International Trade in Venezuela

News Related to International Trade in Venezuela

Business outline for Venezuela

Main Industry Sectors

With a minimal significance in its economy, the agricultural sector of Venezuela contributes to 4% of the GDP and employs about 9% of the active population. The main agricultural products of the country are: corn, wheat, soya, sugar cane, rice, cotton, bananas, vegetables, coffee, beef and pork meats, milk, eggs and fish. Venezuela benefits from important natural resources: oil, gas, gold and silver mines, bauxite and diamonds.

The industrial sector represents almost 60% of the GDP and employs close to 24% of the population. The main industrial activities are oil (controlled by a state's company, oil represents the first natural wealth source of the country), construction material, foodstuffs, textile, iron, steel, aluminum and motor-car assembly.

The services sector represents a little less than 40% of the GDP and employs two thirds of the active population.

Economic Overview

Venezuela depends excessively on the fluctuations in oil prices,Venezuela's economy was strongly affected by the global economic crisis, the growth of its GDP was contracted to -3.3% in 2009 and -1.3% in 2010.  Even if its growth becomes positive in 2011, the perspectives are not very encouraging. 

In this context, the priority of the government is to get Venezuela out of the crisis.  Facing a recession and an increase in inflation, Chavez set up a double exchange rate and devalued the national currency by almost 50%.  The result of this was the emergence of a parallel market in which the USD is exchanged at very high rates.  Chavez also made transfer the deposits from the private banks into the new public banks, and has restricted the access to foreign currency.  In top of that, the country is also going through an energy crisis which has led the president to order power cuts and to make a call to reduce energy consumption.  The country has decided to stop all non-essential expenses.  A new devaluation of the Bolivar is expected in 2011.

The country's wealth is unequally distributed among the population. The unemployment rate has reached 8.6% in 2010 and almost 40% of the population lives below the poverty line.

FDI in Figures

Despite the attractiveness of the country due to its godsend oil, the large size of its domestic market and the richness of its natural resources, the inflows of FDI in Venezuela have been smaller in the last few years.  During the period of political and economic crisis from 2000 to 2004, the country experienced a significant capital flight. Likewise, the economic and political crisis set off by the international financial crisis has provoked a significant back-flow of FDI.  The uncertain climate born from the "Bolivarian" reforms (infringement of private property rights, foreign currency control, increasing regulations, nationalizations, etc.), Chavez's anti-American speech, the ineffectiveness of the port system are some of the many hindrances to investment.  Venezuela is combining regional and revolutionary politics, without closing its doors to foreign investment, which it needs badly.  In 2009 the net FDI flows represented almost 0.4% of the GDP.

FDI Government Measures

Venezuela has adopted the Decree 2095 on foreign investment, which is encouraged and protected by a new legal framework. In addition to this, there is a policy supporting production activities that are particularly dynamic or potentially good for exports. The government also gives fiscal bonuses, ranging from tax exemptions to special credit treaties, in order to encourage investment in the so-called "strategic" sectors, or in order to stimulate the establishment of businesses in the country's five least developed states.

Country Strong Points

Ports and airports are being privatized and important markets should develop in these sectors. The oil sector is very dynamic, prospecting and exploitation remain attractive, even if the government has made the conditions of exploitation more difficult. Numerous markets remain unexploited in the country, mainly those concerning the production of finished products which are mostly imported. The technological sector has developed very little. In the recent years, a policy of aid to production has given a new impetus to the agro-food industry: coffee, tropical fruits, rice, tobacco, cacao, alcoholic drinks, as well as to the car industry and audiovisual production.

Country Weak Points

The control of the state developed and promoted by the current government could steer into an unattractive commercial environment to foreign investors. Inflation, corruption, unemployment, the importance of the informal sector, poverty and violence are all restraints to the establishment and prosperity of a business.   

Foreign Trade Overview

Foreign trade in Venezuela represents about one third of the GDP.  The country is trying, above all, to improve and to increase its trade relations with the Latin American zone, the EU and China.

Venezuela exports oil, iron bauxite and aluminum, agricultural products, semi-manufacturing products, vehicles and chemical products. Its main clients are:  the United States,  the West Indies, Colombia and China.

The country imports manufactured and luxury products, machinery, transportation equipment, construction material and pharmaceutical products. Venezuela's main suppliers are: the United States, Colombia, China, Brazil and Mexico. The trade balance of Venezuela is structurally very positive due to its richness in oil.  However, this surplus was strongly reduced in 2009 due to the effect of the drop in oil prices and its exports.