Transcript Venezuela - David Barber

Venezuela
Venezuela
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Northern South America
Bordering Caribbean Sea
and North Atlantic
Between Columbia and
Guyana
~ twice the size of
California
Population: 24,287,670
History
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Original inhabitants: Carib, Arawak, and Chibchaspeaking
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
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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
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Next 100 years – caudillos and rule was held by various
dictators
1958 – first elected government
1999 – new Constitution and newly elected government
Since 1999:
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Natural disasters (floods and mud slides)
Oil strikes
Government
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Federal Republic
22 States
1 Metropolitan District
11 Federally controlled islands
72 additional islands in the Caribbean (federal
dependencies)
Government
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Executive power at the state level
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Local government
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Elected to four year terms
Mayor
Municipal Council
Parishes
Current Chief of State
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Hugo Chavez
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Initially elected in 1998
Re-elected to a six year term in July, 2000
Government
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Chavez Administration
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Called for fundamental restructuring
New Constitution
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Appointed National Constituent Assembly
Guarantees freedom to create political parties
Legislative power is a unicameral National Assembly
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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.”
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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
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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:
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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.
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This group is growing faster than that of the general population.
Environmental Initiatives
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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
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Sewage pollution of Lago de Valencia
Oil and urban pollution of Lago de Maracaibo
Deforestation
Soil degradation
Urban and industrial pollution
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Particularly along the Caribbean coast
Rainforest Ecosystem
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Threat from irresponsible mining operations
Environmental Issues
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Venezuela has a relatively good conservation record.
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1976 the first Ministry of the Environment in Latin
America was established.
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Since then a complex legal framework for environmental
management has been established.
Extensive protected area systems
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Nearly half of national territory is under some kind of
protection.
Oil Background
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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
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80% of export earnings come from oil
50% of the government’s operating revenue stems from oil
Oil Background
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Mid-nineties oil price decline led to:
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Economy is slow to recover because of:
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Recession and eventual reorganization of government
Weak non-oil sector
Capital flight
Safety net created to avoid recurrence:
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Macroeconomic Stabilization Investment Fund
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Deposits come from petroleum revenue
Oil Strike
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November 2001
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December 2, 2002
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Chavez enacted a new law that makes the government the majority partner in
any new energy venture in Venezuela.
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
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Has imported up to 15% of oil from Venezuela.
Has branded Venezuelan oil supplies as unreliable.
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Venezuelan daily oil production has dropped to 440,000 compared to 3 million barrels.
Trade and FDI
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US Viewpoint (1999 statistics):
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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):
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$5.7 billion from U.S. in 1998.
Investments were predominantly in manufacturing, petroleum,
and wholesale sectors.
Trade Alliances
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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:
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Free trade agreement with MERCOSUR
Investor Benefits
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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
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Early 2002 – exchange rate system changed from pegged
to free-floating.
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Since then, the Planning and Development Department
have pegged the Bolivar to the US Dollar.
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Caused the Bolivar to depreciate.
Pegged at Bs. 1600.00 – 1596.00
Also under investigation, a crawling peg system, which
would modify the exchange rate weekly.
Commercial History
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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
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Early 1994 – a banking crisis led to capital flight, currency erosion,
and worsened the fiscal crisis.
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Emergency currency and price controls were enacted.
Recovery was dependent on:
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Revision of labor benefits.
Elimination of subsidies.
Government withdrawal from industry.
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Eventually several hotels, banks, and some shares of the telephone company were sold.
Mid-1995 Landmark decision opened oil sector to foreign
investment.
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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 Continued
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1996 – Government initiated a fiscal, monetary, and foreign
exchange plan. It was intended to:
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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:
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Overseas Private Investment Corporation (OPIC) – protects from political
risk.
World Bank’s Multilateral Investment Guarantee Agreement (MIGA) –
provides similar protection.
Financial Overview
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2000
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2001
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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%
Economy contracted by 6.4%
Inflation 12.3%
2002
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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
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Originated in Catholic Church in the colonial period.
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Reserved for the wealthy landowner class.
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Roots can be traced to France.
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
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Free education became an integral part of the political
landscape.
Education Continued
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In 1958 education began to expand both in quality and
quantity:
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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.
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In 1969, the government attempted to address this issue by
facilitating the entry of students of various backgrounds.
Education Continued
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Secondary schooling was not compulsory until 1980.
Existence of a social split:
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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 Continued
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Population growth has affected education.
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Literacy rate in Venezuela is one of the highest in Latin
America (nearly 90%) among those fifteen and older.
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Number of universities between 1958 to 1984 tripled.
Overall number of places of higher education grew tenfold (to
more than 70).
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.
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Six years of primary and three years of secondary.
Education Continued
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Higher Education
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Can attend two years of senior high school.
Can follow that with a variety of colleges, universities or
technical schools.
Labor Force
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Until the 80’s, skilled workers were a premium.
Due to economic downturn, the large number of skilled workers
are no longer needed.
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Technical education has become less important.
Education Today
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Chavez administration has created the National Education
Project (PEN).
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Intended to fix some of the things still considered wrong with
the educational system:
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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.
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Teacher’s groups and the church leaders claim it is a “Cuban-style indoctrination
of youth.”
Educational Data
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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
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All available information points at a country that could go
either way.
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Oil resources give Venezuela both benefits and problems of an
easy source of revenue.
Actions have been taken to counteract the cyclical revenue
streams.
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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.