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- GDP (PPP):
- $538.9 billion
- -4.0% growth
- 1.1% 5-year compound annual growth
- $17,695 per capita
- Inflation (CPI):
- FDI Inflow:
Venezuela’s economy is in decline. Unwise government spending and fiscal deficits have affected the daily lives of Venezuelans as a shortage of basic consumer goods has become more widespread. President Nicolás Maduro has issued decrees that erode the rights of foreign investors and increase the government’s control of the economy. Many U.S. and multinational firms have shut down operations in Venezuela because of rigid labor regulations.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 33.7 (down 0.6 point)
- Economic Freedom Status: Repressed
- Global Ranking: 176th
- Regional Ranking: 28th in the South and Central America/Caribbean Region
- Notable Successes: None
- Concerns: Rule of Law, Regulatory Efficiency, and Open Markets
- Overall Score Change Since 2012: –4.4
Oil represents nearly all of Venezuela’s exports and contributes about half of its annual income. Lack of economic diversification leaves Venezuela extremely vulnerable to declining world oil prices. The Maduro administration has pushed government spending to the brink, resulting in higher inflation and public debt.
Venezuelans enjoy few civil liberties and little economic freedom, and crime rates are high. Nicolás Maduro, who became president in 2013 following the death of Hugo Chávez, faces renewed social unrest. He has tried to shift blame for shortages created by price controls, subsidies, rigid labor regulations, and other deeply flawed economic policies onto what remains of Venezuela’s private sector. Access to U.S. dollars is highly restricted, and the business climate is hostile. In 2015, the government made the first withdrawals of Special Drawing Rights from the International Monetary Fund since 1997. Venezuela’s international reserves continue to fall, and a debt default is not out of the question.
Corruption is pervasive. Smuggling has become extremely lucrative because of state subsidies and price controls; gasoline smuggling alone costs the government several billion dollars per year. Spiraling rates of violent crime prompt large numbers of skilled workers to emigrate, which will affect the economy’s long-term performance. Expropriations, weak public-sector institutions, and lack of judicial independence undermine property rights.
The top personal income and corporate tax rates are 34 percent. Other taxes include a value-added tax. The overall tax burden is estimated to equal 13.9 percent of total domestic income. Budget deficits have fluctuated depending on changes in the price of oil. Government spending amounts to 38 percent of GDP, and public debt is equivalent to about 45 percent of total domestic output.
Regulatory encroachment on private businesses continues. There is little transparency in decision-making, and most contracts are awarded without competition. The labor market remains controlled by the state. Thanks to huge subsidies and enormous oil reserves, Venezuela has the cheapest fuel in the world; a fill-up costs only a few U.S. pennies at black-market exchange rates.
Venezuela’s average tariff rate is 8.4 percent. Imports of several agricultural products are restricted. State-owned enterprises distort the economy. A November 2014 presidential decree reduced the rights of foreign investors. Hostility to foreign investment and threats of expropriation persist. The financial sector is tightly controlled by the state, and credit is often allocated on the basis of political expediency.