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Venezuela. Northern South America Bordering Caribbean Sea and North Atlantic Between Columbia and Guyana ~ twice the size of California Population: 24,287,670. Venezuela. History. Original inhabitants: Carib, Arawak, and Chibcha-speaking

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Venezuela

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Venezuela


Northern South America

Bordering Caribbean Sea and North Atlantic

Between Columbia and Guyana

~ twice the size of California

Population: 24,287,670

Venezuela


History

  • Original inhabitants: Carib, Arawak, and Chibcha-speaking

  • In the late 1500’s, the Spanish arrived looking for gold and other riches

  • Venezuela became a land of plantations worked by slave labor from Africa


Independence

  • The creole population initiated the drive for freedom due to dissatisfaction with local politics

  • Independence is celebrated on July 5th – based on the initial charge for freedom led by Simón Bolívar

  • 1821 Simón Bolívar became leader of a Venezuela free of Spanish rule

  • 1823 the last Spaniard were forced out after their defeat at Maracaibo

  • May 6, 1830 Venezuela seceded from Gran Colombia


Independence & Chaos

  • Next 100 years – caudillos and rule was held by various dictators

  • 1958 – first elected government

  • 1999 – new Constitution and newly elected government

  • Since 1999:

    • Natural disasters (floods and mud slides)

    • Oil strikes


Government

  • Federal Republic

  • 22 States

  • 1 Metropolitan District

  • 11 Federally controlled islands

  • 72 additional islands in the Caribbean (federal dependencies)


Government

  • Executive power at the state level

    • Elected to four year terms

  • Local government

    • Mayor

    • Municipal Council

    • Parishes

  • Current Chief of State

    • Hugo Chavez

      • Initially elected in 1998

      • Re-elected to a six year term in July, 2000


Government

  • Chavez Administration

    • Called for fundamental restructuring

    • New Constitution

      • Appointed National Constituent Assembly

      • Guarantees freedom to create political parties

      • Legislative power is a unicameral National Assembly

        • Represented by Deputies from each electoral district

        • Creole population guaranteed three Deputies

      • Republican Moral Council – job is to “observe, prevent, investigate and penalize acts against the public ethic and administrative moral and oversee the legality of the use of public fund.”

        • Provides citizen empowerment

        • Includes a People’s Defender, Public Prosecutor, and General Accountant


Industries:

petroleum, iron ore mining, construction materials, food processing, textiles, steel, aluminum, motor vehicle assembly

Export commodities:

petroleum, bauxite and aluminum, steel, chemicals, agricultural products, basic manufactures

Import commodities:

raw materials, machinery and equipment, transport equipment, construction materials

Statistics


Statistics

  • Life expectancy at birth in 1995 was 72.2 years (69.3 for men and 75.1 for women).

  • Population growth: 1.52% (2002)

  • The Venezuelan population is young:

    • 12.6% are under 4 years of age

    • 23.6% are between 5 and 14 years

    • 55.5% are under 25

    • 4.1% of the population is 65 or older.

      • This group is growing faster than that of the general population.


Environmental Initiatives

  • Antarctic Treaty

  • Biodiversity

  • Climate Change

  • Desertification

  • Endangered Species

  • Hazardous Wastes

  • Marine Life Conservation

  • Nuclear Test Ban

  • Ozone Layer Protection

  • Ship Pollution

  • Tropical Timber 83

  • Tropical Timber 94

  • Wetlands


Environmental Issues

  • Sewage pollution of Lago de Valencia

  • Oil and urban pollution of Lago de Maracaibo

  • Deforestation

  • Soil degradation

  • Urban and industrial pollution

    • Particularly along the Caribbean coast

  • Rainforest Ecosystem

    • Threat from irresponsible mining operations


Environmental Issues

  • Venezuela has a relatively good conservation record.

  • 1976 the first Ministry of the Environment in Latin America was established.

    • Since then a complex legal framework for environmental management has been established.

  • Extensive protected area systems

    • Nearly half of national territory is under some kind of protection.


Oil Background

  • Oil exportation began in the early 1920s

  • Oil income was not invested wisely, industry was mired in corruption and waste

  • Venezuela is an OPEC member

  • Eighth largest oil producer

  • Oil export is ~ 1/3 of GDP

    • 80% of export earnings come from oil

    • 50% of the government’s operating revenue stems from oil


Oil Background

  • Mid-nineties oil price decline led to:

    • Recession and eventual reorganization of government

  • Economy is slow to recover because of:

    • Weak non-oil sector

    • Capital flight

  • Safety net created to avoid recurrence:

    • Macroeconomic Stabilization Investment Fund

      • Deposits come from petroleum revenue


Oil Strike

  • November 2001

    • Chavez enacted a new law that makes the government the majority partner in any new energy venture in Venezuela.

  • December 2, 2002

    • Purpose remove President Hugo Chavez from power.

    • Chavez in turn is looking to eliminate state contracts with Venezuela’s private sector (composed of opposition members).

    • Chavez has repeatedly appointed political allies to key positions.

  • Affect on US

    • Has imported up to 15% of oil from Venezuela.

    • Has branded Venezuelan oil supplies as unreliable.

      • Venezuelan daily oil production has dropped to 440,000 compared to 3 million barrels.


Trade and FDI

  • US Viewpoint (1999 statistics):

    • Venezuela is US’s 24th largest export market.

    • Trade deficit with Venezuela was $5.9 billion.

    • Exports to Venezuela (merchandise) was $5.4 billion.

    • US imported $11.3 billion

  • Foreign Direct Investment (FDI):

    • $5.7 billion from U.S. in 1998.

    • Investments were predominantly in manufacturing, petroleum, and wholesale sectors.


Trade Alliances

  • Latin American Integration Association (ALADI)

  • Free trade agreement with Chile

  • Part of the “G3” (the Free Trade Agreement with Mexico)

  • Agreement with the Caribbean Common Market (CARICOM)

  • Currently negotiating:

    • Free trade agreement with MERCOSUR


Investor Benefits

  • Low tariffs and competitive tax rates.

  • New legislation designed to draw in foreign investment.

  • No capital repatriation limitation.

  • No profit transfer limitation.

  • No prior authorization requirement for investment.


Currency Information

  • Early 2002 – exchange rate system changed from pegged to free-floating.

    • Caused the Bolivar to depreciate.

  • Since then, the Planning and Development Department have pegged the Bolivar to the US Dollar.

    • Pegged at Bs. 1600.00 – 1596.00

  • Also under investigation, a crawling peg system, which would modify the exchange rate weekly.


Commercial History

  • Venezuela has attracted the highest per capita U.S. investment in South America.

  • Its markets have absorbed up to $1 billion in U.S. exports quarterly.

  • In the 80’s, Venezuela was one of the “hottest” emerging markets.

  • Early 90’s, investor confidence plummeted because of two coup attempts on President Perez.


Commercial History Continued

  • Early 1994 – a banking crisis led to capital flight, currency erosion, and worsened the fiscal crisis.

    • Emergency currency and price controls were enacted.

  • Recovery was dependent on:

    • Revision of labor benefits.

    • Elimination of subsidies.

    • Government withdrawal from industry.

      • Eventually several hotels, banks, and some shares of the telephone company were sold.

  • Mid-1995 Landmark decision opened oil sector to foreign investment.

    • Eight international groups were selected to explore new oil fields.

    • Expectation was that it would increase U.S. oil equipment imports by 15% annually.


Commercial History Continued

  • 1996 – Government initiated a fiscal, monetary, and foreign exchange plan. It was intended to:

    • Lower inflation.

    • Balance the budget.

    • Restructure and strengthen financial system.

    • Establish a new social security program.

    • Provide resources to most vulnerable sectors.

    • Reform legal institutions.

  • In order to protect foreign investors, Venezuela is now a member of:

    • Overseas Private Investment Corporation (OPIC) – protects from political risk.

    • World Bank’s Multilateral Investment Guarantee Agreement (MIGA) – provides similar protection.


Financial Overview

  • 2000

    • External debt was $34.5 billion

    • Economic growth of 3.2%

    • Current account balance was $13.365 billion

    • International reserves totaled $21.647 billion

    • Inflation 13.2%

  • 2001

    • Economy contracted by 6.4%

    • Inflation 12.3%

  • 2002

    • Bonds rose by 17.7% until dropping after the strike was initiated.

    • Expectation is that agencies will starting downgrading the country’s debt. Credit ratings on debt is at junk levels.

    • Foreign debt stock is 20% of $100 billion GDP.

    • International reserves $12.43 billion.

    • Inflation 31%


Education

  • Originated in Catholic Church in the colonial period.

    • Roots can be traced to France.

  • Reserved for the wealthy landowner class.

    • Concept of education for the privileged has continued into the modern period.

    • Education system at the university level has steered clear of technical and scientific fields.

    • Primary and secondary levels have “ignored the vocational needs of most of the population.”

  • Opened to general public after 1811

    • Free education became an integral part of the political landscape.


Education Continued

  • In 1958 education began to expand both in quality and quantity:

    • Primary education became compulsory

    • Alternative methods of educating hard-to-reach groups (farming communities) were developed.

    • Universities were opened

  • Education geared primarily toward those seeking professional or academic careers.

    • In 1969, the government attempted to address this issue by facilitating the entry of students of various backgrounds.


Education Continued

  • Secondary schooling was not compulsory until 1980.

  • Existence of a social split:

    • Public schools are better funded than private.

    • Private schools more prestigious because of the traditional curriculum and the historical association.

    • Due to social advantages given by the association with a private school, some teachers choose to work in both.

  • Since 1958, international organizations have promoted natural sciences.

  • Development work in the U.S. has had a strong influence on the social sciences.


Education Continued

  • Population growth has affected education.

    • Number of universities between 1958 to 1984 tripled.

    • Overall number of places of higher education grew tenfold (to more than 70).

  • Literacy rate in Venezuela is one of the highest in Latin America (nearly 90%) among those fifteen and older.

    • Government strongly influences this by giving away training materials to encourage dissemination of literacy by the literate.

  • Current educational system requires nine years of schooling.

    • Six years of primary and three years of secondary.


Education Continued

  • Higher Education

    • Can attend two years of senior high school.

    • Can follow that with a variety of colleges, universities or technical schools.

  • Labor Force

    • Until the 80’s, skilled workers were a premium.

    • Due to economic downturn, the large number of skilled workers are no longer needed.

      • Technical education has become less important.


Education Today

  • Chavez administration has created the National Education Project (PEN).

    • Intended to fix some of the things still considered wrong with the educational system:

      • Failure of nearly 10% to complete primary school.

      • Failure of nearly 20% to complete secondary school.

      • Illiteracy still nearly 7% among males and 7.6% among females 15 and older.

    • Plan also “rails…against the evils of globalisation and privatisation” and is led by former revolutionaries.

      • Teacher’s groups and the church leaders claim it is a “Cuban-style indoctrination of youth.”


Educational Data

  • Annual census in all public and private educational institutions.

  • Investigating ways to improve data collection in order to break data down into smaller geographical units.

  • Evaluating causes of class repetition and causes of dropouts.


Summary

  • All available information points at a country that could go either way.

    • Oil resources give Venezuela both benefits and problems of an easy source of revenue.

    • Actions have been taken to counteract the cyclical revenue streams.

      • Alternatives to oil revenue carry with them their own burden.

    • Difficult to see past the problems of leadership to determine where fate will carry the country next.


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