Capital - Caracas (GMT-4) Largest City - Caracas Population - 26,023,528 est. Languages - Spanish Demonym - Venezuelan Currency - Bolívar (VEB) GDP per capita - $6,900 est. Calling Code - +58 Internet TLD - .ve
Venezuela, known since 1999 as the Bolivarian Republic of Venezuela (Spanish: República Bolivariana de Venezuela), is a country on the northern coast of South America. The country comprises a continental mainland and numerous islands in the Caribbean Sea. It borders Guyana to the east, Brazil to the south, and Colombia to the west. Trinidad and Tobago, Barbados, Curaçao, Bonaire, Aruba, and the Leeward Antilles lie just north, off the Venezuelan coast. Falling within the tropics, Venezuela sits close to the Equator, in the Northern Hemisphere.
A former Spanish colony, Venezuela is a federal republic. Venezuela holds territorial disputes with Guyana, largely concerning the Essequibo area, and in the past with Colombia concerning the Gulf of Venezuela. There was a Venezuelan Boundary Crisis in 1985. Today, Venezuela is known widely for its petroleum industry, the environmental diversity of its territory, and its natural features. Venezuela is considered a Megadiverse country.
Venezuela is among the most urbanized countries in Latin America: the vast majority of Venezuelans live in the cities of the north, especially in the largest metropolis, Caracas. Other major cities include Maracay, Maracaibo, Barquisimeto, Valencia, and Ciudad Guayana. Venezuela is also home to a diversity of wildlife in a variety of protected habitats.
Economy
The petroleum sector dominates Venezuela's mixed economy, accounting for roughly a third of GDP, around 80% of exports, and more than half of government revenues. The country's main petroleum deposits are located around and beneath Lake Maracaibo and the Gulf of Venezuela. The oil sector operates through the state-owned Petróleos de Venezuela (PDVSA), whose subsidiaries include the distributor CITGO. Other major exports are bauxite and aluminum, steel, petrochemicals, and agricultural produce. Venezuela's principal trading partners are the United States, Colombia, Brazil, and Mexico. Venezuela is, as of May 2007, undergoing a rapid nationalization program, in line with Chavez's promise to turn the country into a socialist state.
Venezuela is also highly dependent on its agricultural sector. Sectors with major potential for export-led growth are production of both coffee and cocoa crops. At one time, Venezuela ranked close to Colombia in coffee production, but in the 1960s and 1970s, as petroleum temporarily turned Venezuela into the richest country in South America, coffee was relegated to the economic back burner. Today, Venezuela produces less than 1% of the world's coffee, most of it consumed by the domestic market. However, Venezuelan coffees are again entering the North American specialty markets. Venezuela's cocoa industry has decayed since the days of Spanish colonialism, when African slaves worked on cocoa estates. The focus of cocoa cultivation has long since moved to tropical West Africa. In recent years, there has been an attempt to resuscitate this industry, as its rare variety of cacao, known as Chuao, is considered the finest and most aromatic in the world and is used in certain single-origin chocolates. The largest Venezuelan fine chocolate producer is El Rey, though some companies such as Savoy (Nestlé) also manufacture chocolate from Venezuelan cacao and export it to Europe.
Venezuela is one of the five founding members of OPEC, which was the initiative of Venezuelan politician Juan Pablo Pérez Alfonzo; it was proposed in 1960 as a response to low domestic and international oil prices. Since 2005, Venezuela has also been a member of Mercosur, joining Brazil, Argentina, Paraguay, and Uruguay; it has yet to gain voting rights. Venezuela is also a member of the Union of South American Nations (Unasul - Unasur). As of 2007, unemployment in the 12.5 million-strong labor force was 8.4%; 37% of Venezuelans live in poverty.
Market Overview
In light of current conditions, particularly President Chavez' January 2007 statements on the nationalization of several sectors of the Venezuelan economy, U.S. exporters to and investors in Venezuela are well-advised to perform their risk-return calculations carefully, mindful of the uncertainties but aware of the opportunities in the Venezuelan market.
With a population of 27 million, Venezuela is the sixth most populous nation in Latin America.
The political relationship between Venezuela and the U.S. has cooled significantly and is characterized by harsh anti-U.S. rhetoric by President Hugo Chavez (elected 1998 and re-elected in 2000 and 2006).
The U.S. remains Venezuela’s most important trading partner, claiming more than half of Venezuela’s exports (primarily petroleum and petroleum products) and about a quarter of imports.
Venezuela is the U.S.’s third-largest export market in Latin America.
Market Challenges
Political tensions between Venezuela and the U.S. and within Venezuela itself.
Commercial uncertainties from government’s on-going “Bolivarian reforms”, visà-vis, e.g., private property rights, the government-private sector relationship, currency controls, and the democratic process.
Currency controls remain an issue and implementation procedures have changed frequently and significantly over the last twelve months.
Lack of transparency in the public procurement process, coupled with an anti-U.S. company bias in government procurements.
Inadequate Intellectual Property Rights protection.
Lack of judicial certainty and independence.
Aggressive tax collection and potential business closures for tax policy violations and minor infractions by the Venezuelan Tax Authority (SENIAT).
Maintenance issues and occasional closure of the major highway between Caracas and its principal port and international airport.
Market Opportunities
Venezuela’s growth is primarily related to high petroleum earnings and government spending, which have stimulated demand. Economic growth is projected to continue on the strength of oil prices.
U.S. companies still benefit from established commercial ties between the two countries, e.g., strong consumer preference for U.S. products, preference for U.S. technologies, and the long tradition of U.S. foreign direct investment in Venezuela. Venezuelans are avid consumers of imported products.
Geographic proximity to the U.S., and much shorter shipping times (three to five days) compared to other suppliers.
Relatively low tariff rates and transparent customs administration on imported goods. The Venezuelan government has announced plans to develop new port, storage, and silo facilities.
Leading sectors for U.S. exporters include: oil & gas machinery, IT equipment and services, telecommunications equipment and services, auto parts/service equipment, electrical power generation systems and electrical equipment, medical equipment, chemicals, travel and tourism, agricultural commodities, aircraft/parts and aviation services, educational services, safety and security equipment, and transportation equipment.
