Given
the different social manifestations now a day in Venezuela, we would
like to analyze this country to see its the role in international
trade and how it plays in foreign markets to understand the issues
that affect their society.
Venezuela
is a country with a positive trade balance, as its economy is
export-oriented, its main economic activity from exploitation and
refining oil for export as well as supplying the domestic market.
This situation has allowed Venezuela to become the fifth largest
Latin American country after Brazil, Mexico, Argentina and Colombia
economies. The exploitation of Venezuelan oil is made by their own
state company called “Petroleos de Venezuela SA (PDVSA)”. The
origins of oil exploration began in 1875, afterwards they moved
towards the process refinery products, until 1922, starting with the
large-scale exploitation which allowed a change in the direction of
the country. Venezuela is one of the founding countries of the
Organization of Petroleum Exporting Countries (OPEC). Prior to the
change of course, Venezuela had its axis being in the farm at the
time exporting coffee, cocoa, cattle, sugar, brown sugar, snuff,
balata, cattle hides and rubber.
Dependence
on hydrocarbon exports has increased against the rest of the
developing country exports and currently still developing but
decrease exponentially even failing to satisfy the domestic market.
The data demonstrated this statement indicate that in 1999, exports
of goods and oil service in that year represented 76% of exports,
rising to 86 % in 2005 and 96% in 2012. With the expansion oil came
the countryside abandonment, as even the wages and quality of life
were higher in the oil industry instead of agriculture. The
large-scale exploitation flooded the market with an abundant supply
of labor in this sector, enabling the country to grow up per capita
income beating countries with similar geographic characteristics of
the region, which led the country begins to have significant
inflation even higher than they have today.
Besides
exporting oil, Venezuela exports iron, steel, aluminum and articles
thereof, coal, chemicals and other basic industries, which together
contribute 4% of the foreign exchange earned by the country. The
value of non-oil exports have suffered a serious setback, because in
1998 passing of 5.529 millions dollars to 3.771 millions dollars in
2012. In return, the country imported goods and services worth to
15.492 billion dollars in 1998 passing to 65.360 billion dollars in
2012. Imports are mainly of processed products to be accentuated year
after year due to the growing need for existing machinery and spare
parts, whether electrical or electronic. The main buyers of
Venezuela´s exports are US, Colombia, UK, Netherlands Antilles,
Japan, Mexico, Italy, Germany, Brazil, Canada, France and Spain.
Trade has increased with the member countries of the Andean Community
of Nations, Community and Common Market of Caribean (CARICOM), the
Central American Common Market (CACM) and the Southern Common Market
(MERCOSUR).
The
country's main industry is the hydrocarbons and their derivatives,
leaving Venezuela as the nation's ninth global oil exporter. This
activity is mainly concentrated in the mining fields of Lake
Maracaibo, Barinas-Apure Basin and the eastern. The state company
PDVSA manage this resource. There are data regarding production
levels PDVSA company in order to keep people focused on the goodness
of this resource which is then often different from reality and often
fall into contradictions, being the subject of much controversy in
the country.
In
1998 PDVSA with 36.000 employees producing 3 million barrels per day,
while in 2011 with just over 121.000 workers fail to produce over 4
million a day. Recruitment of staff increased by 336% to increase
only 30% of oil production in the term of 12 years, a fact that
demonstrates the ineffectiveness of governments that have opted for
one sector over the other leading to country to lose productive
capacity and competitiveness. In late 2013 Venezuela exported about
1.3 million barrels of oil keeping the same template, due to
production quotas imposed by OPEC.
Meanwhile,
the mining industry, which has one of the largest reserves of iron in
the world has been falling in the recent years, taking back to a
public company (SIDOR) that manages the extraction and processing of
this metal. In 1997 the company was privatized, and in that period a
wave of privatizations due to lack of oil revenue, which allowed
obtaining necessary currencies to convert certain industries were
inefficient in productives. Through privatization, the company
increase production until 2008 was again nationalized, an event which
again demonstrates the failure of a state, as the company has again
cut production, producing only 45% of its installed capacity in 2013.
Other non-oil minerals that the company operates are bauxite and gold
that is not reached intensively exploited yet due to lack of
investment of the state.
For
its part, the agriculture industry has two warring federations
livestock production: FEDENAGA (Traditional) and FEGAVEN (Allied
government), which involves getting conflicting statistics between
the private sector and government. However, the reality of the data
indicate that the production of agricultural products such as milk
and meat from two decades ago were much higher and amounted to
provide a much higher percentage of domestic consumption of these
foods. There are figures indicating that Venezuela came to produce
80% of these foods while now must import 50%. In the case of milk
production fell 33% in 2012 as price controls imposed by the
government. Also, we can see that the same thing happened in
production of rice and maize are reduced year after year. In 2007,
white maize one of the highly demanded products internally in the
country allowed to self-sufficiency, going to have to import up to
55% of this product in 2012. In data, maize production was located
above one million tons, of which 789.000 tons were of white corn, the
main ingredient for making arepa. The processing industry demand
precooked 1.5 millons tons of cereal per year. Of that, 53.54% is
contributed by domestic production and 46.46% is supplied through
imports.
It
is noted that in the food industry, "Empresas Polar", is
the second private company in the country after it PDVSA has expanded
internationally. This company is a supplier of food across the
country, in the last year suffered delays in supplying supermarket
chains, mainly due to the delays the company itself remains in debts
with international suppliers that will facilitate the premiums to
manufacture staples that are part of the food basket of the
Venezuelan people, as the government maintains outstanding authorized
many foreign currency payments. The company has confirmed that the
delays in the settlement of foreign currency that allow them to pay
their debts with external suppliers go from 141 days to 769 days,
affecting reception or delays in new batches of these raw materials
and consequently produces shortages. The company processes precooked
flour, corn oil, pasta, rice, white corn, yellow corn, sugar drinks
among other foods that are affected by these delays. Other factors
affecting the delay in delivery of food are too bureaucratic, as the
company accuses the Superintendency of Agricultural Silos and Storage
Tanks for delays in the delivery of permits and guides for moving
food, affecting this year supply Barinas, Mérida, Táchira and
Zulia, even though the company has the products and raw materials in
stock to supply the demand.
The
scarcity of everyday goods has become the particular phenomenon of
the Venezuelan economy in which the government has tried to intervene
through a policy of regulated prices mainly in milk, meat and oils
between other products. For its part, the government relates to the
shortage increased consumption of the population that can not be
quickly satisfied and the existence of hoarding and smuggling, when
in fact, price controls to a value below the cost of production
before the rise in prices of raw materials, and excess monetary
liquidity to a system of little domestic agricultural production, are
the lack of such shortage. While smuggling is a fact recognized by
all, because in Venezuela there are several cheaper products than in
Colombia, Brazil and other neighboring countries, this is not the
main reason for the shortage and this problem would end with greater
border controls, combating corruption that allows this to happen and
with a system of free trade among countries in the region to allow
equal competition between them.
Another
policies which are missing in Venezuela, is the incentive to the
country's tourism industry, as they have great potential for the
amount of attractive landscapes they have, but they lack policies
that favor the development of this sector and infrastructure
investment today suffer very precarious, improve currency
instability, as well as combat insecurity from lack of use that has
been culturally ingrained and it is endemic in all Latin American
economies, affecting local people and tourists visiting the country.
Following
is preferential policies hydrocarbons sector, Venezuela has become
very dependent on imports of agricultural products, where the main
importer is the Venezuelan state. The data show that total imports of
the country between 1997 and 2009 represented in average 16% of total
foreign purchases happening in 2011 to represent 35% and 64% in 2012.
Imports of many products that came before exported mainly focus on
the food sector in particular items such as milk powder, sugar,
poultry and beef, rice, corn and coffee. The product mostly imported
is milk powder. In 2013, 50% of the food consumed in Venezuela were
imported. Other products in which the government has embarked to
import are weapons, being justified by Chavez to replace weapons
already expired and probably some fear of American reaction to the
verbal outrages against them rushing. This led to Venezuela was the
largest importer of weapons in South America, its main supplier are
Russia with 66%, followed by Spain 12% and China with 6% of these
imports.
Consequently,
Venezuela's GDP unexpectedly fluctuates due to its higher dependency
to petroleum, which sometimes helps to overcome the crisis, but not
enough due to the weak non-oil sectors, capital flight and
unfavorable fluctuations in oil prices. In 2003, due to serious
political instability, many social conflicts and cessation of
activities of PDVSA, the Venezuelan economy experienced a fall of
7.7% of GDP, what led the government to establish a change in control
buying and selling currencies. Chavez reached winnig the elections
after a year of growth for the economy, which in 2004 saw a GDP
growth of 17.9%, allowing the president to undertake social
investments in education, health foods and increased quality lives of
the poorest citizens. Its mandate was followed by several years of
boom and high growth rates due to record exports, which accounted
privatizations significant growth in non-oil activities such as
financial institutions, insurance, communication, construction and
other services. In 2007, was announced a currency redenomination to
sanitize reduce inflation but with results far from what they
expected. Nor forget, were years of consecutive increases in oil
prices reaching a record high in the year 2008-2009, which also
generate substantial foreign exchange reserves that allowed the
Chavez government to increase public spending helping to fight
poverty and reduce it. Later, with the crisis of 2008-2009 the price
of oil began to decline taking the country to a very high inflation
rates accompanied by falls in GDP for that year and subsequent,
leaving Venezuela within the regional context well below other
countries in Latin American and the Caribbean, as it not only oil
prices fall, but also the global crisis affected the demand for this
product because all countries reduced their productivity and energy
consumption. For 2011 the Venezuelan economy back to the path of
growth and a slow recovery, being announced in 2013 a major
devaluation and a new one in 2014 which led to an increase in
inflation plus population fatigue. We should note that the government
increases the debt in order to maintain public spending, but they do
at higher than revenues derived from oil and other sectors currency
suppliers who later will allow you to pay your debt levels worldwide.
Faced with a reduction in the price of oil in Venezuela the situation
could be more complicated, since the country's debt would currently
70% of GDP according to independent studies in a cycle of high oil
prices.
Venezuela
needs to change its business strategy towards foreign investment in
agriculture in order to supply its domestic demand. The deterioration
of the domestic productive apparatus, due to little policy focused on
growth of domestic agriculture, has resulted that the country has
become more dependent on imports than it was a decade earlier.
Analysts believe that as long as resources through oil revenues will
be food security, but that policy as well as being unsustainable over
time is harmful and we see that is starting to take its toll on the
government of Maduro.
The
government has undoubtedly favored the less fortunate and
consequently improved their quality of life. However, these policies
that rely solely on the profits made by the oil sector imply a steady
increase in inflation, rising external debt and shortages of basic
foodstuffs for the population, which leads to significant distress in
a large majority opposed to government policies, and soon reach the
brake investments by the state in other basic services such as
education and health, as they can not increase oil exports and may
maintain the constant current increase debt with third countries.
The
Venezuelan government is facing a major change in its internal and
external policies, but so far seem not to want to recognize their
current situation and needs to claim his people, so let's hope this
does not lead to a further deterioration of their situation internal
where definitely will be harmed are the Venezuelans.
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