivalent of 18.0% of total profits, higher than the Latin American & Caribbean
average of 14.7% of total profits, according to the same source.
It takes on average 792 hours per year for a company to prepare, file, pay or withhold its taxes and
contributions in Venezuela, according to Doing Business 2014. This figure is amongst the highest in
the world, highlighting the countrys complicated tax system especially in relation to VAT and social
security contribution payments.
Despite the countrys high total tax rates, Venezuelas tax burden as a percentage of total GDP stood
at 16.3% in 2012, which is relatively low by regional standards. This is the result of inefficiencies in
the tax collection system, corruption in the countrys tax agency, and widespread tax evasion in
Venezuela. The latter is fuelled by the large informal sector existent in the country.
LABOUR MARKET AND POPULATION SKILL SET
Extremely rigid labour market reduces competitiveness
Backed by government literacy programmes, Venezuelas adult literacy rates have risen over the long
term to reach 96.2% of adult population aged 15+ in 2012 (up from 84.0% in 1980). In 2012, 15.6%
of the total Venezuelan population aged 15+ had a higher education degree, higher than the Latin
American average of 12.7%. Nevertheless, the quality of the countrys educational system is
perceived as poor, as reflected by Venezuelas ranking in the Quality of the educational system sub-
category of the Global Competitiveness Report 2013, where Venezuela held 128th position at a global
level.
Government spending on education as a percentage of total GDP in Venezuela has risen from 6.4% in
2007 to 8.0% in 2012 one of the highest in the region. However, this spending makes relatively
little emphasis on the higher education segment, which is facing increasing funding demands owing to
the rising number of higher education students (including universities) in the country which reached a
historical high of 2.7 million in 2012, up from 1.7 million in 2007.
Venezuelas constraints to private sector growth have weighed on job creation by private businesses,
leading to an oversupply of graduates that cannot be absorbed by subdued demand from the labour
market. The excess of professionals is most evident in popular careers like Social Sciences, Business
and Law and Education. Notwithstanding the abundance of labour, the country suffers from skills
shortages owing to the deficient quality of the countrys educational system, which creates a vast pool
of semi- and low-skilled labour but relatively few highly-qualified professionals. Skills shortages are
particularly critical in areas like engineering and finance, and are exacerbated by strong levels of brain
drain due to qualified Venezuelans emigrating to look for opportunities elsewhere due to political and
economic instability existent in the country.

Source: Euromonitor International from UNESCO/national statistics/ International Labour Organisation
(ILO)/OECD/Trade Sources
Venezuelas unemployment rate as a percentage of economically active population rose from 7.4% in
2008 to 8.5% in 2010 due to the impact of the global economic crisis, although it has somewhat
eased since then to reach 7.8% in 2012. The decline has been the result of the countrys economic
growth, rising public sector employment and a decline of the labour force participation rate (due to
discouraged jobseekers leaving the labour force). Between 2007 and 2012, Venezuelas youth
unemployment rates have remained about twice as high as overall unemployment rates, reaching
16.4% of economically active population aged 15-24 in 2012, reflecting the excess of graduates in the
labour force as well as employers preference for experienced personnel.
In 2012, Venezuelas female employment rate stood at 50.0% of the female population of working age
(15-64), up from 49.2% in 2007. This is markedly lower than the male employment rate which
reached 77.5% of male population of working age in 2012, down from 78.3% in 2007. The difference
between female and male employment rates is the consequence of traditional lack of work
opportunities for Venezuelan women, and of cultural characteristics of the Venezuelan society where
single-income households have been predominant. Nonetheless, the gap is expected to narrow over
the long term driven by rising rates of educational attainment amongst Venezuelan women and
cultural shifts in the Venezuelan society (where households with two breadwinners are becoming
increasingly common).
The Community, Education, Health, Social, Personal Services, Public Administration and Defence
sector is Venezuelas largest employment generator, accounting for 31.5% of the total employed
population in 2012 (up from 30.4% in 2007) and reflecting the large size of the countrys public sector
and massive amounts of government spending. This sector also experienced the largest rise in the
share of employment across all industries over 2007-2012, as job losses in the private sector were
partly offset by employment gains in the public sector. On the other hand, the Manufacturing sector
registered the biggest decline in employment during the same period, with its share of total
employment decreasing from 12.3% in 2007 to 11.1% in 2012, owing to the effects of the global
economic crisis 2008-2009 and the real appreciation of Venezuelas domestic currency (due to rapidly
rising levels of inflation), which adversely impacted the countrys exports of manufactured products.
Venezuelas labour market is extremely rigid in terms of wage determination, work hours and hiring
and firing practices it is not possible under Venezuelan labour law to make an employee redundant.
In 2012, the government approved a new Law of Labour and Workers significantly expanding workers
rights and benefits, banning outsourcing and reducing the length of the legal work week (from 44.0 to
40.0 hours). Current labour regulations allow the hiring of workers on probationary periods, although
the maximum length of such contracts was reduced to one month from three months by the new 2012
labour law.
The minimum wage per month in Venezuela stood at BsF2,048 (US$477) in 2012, one of the highest
in Latin America, after having increased by 233% in nominal terms over 2007-2012 (although in real
terms the rise was only 1.7% during this period due to rampant levels of inflation). The countrys
labour productivity levels (measured as GDP per person employed) rose by 50.8% in US$ terms over
the period 2007-2012 to reach US$28,420 by the end of this period. These are amongst the highest in
the region, though they are more the consequence of higher prices of crude oil during this period
(which supported a rise in exports), considerable government spending and an overvalued domestic
currency, which boosted Venezuelas GDP in US$ terms over 2007-2012.




Risks and Vulnerabilities: Venezuela
Country Briefing | 27 Mar 2013
MAJOR COMPONENTS OF THE ECONOMY
Oil sector remains key driver of economic growth
Venezuelas lucrative oil sector continues to be the main engine of the economy, and attracts the majority of government funding
and foreign direct investment (FDI). High global prices for oil have driven the development of the oil sector, with Europe Brent
crude oil trading at above US$100 per barrel for most of 2012. However, political intervention in the economy has continued to
undermine the business environment, with the World Banks 2013 Ease of Doing Business Index ranking Venezuela at 180th out
of 185 economies, below Guinea-Bissau and above the Democratic Republic of Congo.
In 2012, the mining and quarrying sector comprised 25.7% of total Gross Value Added (GVA), making it the dominant economic
sector. However, growing dependence on the oil sector has led to the contraction of the non-oil sector, exacerbated by frequent
state nationalisations of key industries and the imposition of price and supply controls. This has reduced incentives to invest in
the non-oil sector and left the economy vulnerable to a sharp downturn in global oil prices. The importance of the oil sector is
shown by the fact that the second-largest sector, manufacturing comprised 13.3% of total GVA in 2012.
Even despite current high global oil prices, Venezuelas economy is suffering. GDP grew by 5.6% year-on-year (y-o-y) in real
terms in 2012 and by a real 4.2% in 2011. This was an improvement on the real contractions of 1.5% and 3.2% in 2010 and 2009
respectively, but remains well below the high real growth rates of more than 7.0% of much of the 2000s. However, this does not
represent a major economic recovery but more the huge increase in public spending approved by President Hugo Chvez in the
run-up to presidential and legislative elections in October 2012. With the elections over, spending is likely to fall in 2013, with
real GDP growth forecast at only 1.3%. The stuttering economy is also weighing on GDP per capita, which fell to BsF45,930
(US$10,708) in 2011, down from BsF35,011 (US$13,578) in 2010, before rebounding to BsF58,658 (US$13,675) in 2012.
Between 2007 and 2012, Agriculture, Hunting, Forestry and Fishing formed the fastest growing sector of the economy, growing
by 7.5% on average annually in real terms. This reflected the sharp run-up in incomes and consumer prices, fuelled by high levels
of government spending and surging oil revenues. The second fastest growing sector was Hotels and Restaurants, growing at an
annual average rate of 6.0% in real terms in the same period. The services sector is likely to suffer from slower forecast growth in
2013, especially as political uncertainty will weigh on consumer confidence.
Perhaps counter-intuitively, the mining and quarrying sector posted poor growth between 2007 and 2012, growing by an annual
average of 0.5% in real terms. High oil revenues, driven by global oil prices, act to mask the deteriorating state of the domestic
hydrocarbons sector, which suffers from persistent under-investment and inefficiency at state-run oil firm PDVSA. These factors
will continue to hinder the mining and quarrying sector growth in the medium term, particularly with post-election government
spending forecast to decelerate in 2013.
The manufacturing sector also performed poorly between 2007 and 2012, growing by an annual average rate of 0.7% in real
terms. This is also a result of under-investment; nationalisations in sectors such as the steel industry have deterred investment and
reduced efficiency.

SOCIO-POLITICAL RISK
Political tensions deter investment
Socio-political tensions are extremely high in Venezuela, particularly following President Chvezs
death on 5th March 2013. As Mr Chvez has been Venezuelas dominant political figure since he first
won the presidency in 1998, his death could undermine stability. Elections must now be held within 30
days. A disputed result could spark violent demonstrations and clashes between supporters and
opponents of Mr Chvezs designated successor, Vice-President Nicols Maduro. The World Banks
Political Stability and Absence of Violence Index ranked Venezuela at -1.3 in 2011 (latest available
data), with -2.5 being the most negative.
Under Mr Chvez, corruption has become entrenched, particularly in the hydrocarbons sector but
generally throughout the Venezuelan business environment. In Transparency Internationals
Corruption Perceptions Index 2011, Venezuela was ranked 165th out of 176 countries, making it one
of the least attractive locations in the world. High levels of corruption, alongside the governments
ongoing nationalisation process, have acted as a strong disincentive to investment. While foreign
investors are still willing to invest in the hydrocarbons sector, owing to the high rates of return,
investment in the non-oil sector has fallen sharply. In particular, Venezuelas decision in January 2012
to withdraw from the International Centre for the Settlement of Investment Disputes (ICSID) has
unnerved investors, who now have little recourse for arbitration in the event of an investment dispute.
Unemployment is falling yet the economy is slowing and the non-oil sector declines, reaching 7.8% of
the economically active population in 2012, although it is worth noting that this is a reduction from
10.0% in 2006. In particular, the youth unemployment rate is high, standing at 16.4% in 2012. This is
partly due to the decline in the non-oil sector but particularly to a reduction in the need for skilled
labour. Although Venezuelas education standards are high relative to the region, the slowing economy
has made it difficult for recent graduates to find employment. Employers are unwilling to lose
experienced staff, particularly in the hydrocarbons sector, where there is a shortage of trained
technical staff and so are less willing to take on new graduates.

Despite high levels of social spending under the Chvez government designed to alleviate poverty,
income inequality has risen in Venezuela between 2007 and 2012. In 2012, the Gini index (with zero
corresponding to perfectly equal and 100 corresponding to perfectly unequal) stood at 42.5, up from
41.0 in 2007. In part, this is the result of the economic slowdown since 2009, but in larger part it
reflects the concentration of the economy and particularly the lucrative oil sector in the hands of a
small elite group, who reap most of the benefits.
Such inequality continues to fuel social tensions, with Mr Chvezs core constituency being among the
working classes and rural poor. He and his government are highly popular and he easily won re-
election in October 2012, meaning that his successor is likely to perform well in the fresh 2013
elections. However, his authoritarian style of government has undermined democratic institutions and
there are grave concerns about the independence of institutions, such as the judiciary, the central
bank and the electoral council. There is a vocal opposition media, although the state media is able to
call on far more financial resources and airtime.


Source: Euromonitor International from World BankNotes: Political stability and absence of violence ranking is
obtained from political stability and absence of violence index reflecting a better score in a higher position. Political
stability and absence of violence index measures the perceptions of the likelihood that the government will be
destabilised or overthrown by unconstitutional or violent means, including domestic violence and terrorism

EXTERNAL SECTOR
Oil exports drive economic fortunes
Venezuela is one of the worlds largest oil exporters, ranked 9th in the world in 2012, and its oil
exports determine the overall trend of its economy. The USA is Venezuelas largest export partner,
with exports to the USA comprising 48.0% of Venezuelas total exports in 2012. This is despite
Venezuelas hostile rhetoric towards the USA and it is worth noting that despite President Chvezs
frequent threats to shut off the taps to the USA, he has never done so. Indeed, such an action would
be highly damaging to Venezuelas economy, as it would substantially damage export revenues; for
this reason, Venezuela is highly unlikely to reduce oil exports to the USA.
This dependence on oil exports leaves Venezuela vulnerable to any downturn in oil prices, although it
has been fortunate in the last decade to enjoy sustained high oil prices. Apart from oil, Venezuelas
exports are agricultural and manufacturing, with many of its exports going to neighbouring Colombia.
Venezuela joined the Common Market of the South (Mercosur: Brazil, Argentina, Paraguay and
Uruguay) trade bloc in July 2012 and was formally inaugurated in December 2012. It now has three
years to bring its trade tariffs in line with Mercosur regulations, which will open up its markets to
member states. This may in fact not benefit Venezuelas economy greatly at first, as goods produced
by its oil-inflated economy are more expensive than those from Brazil, and will be uncompetitive with
many Mercosur products.
Venezuela has an open economy, with exports comprising 23.7% of total GDP in 2012. Exports are a
key driver of economic growth and high oil export revenues allowed Venezuela to post large trade
surpluses in the pre-downturn years, peaking at 13.9% of total GDP in 2008. The trade surplus decline
during the downturn of 2008 and 2009, to 5.4% and 6.9% respectively, but returned to health in
2011, registering 14.6% of total GDP before declining to 10.0% in 2012. The current account balance
followed a similar pattern, dipping to a low of 0.7% of total GDP in 2009 but recovering to 2.7% of
total GDP in 2012.


The economy is becoming increasingly reliant on imports, as a result of government policies, which
have created domestic supply shortages and consequent price rises. This is particularly the case with
food and beverages; several cities in Venezuela report that queuing for available food is becoming
common. Imports comprised 13.8% of total GDP in 2012, although this was a reduction from 20.2%
in 2007. This decline reflects a shift in the nature of imports; Venezuelans are importing fewer
expensive goods, such as industrial machinery or consumer items, and instead imports have moved
towards core requirements, such as food. Imports of food and live animals rose to 12.4% of total
imports in 2012, from 5.8% in 2007, imports of machinery fell from 38.7% of total imports in 2007 to
37.9% in 2012.
The political uncertainty may also delay a planned devaluation of the Bolivar currency, which had been
expected to take place shortly after Mr Chvezs re-inauguration in January 2013. The exchange rate
is fixed by the government and is overvalued, leading to a flourishing black market exchange regime.
The black market rate was floating at around BsF10.9 per US$ in late 2011, compared to the official
rate of BsF4.3 per US$. High government spending ahead of the October 2012 elections has increased
pressure for a devaluation, which will bolster the amount of bolivars the government receives for its
US-denominated oil exports. However, it may be unwilling to introduce a major devaluation at a time
when the political leadership remains so uncertain.
To maintain the exchange rate, as well as high levels of government spending, the government has
been running down its foreign exchange reserves. These fell to US$2.8 billion in 2012, from a high of
US$32.6 billion in 2008, demonstrating the impact of the 2008-2009 economic slowdown on reserves.
The government has failed to translate the benefits of high oil revenues into foreign exchange
reserves, which will reduce its ability for fiscal manoeuvre during a potentially difficult political
transition.



GOVERNMENT FINANCE
Government finances increasingly precarious
The governments financial position is highly dependent on oil revenues, which funds high levels of
social spending. At the same time, the government is increasing borrowing to fund this spending,
which has resulted in a slow but steady build-up of debt. This accelerated during the economic
downturn of 2008-2009, with the budget deficit spiking to 8.1% of total GDP in 2009, from 2.6% of
total GDP the previous year. This moderated to 5.4% before rising again to 7.4% in 2011 and 2012
respectively, which is high for such a resource-rich country. This level of deficit is sustainable given
current oil revenues, but would become less so if global oil prices dipped.
Moreover, the government has failed to reap the benefits of its decade-long oil bonanza in the form of
savings, or a fiscal sustainability fund. Instead, revenues are immediately dispersed in the form of
social spending, leaving the government with no cushion to counter any potential economic shocks.
Borrowing and spending might have been expected to decline in 2013, following Mr Chvezs re-
election and a consequent reduced need to garner public support. However, political instability and the
prospect of fresh elections following Mr Chvezs death may keep spending high and push the budget
deficit up further.
As part of the governments social spending policy, pension payments have been increased. With
Venezuelas ageing population, this is storing up a pensions crisis in the long term. However, far more
risky is the governments high-spending and no-savings fiscal policy, which is likely to bring about a
fiscal crisis far earlier. This is likely to take place in conjunction with a political crisis, with any change
of government likely to provoke a reassessment of expenditure and borrowing commitments.
Chart 6 Public Debt vs. General Government Budget Deficit in Venezuela: 2007-2012

Chart 6 Public Debt vs. General Government Budget Deficit in Venezuela: 2007-2012