Introduction • Venezuela is one of the world largest exporters of crude oil and the largest in the Western Hemisphere. • Population about 26 million People and Venezuela is twice as large as California • In 2008, the country was the eighth-largest net oil exporter in the world. • Current President Hugo Chavez- 10 years in Power. • Ranks 162 out of 179 countries ranked on Transparency International's corruption index
Oil Background • 1900s: Oil was discovered, but the country’s leaders kept wealth for themselves. • Oil exportation began in early 1920s. • 1960s: Oil production made a few wealthy; the majority of the rest lived in poverty in cities or shacks on the outskirts. • 1980s: The price of oil dropped. People suffered economically. The price of oil recovered in 1990s. • Venezuela joined Organization of Petroleum Exporting Countries (OPEC) that tries to keep oil prices stable.
Industry • Nationalize • Major export: Oil (PDVSA) • 5th largest oil producer in the world • 80% of export earning come from oil • Accounts for 50% of the Gov. Revenue • One-third of the country’s gross domestic product (GDP) • U.S is the biggest trading partner • Major import: Raw materials
Dutch Disease • This economic disease is caught whenever a commodity brings a sudden increase of income in one sector of the economy, which is not matched by increased income in other sectors of the economy. • Manufacture & agricultural production began to decrease dramatically • The increased demand for imported goods and domestic services has caused a general inflation of wages and prices. Ignored serious social problems, including education, health, infrastructure, agriculture, and domestic industries, causing Venezuela to fall well behind other industrialized countries.
Nationalization • Takeover of privately owned corporations, industries, and resources by a government with or without compensation • (1) Prevention of unfair exploitation and large-scale labor layoffs • (2) fair distribution of income from national resources, • (3) to keep means of generating wealth in public control. • Birth of PDSA in 1976 • In 2006, Chavez announced a nationalization of oil fields managed by foreign companies, which resulted in an increase of the government’s shares in these projects from 40 percent to 60 percent. • Potentially burden PDVSA with investment costs. • Hurt agriculture, Manufacture and Other industries.
PDVSA • PDVSA (Petróleos de Venezuela, S.A.), Venezuela’s state-owned petroleum company, oversees the exploration, production, refinement, and export of oil as well as the exploration and production of natural gas. • It is the world's third-largest oil company, behind Saudi Aramco and ExxonMobil. • In 1980, PDVSA acquired CITGO, a U.S.-based refinery, and it is now one of the world's largest refiners.
Issues • 60% live under “extreme poverty” • Issue with Gov. Revenue • Tax • Corruption • Chavez take more control of Gov. • Newspapers • Television • Companies
Conclusion • Nationalization • Depended to heavily on oil as their main source of revenue. • Oil income was not invested wisely and industry was mired in corruption. • The country's wealth is unequally distributed among the population. The unemployment rate has reached 8.6% in 2010 and almost 60% of the population lives below the poverty line.