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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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venezuela2
Northern South America

Bordering Caribbean Sea and North Atlantic

Between Columbia and Guyana

~ twice the size of California

Population: 24,287,670

Venezuela
history
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
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
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
Government
  • Federal Republic
  • 22 States
  • 1 Metropolitan District
  • 11 Federally controlled islands
  • 72 additional islands in the Caribbean (federal dependencies)
government7
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
government8
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
statistics

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
statistics10
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
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
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 issues13
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 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 background15
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
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
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
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
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
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
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
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 continued23
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
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
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
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 continued27
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 continued28
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 continued29
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
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
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
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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