Venezuela

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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

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History

• Original inhabitants Carib, Arawak, and
  Chibcha-speaking
• In the late 1500s, the Spanish arrived looking
  for gold and other riches
• Venezuela became a land of plantations worked by
  slave labor from Africa

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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

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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

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Government

• Federal Republic
• 22 States
• 1 Metropolitan District
• 11 Federally controlled islands
• 72 additional islands in the Caribbean (federal
  dependencies)

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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

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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 Peoples Defender, Public Prosecutor,
  and General Accountant

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Statistics
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Statistics
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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.

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Statistics
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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

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Statistics
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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

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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.

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Statistics
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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 governments operating revenue stems
  from oil

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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

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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 Venezuelas 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.

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Trade and FDI

• US Viewpoint (1999 statistics)
• Venezuela is USs 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.

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Statistics
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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

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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.

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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.

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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 80s, Venezuela was one of the hottest
  emerging markets.
• Early 90s, investor confidence plummeted because
  of two coup attempts on President Perez.

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Statistics
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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.

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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 Banks Multilateral Investment Guarantee
  Agreement (MIGA) provides similar protection.

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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 countrys 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

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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.

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Education Statistics
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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.

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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.

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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.

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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 80s, 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.

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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 railsagainst the evils of
  globalisation and privatisation and is led by
  former revolutionaries.
• Teachers groups and the church leaders claim it
  is a Cuban-style indoctrination of youth.

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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.

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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.