Venezuela

Politics:

• Analysis

  Venezuela politics: A change of government looks more remote

  On December 16th Venezuelans elected 23 state governors and their respective regional legislatures. The result was a sweeping victory for the ruling Partido Socialista Unido de Venezuela (PSUV), marred only by its failure to wrest Miranda from its incumbent governor and recent presidential candidate, Henrique Capriles. Although Mr Capriles's position as the opposition leader is now undisputed, the PSUV's clear victory has raised doubts about the opposition's chances in the event that the deteriorating health of the president, Hugo Chavez, precipitates a fresh election. In fact, the government could find that an early presidential vote works to its advantage.

  PSUV candidates took 20 of the 23 states, rolling back previous opposition gains in Zulia, Carabobo, Tachira and Nueva Esparta. In Monagas, where the incumbent-former chavista Jose Briceño-failed to reach a unity agreement with the opposition candidate, Soraya Hernandez, the result was another gain for the government. Apart from Mr Capriles, the only opposition figures to retain state governorships were Henri Falcon in Lara and Liborio Guarulla in Amazonas (both of whom are former PSUV members). Mr Falcon's was the most decisive victory, but his leadership remains too regional in nature to pose a challenge to Mr Capriles at a national level.

  In general, the vote took place without significant violence or social unrest. The Mesa de la Unidad Democratica (MUD) alliance has accepted its defeat, with the exception of one state: Bolivar. There, MUD candidate Andres Velasquez is alleging fraud after the incumbent PSUV governor, Francisco Rangel Gomez, was declared the winner by a very small margin. However, the dispute is likely to be short-lived, as the government (which controls all the country's institutions) has announced that a recount will not take place.

  Strategic move

  The government's calculation, in scheduling the election so close to Christmas and so soon after the October 7th presidential vote, paid off. Abstention was high on both sides, but affected the opposition more. The national vote outcome was similar to the October result, with the PSUV winning an average of 56% of votes, against 44% for the opposition. This suggests that, even without Mr Chavez on the ballot-he was almost entirely absent from the campaign-the PSUV and its allies can still win comfortably.

  For the PSUV, gaining control of so many states-including winning a majority in the state legislatures in Miranda and Lara-appears to clear the way for it to advance towards Mr Chavez's dream of a "communal state", in which mayors and governors are sidelined in favour of grassroots committees controlled by the ruling party and the national executive. This might clash with the aspirations of some of the PSUV governors, but, so far, all seem to stick to the goals set forward by Mr Chavez and his designated successor, the vice-president, Nicolas Maduro. Also noteworthy is that no fewer than 11 states are now ruled by retired military officers, many of them ex-army generals with close ties to the president.

  For its part, the MUD alliance has begun a painful post-mortem, which will probably need to produce some clear changes in the short term, especially if Mr Chavez (who is slowly recovering from more surgery in Cuba) cannot physically be present at the inauguration of his new term on January 10th, forcing new elections. This will have to reflect the changing balance of forces within the parties that make up the MUD. Venezuela's traditional parties, Accion Democratica (AD) and the Comite de Organizacion Politica Electoral Independiente, now appear on the brink of extinction, with not a single governor with roots in the old, two-party system still standing. Un Nuevo Tiempo, the Zulia-based party of incumbent governor Pablo Perez and an offshoot of AD, has also been hit hard by the loss of its home base. In contrast, Mr Capriles's Primero Justicia has consolidated its position as the main opposition party at the national level, while Voluntad Popular, the party of recent presidential hopeful Leopoldo Lopez, has also continued to expand.

  Looking ahead

  Although Mr Capriles improved his share of the vote in Miranda from its level in the October presidential election, it is uncertain whether he would be able to defeat a PSUV candidate in a new presidential poll. Speaking after results were announced, Mr Capriles stressed that he had now beaten two of Mr Chavez's former vice-presidents-Diosdado Cabello, currently head of the National Assembly, in 2008, and now Elias Jaua-suggesting that he could also defeat Mr Maduro. However, in a quick election, with Mr Maduro standing in for Mr Chavez, that seems unlikely. Not only it is clear that the PSUV party bases are highly motivated, but any PSUV candidate is likely to enjoy huge incumbent advantages. The recent regional elections were marked by even more blatant abuse of state resources than on previous occasions. These ranged from local politicians inaugurating public works carried out by the central government, to the electoral authority's decision to reopen the electoral register so that chavista candidates-and in some cases their supporters and families-could vote in the states to which Mr Chavez had assigned them as candidates.

  With most indicators at present pointing to a presidential election in the short term, the government appears to maintain the upper hand. This does not mean that the opposition, and particularly Mr Capriles, will not manage to mount a strong challenge, but it currently seems unlikely that a regime change will take place. The PSUV leaders, including Mr Chavez, may seek to use the party's momentum to achieve a change within its own ranks and make the necessary alignments for a new presidential election to take place in early 2013.

  December 19, 2012

• Background

  Venezuela: Political and institutional effectiveness

  During the forecast period (2010-14), Venezuela will continue to be the worst-ranked of the 12 Latin American countries that we cover in the business environment ratings for political and institutional effectiveness, and globally it will slip from 77th in the historical period (2005-09) to 80th (out of 82 countries). Although the heavy centralisation of power in the executive and the PSUV's dominance of the National Assembly have removed most obstacles to formulating and executing policies, the quality of policymaking is extremely poor. Under Mr Chavez, the decision-making process is likely to remain arbitrary and subject to frequent reversals. There is little discussion of policy proposals in the legislature or among the wider public, with new measures often announced by the president, Hugo Chavez, in his weekly television programme "Alo Presidente". Little thought will be given to the adverse consequences for the economy and the investment climate of the president's increasingly radical stance.

  The investment climate will be further undermined by a politicised judiciary and high levels of corruption. The Chavez government's increasingly aggressive stance towards some foreign multinationals (while granting more favourable treatment to other companies from countries with politically sympathetic governments) is expected to continue. Failure to address an incoherent, inefficient bureaucratic system will further complicate policy delivery in the forecast period. Concerns over the excessive size and poor quality of the bureaucracy will remain, and it is unlikely that the government will attempt any overhaul, owing to the perceived need to reward political loyalty.

  Institutional decay will accelerate

  Since taking office in 1999, the government has aggravated the chronic problems of institutional decay that it inherited. An array of new institutions were introduced rapidly and have become politicised, undermining their credibility. This trend will continue during the forecast period. In particular, there are concerns about an increasing lack of accountability as responsibilities are handed to unelected regional and local authorities, as Mr Chavez seeks to undermine the power of elected administrations, many of which are led by the opposition.

  Violent crime will remain a major problem, fuelled by impunity, shortcomings in law enforcement and the growing problem of cross-border drug-trafficking in the sub-region. The homicide rate has risen sharply in the last decade and there have been a number of high-profile kidnappings for ransom in urban areas, a development that has raised growing concerns over corruption and mismanagement of the police force. The decline will not be halted unless measures are adopted to improve the competence and effectiveness of law enforcement agencies.

  May 05, 2010

• Structure

  Venezuela: Political structure

  Official name

  The Bolivarian Republic of Venezuela

  Form of government

  Federal republic comprising 72 federal dependencies, 23 states, two federal territories and one federal district

  The executive

  The president is elected for a six-year term and appoints a Council of Ministers; after a shortened term beginning in 1999, Hugo Chávez Frías began a fresh six-year term in July 2000, a second full consecutive term in December 2006 and won the October 2012 presidential election to secure a third consecutive full term

  National legislature

  165-member unicameral National Assembly, headed by the president, which replaced the bicameral Congress abolished by the new constitution adopted in December 1999

  Legal system

  Supreme Justice Tribunal at the apex of the court system appoints judges and magistrates in consultation with civil groups

  National elections

  The next elections are September 2015 (legislative) and October 2018 (presidential)

  Main political organisations

  Government: the Partido Socialista Unido de Venezuela (PSUV) was created to unite the Movimiento V República (MVR) with other pro-Chávez parties, but some parties remain outside this grouping

  Opposition parties: Mesa de la Unidad Democrática (MUD), which includes Acción Democrática (AD); the Comité de Organización Política Electoral Independiente (COPEI); Primero Justicia (PJ); Convergencia Nacional (CN); Un Nuevo Tiempo (UNT) and minor regional parties. The leftist Patria Para Todos (PPT) occupies a middle ground between the government and the opposition

  President: Hugo Chávez Frías

  Vice-president: Nicolás Maduro

  Office of the presidency: Franciso Ameliach

  Key ministers

  Basic industry & mining: José Khan

  Communications & information: Mauricio Rodríguez

  Defence: Diego Molero

  Education: Maryann Hanson

  Energy & oil: Rafael Ramírez

  Environment & natural resources: Alejandro Hitcher

  Finance & planning: Jorge Giordani

  Food: Carlos Osorio Zambrano

  Foreign affairs: Vacant

  Health & social development: Eugenia Sader

  Interior & justice: Néstor Reverol

  Labour: María Cristina Iglesias

  Prisons: Iris Varela

  Science & technology: Ricardo Menéndez

  Tourism: Alejandro Flemming

  Trade: Richard Canán

  Central Bank governor

  Nelson Merentes

  December 14, 2012

• Outlook

  Venezuela: Key developments

  Outlook for 2013-17

  • Hugo Chávez's clear victory in the October presidential election opens the way for a further radicalisation of his agenda, raising concerns about the long-term viability of the opposition and other groups critical of the president.
  • Public discontent over a very poor security environment and the failure on the part of the Chávez administration to fully deliver on promises of improved healthcare, education, housing and electricity provision will persist.
  • After expanding by an estimated 5% in 2012, the economy will lose momentum significantly during 2013-17, reflecting weak macroeconomic fundamentals, stagnating oil production and deteriorating infrastructure.
  • A distorted macroeconomic framework and antagonism towards the private sector mean that the business environment will continue to deteriorate in the forecast period, remaining among the least friendly in the world.
  • Venezuela's weak public finances and rising debt mean that, in coming years, the authorities' capacity to implement countercyclical policies in the event of an external shock will be very limited.
  • Annual inflation will remain very high in 2013-17, at around 26%,, but with many people relying on the black market (where prices are higher) for staple goods, the cost of living will increase faster than official data suggest.
  • The continued build-up of supply/demand imbalances will force repeated devaluations in the exchange rate, with the fixed exchange rate forecast to end 2017 at BsF12:US$1.
  • The trade balance, and oil prices in particular, will continue to determine current-account trends in the outlook period, with the surplus falling from a high of 8.6% of GDP in 2011 to an average of 4.2% of GDP in 2013-17.

  Review

  • Of the 23 state governorships at stake in upcoming regional elections, the race in the state of Miranda is attracting most attention, as the leader of the opposition, Henrique Capriles, battles the former vice-president, Elías Jaua.
  • Electricity blackouts have continued to hit various parts of the country, in particular the economically vital central and western regions.
  • The amounts traded at the Sistema de Transacciones en Moneda Extranjera (SITME, a parallel exchange market) fell considerably in November, suggesting an exchange-rate adjustment in the short term.
  • The economy expanded by 5.2% year on year in the third-quarter of 2012, boosted by a rapid rise in public and private consumption. However, recent data suggest that fiscal spending has fallen rapidly since the October elections.

  December 14, 2012

Economy:

• Background

  Venezuela: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	29.1	Population growth	1.6
  GDP (US$ bn; market exchange rate)	315.9	Real GDP growth	2.6
  GDP (US$ bn; purchasing power parity)	374.1b	Real domestic demand growth	4.4
  GDP per head (US$; market exchange rate)	10,867	Inflation	26.0
  GDP per head (US$; purchasing power parity)	12,868b	Current-account balance (% of GDP)	6.4
  Exchange rate (av) BsF:US$	4	FDI inflows (% of GDP)	0.5
  a Actual. b Economist Intelligence Unit estimates.

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  Background: From 1958 until the mid-1990s two parties, Acción Democrática (AD) and the Comité de Organización Política Electoral Independiente (COPEI), alternated in power. Frequent economic crises and endemic corruption eventually led to a collapse in their support, culminating in the election in December 1998 of a former lieutenant-colonel and leader of a failed coup in 1992, Hugo Chávez, with a mandate for radical political reform. Mr Chávez's policy programme has exacerbated political polarisation, but he has survived several attempts to remove him from power. Mr Chávez won a referendum in February 2009 to remove caps on the number of terms that elected officials may serve. He stood for and won a fourth term in October 2012.

  Political structure: Although Venezuela is a federal republic, successive administrations-including that of Mr Chávez-have proved reluctant to devolve political authority, with the transfer of financial resources from the federal to local level still highly dependent on the central government. The political system is unicameral and elections for the 165-seat National Assembly take place every five years (a new legislature, with a large opposition presence, took office in January 2011). However, the executive has become increasingly powerful in recent years, at the expense of other branches of government.

  Policy issues: Political radicalisation has been reflected in increasingly heterodox economic policymaking in recent years, including an acceleration of the nationalisation of industries deemed "strategically important" and the introduction of a multiple fixed exchange-rate system in 2010. However, distortions created by the government's policy approach have become increasingly evident, with the economy growing by far less than its potential and with inflation remaining high in spite of price controls, reflecting import restrictions and weakening productivity. Failure to invest part of the oil boom in recent years has led to a startling decline in the country's physical infrastructure, resulting in recurrent electricity shortages.

  Taxation: The top corporate tax rate is 34% for non-oil companies and 60% for oil companies. As of April 2011, a maximum royalty rate of 95% applies to oil extraction. The VAT rate was cut from 14% to 9% in 2007, but, following the collapse in oil prices in late 2008, the authorities raised the rate to 12% in early 2009 in an attempt to boost revenue. A financial transactions tax was eliminated in 2006, reinstated in 2007 and eliminated once more in 2008.

  Foreign trade: Exports of US$92.6bn and imports of US$46.4bn led to a trade surplus of US$46.2bn in 2011, compared with a US$27.1bn surplus in 2010. The current-account surplus widened to US$27.2bn in 2011 (representing 8.6% of GDP).

  Major exports 2011	% of total	Major imports 2011	% of total
  Oil & gas	95.2	Intermediate goods	43.8
  Other	4.8	Capital goods	20.3
  		Consumer goods	18.7
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  US	43.1	US	35.4
  Netherlands Antilles	11.3	Colombia	18.7
  China	6.5	Brazil	13.2
  Spain	1.4	Mexico	4.4

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  December 14, 2012

• Structure

  Venezuela: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 14, 2012

• Outlook

  Venezuela: Country outlook

  Venezuela: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The populist president, Hugo Chávez, will continue to push forward with programmes that target high public spending on social investment, combined with a much more controversial drive towards what he calls "21st-century socialism". Indeed, after winning a fourth-term in October 2012 by a clear margin, Mr Chávez will seek a further radicalisation of his agenda in 2013-17, taking significant steps towards his stated goal of making his "revolution" irreversible. Once local elections (including those for mayors, due in April 2013) are out of the way, Mr Chávez is likely to seek legislative backing to extend his powers to rule by decree (which he had done until mid-2012), as well as to revive the issue of constitutional reform, on which he was narrowly defeated in 2007. As the current constitution calls for new elections in the event that the head of state cannot continue in office during the first four years of the six-year term, Mr Chávez is most likely to include a constitutional change to guarantee that another figure from the ruling Partido Socialista Unido de Venezuela (PSUV) would finish his term, should he need to step down. This issue has again taken centre stage, following renewed questions over the health of Mr Chávez (who was diagnosed with cancer in mid-2011 and is again undergoing medical treatment in Cuba). Another key aspect of any constitutional reforms would be to create the legal and political framework required for the parallel "communal state" that the president seeks to put in place, which aims to bypass existing structures and so diminish the influence of those in opposition who still hold elected posts (notably at state level). Although the long-term viability of Mr Chávez's communal state is questionable--especially the establishment of a new economic system based on communal ownership--a likely outcome is the further centralisation of power in the executive.

  ELECTION WATCH: Following the recent presidential election, attention will be focused on the elections for state governors, due to be held on December 16th. The opposition Mesa de la Unidad Democrática (MUD) alliance will strive to overcome potential voter apathy and avert a repeat of the situation in 2004, when a heavy and unexpected defeat in a recall referendum on Mr Chávez's presidency led to it losing almost every gubernatorial contest later that year. In the recent presidential election, Mr Chávez won in all but two states (Mérida and Táchira), although in several others his margin of victory was small. Nonetheless, his party, the PSUV, may find it hard to capitalise on this result. The PSUV's gubernatorial candidates (selected by the president himself) are in many cases unpopular figures: this has led to tensions between party bases and the leadership. The MUD, in contrast, chose many of its candidates through primaries in February, including some who are incumbents or recognised regional leaders with a strong political base. The focal point of the regional elections will be the state of Miranda, where Henrique Capriles--the MUD presidential candidate defeated in the October election and now the unquestioned leader of the opposition--faces a former vice-president, Elias Jaua. Although Mr Capriles has built a strong support base in Miranda (where he was governor until mid-2012) and is the favourite to win, there is a small, but significant, risk that he could lose, in which case the opposition would suffer a severe blow, possibly leading to permanent splits within the MUD. Even if the opposition manage to obtain important victories in regional elections, Mr Chávez's drive to create a parallel state is likely to reduce their influence progressively in 2013-17.

  INTERNATIONAL RELATIONS: External relations under Mr Chávez will continue to focus on boosting agreements with non-traditional allies, especially China, in an effort to attract investment and diversify Venezuela's oil export market (the US still accounts for around half of all exports). Mr Chávez will also retain close relations with a few radical leftist leaders in the region who continue to sympathise with the Chavista model, including those of Cuba and Nicaragua, which enjoy considerable aid from Venezuela. There will be a push for closer trade integration with Southern Cone countries--following Venezuela's entry in the Mercado Común del Sur (Mercosur, the Southern Cone customs union) in July--but the economic benefits will be limited, given its highly distorted and oil-dependent economy. Despite lingering differences, improved relations with Colombia are likely to prove resilient in the short to medium term, as shown recently by a joint security operation to capture a major drug-trafficker. In contrast, relations with the US are expected to remain tense, partly on the back of Mr Chávez's strong anti-US rhetoric and close relationship with Iran, although outright conflict is highly unlikely, especially given the strong commercial ties between the two countries.

  POLICY TRENDS: Severe macroeconomic distortions--stemming in part from the massive fiscal splurge that preceded the recent presidential election--coupled with a weak and volatile external environment, pose considerable short and medium-term challenges for Venezuela, requiring the government to take corrective measures on the macroeconomic front. However, the Chávez administration is likely to maintain its heterodox economic policy agenda, limiting post-election reforms to addressing currency overvaluation and enhancing debt sustainability. Currency, trade, fiscal and monetary distortions are set to continue, leading to high inflation, capital flight and a shrinking domestic production base. There will be no improvements in fiscal transparency or strengthening of the finances of the Banco Central de Venezuela (BCV, the Central Bank) or the state oil firm, Petróleos de Venezuela (PDVSA). In addition, the progressive implementation of Mr Chávez's brand of socialism and antagonism towards the private sector will mean that Venezuela's business environment will deteriorate further in 2013-17, remaining among the least business-friendly in the world. Difficulties in the business environment will be aggravated by rising labour costs (among the highest in the region), persistent high levels of corruption and a very politicised and ineffective judicial system. Moreover, the risk of nationalisation will persist, with the government likely to target certain players in key sectors (such as food processing and the financial industry) in the short term.

  ECONOMIC GROWTH: From an estimated 6.8% in 2012, private consumption growth will slow to an average of 4.3% per year in 2013-17 (including growth of just 1.4% in 2013), down from an annual average of 14% during the boom years of 2004-08, as rising inflation, weak job creation, and fiscal retrenchment affect household income. Fixed investment growth will follow a similar pattern, slowing considerably in 2013-14, reflecting the lingering threat of nationalisations, rising capital flight, a deteriorating infrastructure and the weak fiscal position. Investment growth is likely to pick up slightly in the medium term, as long-delayed joint projects with Chinese and Russian state firms in the energy and mining sectors are gradually put in place, although the state's poor implementation capacity will hinder any substantial improvements. Export volumes will expand only modestly in 2013-17, reflecting stagnant oil production following years of underinvestment in exploration and capacity expansion. From 2014 imports will once again increase much faster than exports, in tandem with the expansion of domestic demand, acting as a drag on growth.

  INFLATION: The deterioration of domestic productive capacity, coupled with tight currency restrictions--which force importers to rely partly on the more expensive black-market rate--will continue to fuel strong supply-side price pressures, keeping inflation at one of the highest rates in Latin America in 2013-17. Repeated devaluations of the fixed exchange rate will also prove inflationary, while Mr Chávez's attempts to control prices across all sectors of the economy will fail, increasing corruption levels and leading to persistent scarcity of basic goods. The government has managed to bring inflation down in 2012 (to an estimated annual average of 20.9%), but the policy is unsustainable, as it requires high levels of fiscal spending on imported items. As a consequence, and assuming that some initial adjustments to fixed prices and the exchange rate take place within the next year, the Economist Intelligence Unit expects inflation to accelerate to an annual average of 30.2% in 2013, before gradually moderating. However, at an average rate of 24.3% in 2017, it will remain extremely high.

  EXCHANGE RATES: Since January 2011, in an effort to correct currency distortions, Venezuela has had two official rates: a BsF4.3:US$1 exchange rate for all imports and a parallel BsF5.4:US$1 Sistema de Transacciones con Títulos en Moneda Extranjera (SITME) rate overseen by the BCV, which directs sales of government and PDVSA bonds. Despite recent changes to the SITME platform that allow more companies and individuals to access it, the exchange-rate system remains highly inefficient, in part because the government has stopped issuing bonds to supply the parallel market. This has put sustained downward pressure on the bolívar and continues to require burdensome currency control measures. It has also increased pressure on the government to devalue the official exchange rate in the short term (in fact, we expect a nominal devaluation of 35% in the first half of 2013, to BsF5.8:US$1). The build-up of supply and demand imbalances in 2014-17, in line with a huge increase in local-currency liquidity, will eventually require further downward adjustments to the exchange rate, with the primary rate expected to end 2017 at BsF12:US$1. The black-market rate will remain weaker (it currently stands at around BsF13:US$1), but the gap will narrow.

  EXTERNAL SECTOR : We expect the current-account surplus to average a moderate 4.2% of GDP annually in 2013-17, backed by still high oil prices. However, Venezuela's traditionally large trade surplus, at an annual average of 8.6% of GDP, will be much smaller than in the boom years of 2004-08, when it averaged 16.7% of GDP. This is largely because of the government's heterodox economic policies, which will lead to a smaller domestic production base, hitting non-oil exports and boosting import demand. It also reflects our forecast for stagnating oil production, combined with falling refinery capacity (which boosts demand for imports). The services deficit will remain at around its historical average (2.8% of GDP in 2013-17), while the income deficit will gradually fall, to 1.3% of GDP in 2017, as multilateral companies continue to leave Venezuela. Despite continuing current-account surpluses during the forecast period, foreign reserves will rise only gradually in 2013-17 as a consequence of high levels of capital flight, transfers to off-budget spending accounts and the need to meet rising debt repayments.

  December 05, 2012

• Forecast

  Venezuela: Country forecast summary

  Country forecast overview: Highlights

  • The political scene will remain unstable in the forecast period, owing largely to a deteriorating social climate, political polarisation and a further concentration of power in the hands of the president, Hugo Chávez, who won a fourth six-year term in October. Uncertainty regarding Mr Chávez's health will also exacerbate instability.
  • Control of all the organs of the state will help Mr Chávez to make significant progress towards his stated goal of making his "revolution" irreversible. This includes putting in place the necessary legal and political framework to create the parallel "communal state" that the president is committed to installing, and which aims in part to diminish the influence of those in opposition who still hold elected posts (particularly at state level).
  • External relations under Mr Chávez will continue to focus on boosting agreements with non-traditional allies, such as China and Russia, in an effort to attract investment and diversify Venezuela's oil export market (at present, half of its crude oil production is sold to the US).
  • Although Venezuela will enjoy an important demographic bonus in 2013-17 in the form of a more rapid increase in the working-age population than in the overall population, it will struggle to deal with new entrants to the labour market, resulting in a further expansion of the already large informal economy.
  • Despite an ongoing oil bonanza, the economic outlook in the forecast period is fairly poor. After expanding by an estimated 5% in 2012, in line with a massive fiscal expansion, the economy will grow well below potential in 2013-17. High fiscal spending and stagnant oil production will keep the fiscal accounts in deficit in the forecast period.
  • Fairly strong oil prices will keep the current account in surplus, but will provide little boost to domestic engines of growth, as high inflation, capital flight and falling productivity will constrain the domestic private sector. Inflows of foreign direct investment (FDI) will rise gradually in the outlook period, but will remain well below 1% of GDP.
  • Venezuela's economy will remain one of the weakest among emerging-markets in the forecast period. Weak institutions, oil dependency and poor prospects for an improvement in the policy environment will hamper growth. Not only is there little prospect of catching up to OECD levels, but Venezuela is forecast to slip even further behind developed economies.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	5.0	0.4	2.5	2.3	3.0	3.2
  Consumer price inflation (av; %)	20.9	30.2	25.8	26.0	25.0	24.3
  Budget balance (% of GDP)	-14.7	-7.7	-5.8	-4.9	-5.4	-5.6
  Current-account balance (% of GDP)	4.6	5.3	4.4	3.5	3.7	4.1
  Commercial banks' prime rate (%; av)	16.5	18.8	19.8	21.5	22.0	23.0
  Exchange rate BsF:US$ (av)	4.29	5.41	5.79	6.05	8.90	12.00
  Exchange rate BsF:€ (av)	5.51	6.83	7.25	7.48	11.22	15.11

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  December 14, 2012

View detailed map

Country Briefing

Total area

912,050 sq km, of which land area 882,050 sq km; inland waters, 30,000 sq km

Population

28.8m (2010 estimate)

Main towns

Population (m), 2001 census

Caracas (capital): 1.8

Zulia: 2.9

Carabobo: 1.9

Climate

Tropical, cooler in highlands; the rainy season lasts from May to November

Weather in Caracas (altitude 1,035 metres)

Hottest months, May-September, 18-32°C (average daily minimum and maximum); coldest month, January, 2-13°C; driest months, January-April, 8 mm average rainfall; wettest months, August-October, 145 mm average rainfall

Language

Spanish; Indian dialects spoken by 200,000 Amerindians in the remote interior

Measures

Metric system; local measures used in agriculture include 1 arroba=11.5 kg

Currency

The bolívar was redenominated in January 2008 to remove three zeroes from the currency. The bolívar "fuerte" (BsF1=100 céntimos) was fixed at a rate of BsF2.15:US$1, but subsequently devalued to BsF2.6:US$1 in early 2010. A secondary rate of BsF4.3:US$1 was established for non-essential imports. In December 2010, the BsF2.6:US$1 rate was also devalued to BsF4.3:US$1.

Time

4.5 hours behind GMT

Public holidays

January 1st; Thursday-Saturday of Holy Week; May 1st; June 24th; July 5th and 24th; October 12th; December 25th; there are other holidays for bank employees and those in certain other occupations, as well as local holidays

March 01, 2012