Economy of Venezuela

The economy of Venezuela is based primarily on petroleum.Venezuela is the 25th largest producer of oil in the world and the 8th largest member of OPEC. Venezuela also manufactures and exports heavy industry products such as steel, aluminum, and cement. Other notable manufacturing includes electronics and automobiles as well as beverages and foodstuffs. Agriculture in Venezuela accounts for approximately 4.7% of GDP, 7.3% of the labor force and at least one-fourth of Venezuela's land area. Venezuela exports rice, corn, fish, tropical fruit, coffee, pork and beef. Venezuela has an estimated US$14.3 trillion worth of natural resources and is not self-sufficient in most areas of agriculture. Exports accounted for 16.7% of GDP and petroleum products accounted for about 95% of those exports.

Top Sectors in Venezuela

Petroleum in Venezuela

The country is a major producer of petroleum products, which remain the keystone of the Venezuelan economy. The International Energy Agency shows how Venezuela's oil production has fallen in the last years, producing only 2,300,000 barrels (370,000 m3) daily,Venezuela has large energy subsidies.

natural resources in Venezuela

A range of other natural resources, including iron ore, coal, bauxite, gold, nickel and diamonds, are in various stages of development and production. During Venezuela's economic crisis, the rate of gold excavated fell 64.1% between February 2013 and February 2014 and iron production dropped 49.8%. In the production of gold, until 2009 the country produced an annual average between 11 and 12 tons per year.

Manufacturing in Venezuela

The manufacturing sector is experiencing severe difficulties, amidst lack of investment and accusations of mismanagement. Venezuela manufactures and exports steel, aluminum, transport equipment, textiles, apparel, beverages and foodstuffs. It produces cement, tires, paper, fertilizer and assembles cars both for domestic and export markets.

Agriculture in Venezuela

rice, corn, fish, tropical fruit, coffee, beef and pork. The country is not self-sufficient in most areas of agriculture. American firms exported $347 million worth of agricultural products, including wheat, corn, soybeans, soybean meal, cotton, animal fats, vegetable oils and other items to make Venezuela one of the top two American markets in South America. The United States supplies more than one-third of Venezuela's food imports. Recent government policies have led to problems with food shortages. During times of high oil revenues domestic agriculture was neglected in favor of imported products, but when oil revenues fell and the currency experienced hyperinflation, the cost of acquiring those imported goods became prohibitive for most Venezuelans.

Venezuela - Key Economic Indicators

Exports and Imports

Venezuela's exports have significantly declined in recent years, reaching $4.3 billion in 2022. Scrap iron, petroleum coke, and crude petroleum are the top exports, mainly going to China, Turkey, and the United States. Imports, on the other hand, are dominated by China and the US, with a focus on manufactured goods and food.

Balance of Trade

Despite the decline in exports, Venezuela maintains a positive trade balance. This means the value of their exports exceeds the value of imports, though by a much smaller margin compared to the past.

Infrastructure Development

Infrastructure development in Venezuela faces challenges. Road quality suffers from a lack of maintenance, and overall investment has declined. The total road length is estimated to be around 100,000 kilometers, but many require repairs and upgrades.

Fiscal Policy

Venezuela's government spending exceeds its tax revenue, leading to a budget deficit. This is partly due to lower oil revenue and economic hardship. The government attempts to cover the deficit through printing money, contributing to inflation.

Monetary Policy

The Venezuelan Central Bank struggles to control inflation, which has reached hyperinflation levels in recent years. They have implemented policies like raising interest rates and currency devaluations, but these have had limited success.

Trade Agreements

Venezuela has trade agreements with several countries, including some members of the Caribbean Community (CARICOM) and the Southern Common Market (MERCOSUR). However, recent economic and political issues have limited the effectiveness of these agreements.

Environmental Regulations

Venezuela has environmental regulations in place, but enforcement can be weak. Issues like deforestation and oil spills remain a concern. There is a growing focus on environmental sustainability, but significant challenges need to be addressed.

Tax System in Venezuela

Corporate tax rate: The corporate income tax rate in Venezuela is progressive, with the highest bracket reaching approximately 34% for taxable income exceeding 1,500 Tax Units (TU). It's important to note that the value of the TU was recently increased in 2023 to VES 9 (Venezuelan Bolívar Soberano).
Sales tax: Venezuela uses a Value Added Tax (VAT) system with a standard rate of 12%. However, an additional tax rate of 5% to 25% applies to goods and services paid for in foreign currency, cryptocurrency, or certain assets.
Property tax: Property taxes are levied by municipalities and generally considered low. Rates may vary depending on location and property value.
Payroll tax: Venezuela has a payroll tax that funds social security and other social programs. The exact contribution rate can vary depending on the employer and employee categories.
Tax deductions and credits: Deductions and credits are limited in Venezuela, offering less flexibility in reducing tax burdens compared to some other countries.
Tax compliance: Challenges exist with tax collection and enforcement in Venezuela. This can be due to factors like a large informal economy and administrative hurdles. The government is making efforts to improve compliance, but progress is slow.
Tax burden: The overall tax burden in Venezuela is considered high. This is partly due to inflation and the economic situation, pushing effective tax rates higher than intended. Additionally, the recent increase in the TU value can also impact the tax burden for some taxpayers.

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