The Venezuelan Economy
Compared to other Latin American countries, the Venezuelan economy is a rather weak one. This is because it is still largely dependent on oil, which is an expensive commodity, and the country has not developed a stable financial system, thus making it more vulnerable to inflation. The government is attempting to address this problem, but it has not succeeded yet. Moreover, the country’s foreign trade is largely dominated by China and Mexico, which means that it faces a great deal of competition from them.
OPEC and Venezuela’s economy have always been closely linked. Since the beginning of the twentieth century, oil has been Venezuela’s primary industry. Oil exploration and production have been a central focus of the country’s economy, as have refining and transportation. In the mid-1980s, oil exports accounted for 90% of all export revenues. In the 1990s, a policy called the Oil Opening was initiated to counter globalization.
The first oil field was discovered in 1913, and the largest, Mene Grande, was discovered in 1917. However, the modern oil industry is more focused on exploration and refining than production.
Venezuela’s economy was supported by exports of coffee, cocoa, and cattle. In 2014, manufacturing contributed 12% of GDP. In addition, agriculture contributed 5%. The country produces paper, textiles, beverages, steel, and aluminum.
The country’s gross domestic product shrank by 28% in 2019, while its GDP expanded by 0.5% to 4% in 2021. However, inflation has continued to weaken the bolivar. In addition, environmental degradation is felt in every corner of the country.
Venezuela’s manufacturing sector is facing accusations of mismanagement. The government has given the industry instructions to increase petrochemical production. In addition, the country’s crude oil production is expected to increase.
Venezuela’s oil policy has been crucial to the government’s efforts to mitigate the country’s economic crisis. Its desperation for foreign capital continues to clash with the country’s traditional inclination to exercise its sovereignty over its natural resources. However, the country has proven its ability to defend its interests in the face of adversity.
Venezuela’s oil policy has been designed to keep the industry accountable to the government. The State Participation in Profits (PEG) was set at 50% of net profits.
Despite its vast oil reserves and fossil fuel resources, Venezuela has been reliant on hydroelectricity for more than a decade. Its largest dams are Guri and Macagua, which supply about two-thirds of the country’s electricity.
Venezuela has also benefited from a number of other power resources, including shorter Andean rivers. However, government mismanagement has degraded Venezuela’s power sector and has sparked a number of large-scale power failures. A report from Transparency International analyzed 40 power generation projects in Venezuela between 2000 and 2014. It concluded that the country only has 4,360.5 MW operational.
The report suggested that the Venezuelan government had to enact a new law to ensure the implementation of renewable energy projects. The law should establish key principles for renewable energy projects and establish fiscal and tax incentives for renewable energy. It should also provide real space for private actors, such as foreign investors, to participate in these projects.
The country also needs a renewable energy law that provides incentives for the private sector to take over distribution, dispatch and commercialization activities. The government should also establish an independent national electricity system operator. It should oversee private generators and coordinate their efforts with the state.
An aggressive oil export program needs to go hand in hand with an energy transition. It also needs to include incentives for private sector participation, such as tax refunds and exemptions from taxes.
Venezuela’s electricity system needs to be reconstructed. It has been mismanaged by the government and has been a drain on human and financial capital. Its electrical infrastructure is vulnerable to natural disasters, such as droughts, and needs major upgrades to handle the growing demand.
Currently, forestry is only a minor part of the economy of Venezuela. Forestry accounts for less than 1% of the nation’s land area, with less than one-fourth of the nation’s land area being used for grazing and crop production.
The Venezuelan economy is industry-oriented, and petroleum and natural gas are the main sources of revenues. The country’s main cash crop is coffee. Petroleum accounts for about nine-tenths of Venezuela’s exports. Petroleum reserves are mainly located in the Orinoco Delta and eastern Llanos. The main heavy industries are located in the southern region.
The main forest types in Venezuela are mangroves, riparian forests, endemic-rich high elevation areas in the Guiana Shield, lowland evergreen forests, and complex cloud forests in the Andes. Most of Venezuela’s forests are covered by forest plantations. The main plantation species in Venezuela are Caribbean pines, which account for more than half of the nation’s forest plantations.
In the 1980s, the timber industry in Venezuela underwent a modernization. During that time, large integrated wood pulp plants and newsprint plants were established. Foreign companies began to participate in joint ventures. This represented a significant advance in the Latin American forestry industry.
However, the timber industry has experienced moderate growth. Most of the logging concessionaires have adopted the stand growth cycle. This is a management technique that has been proven to produce higher stand yields. The process of forest conversion has raised concerns about biological diversity conservation.
In the 1980s, foreign companies began to participate in joint ventures. They sought to harvest hardwood species for chemical derivatives. They also sought to develop large integrated newsprint plants. They have been characterized by poor planning and environmental impacts.
Ports of commerce
Despite the government’s illegitimate regime, the United States stands with the people of Venezuela. We will continue to use economic tools to support the interim president, Juan Guaido. The path to sanctions relief requires the democratically elected government to quickly transfer control of the nation.
The United States is currently issuing sanctions against the Government of Venezuela. These sanctions do not prohibit transactions with the people of Venezuela or with certain activities that are otherwise legal under U.S. jurisdiction. They do, however, preclude certain transactions with a person that is owned or controlled by the Government of Venezuela. In addition, they prohibit dealing in new debt, debt that was issued prior to August 25, 2017, and dividend payments.
Dealing in the debt of the Government of Venezuela is generally prohibited. However, some types of debt are permissible. These types of debt include long-term financing for the Government of Venezuela and certain agricultural commodities.
Certain types of equity issued by the Government of Venezuela are also permissible. This includes debt that was issued prior to August 25, 2017, but only if it was issued prior to August 25, 2017. The exception is dealings in equity issued by entities owned or controlled by the Government of Venezuela. These entities include Petroleos de Venezuela, S.A. (PdVSA), Banco Central de Venezuela (BCV), and the International Committee of the Red Cross. The repayment terms for PdVSA must be at least 90 days and for the rest of the Government of Venezuela, at least 30 days.
In addition to sanctions on the Government of Venezuela, OFAC has issued several general licenses. These general licenses authorize transactions with certain individuals or entities that are blocked under the Executive Order.
Generally, U.S. persons are prohibited from engaging in transactions with the Government of Venezuela, its citizens and entities related to the foregoing. However, there are exceptions to these general prohibitions. A few exceptions include legal services, personal communications-related services, and humanitarian-related transactions.
Depending on the circumstances, U.S. persons may be permitted to deal in Venezuelan debt. In addition, U.S. persons may accept payment for a preexisting debt, but the tenor of the debt must be 30 days or less. This is not necessary for the debt to be a new debt. If the debt is in an existing parent agreement, the parent agreement must have a repayment term of 30 days or less for the remainder of the Government of Venezuela.
The Government of Venezuela may act as underwriter on a new debt, but this does not constitute a prohibited transaction. The Government of Venezuela may also accept payment under a letter of credit. The letter of credit must be issued by the Government of Venezuela and must be advised to the U.S. financial institution.
Financial institutions must be careful to determine whether their customers are eligible for these transactions. In addition, financial institutions must confirm that customers are not blocked. Depending on the circumstances, they may be required to perform due diligence on direct customers. In the event that a customer is blocked, they will be referred to the appropriate regulatory response.
The Government of Venezuela may sell or transfer assets, but this does not mean that the assets will be sold for less than their worth. In many cases, proceeds from sales are used to support the regime. Moreover, the proceeds from sales are often used to enrich the regime’s supporters.