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Venezuela
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Individual Project “Venezuela” Over the past ten years Venezuela has lived historical moments that have affected its economical development tremendously. Most likely what altered the “traditional” ways of governing the country has been the past election of President Hugo Chavez Frias in 1999. The results of the analysis, based on the degree of instability Venezuela could face in the near future, have been mainly focused on the direct effect Chavez has had on the economical, political and social reforms applied. ECONOMICAL RISK Falling GDP per person: 7/8 By the end of 2002 the Venezuelan economy reported a contraction in its GDP of 8.9 % with a purchasing power parity of $5,500. This is a drastic change compared to the 2.8 % growth in GDP reported in 2001, even though in 1999 it showed signs of a strong recession with its economy falling 7.2 %. The main events that occurred in the past year that had a significant effect on the fall of the economy were: last April’s failed coup, severe financial government problems and a tense situation between Chávez and the private sector. The petroleum sector is about 80 % of Venezuela’s exporting earnings and more than half of the government’s operating revenues. Last December the country suffered a national oil strike that had a negative impact on the economy and it is predicted that this current year Venezuela will live a recession that will take down 25 % of the economic development. Mainly because the first month of the year is practically lost and the political crisis is anything but solved. High Inflation: 3/5 The inflation rate for the year 2002 was of 31.2 %, which can be considered quite high in comparison to the previous year (12.3 %) and to the rest of the world. Nevertheless it is important to point out that in 1995 Venezuela had an uncontrollable inflation of 103 %. Capital Flight: 4/4 Due to the two-month national strike against the government a strong deterioration in the currency and international reserves resulted from the political disarray that prompted the government to impose foreign exchange, capital and price controls.
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