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- GDP (PPP):
- $407.9 billion
- 1.0% growth
- 1.2% 5-year compound annual growth
- $13,605 per capita
- Inflation (CPI):
- FDI Inflow:
Venezuela’s economic freedom score is 34.3, making its economy the 176th freest in the 2015 Index. Its score has decreased by 2.0 points since last year, reflecting declines in half of the 10 economic freedoms including labor freedom, monetary freedom, investment freedom, and business freedom. Venezuela is ranked 28th out of 29 countries in the South and Central America/Caribbean region, and its overall score is far below the world and regional averages.
Over the past five years, economic freedom in Venezuela has declined by 3.3 points, primarily due to deteriorations in the management of government spending, labor freedom, business freedom, and investment freedom. Recording the fifth largest score drop of any country graded, Venezuela has registered its lowest economic freedom score ever in the 2015 Index.
Venezuela’s economic collapse has been preceded by blatant disregard for the basic foundations of the rule of law and limited government. The administration of Nicolás Maduro has pushed government finances to the brink despite some of the world’s largest petroleum reserves. Price controls and import barriers have expanded the informal sector. With monetary stability severely eroded by high inflation, the livelihood of the poor and middle class has deteriorated severely.
In 2014, 15 years after the “21st-century socialist revolution” began, Venezuela was rocked by anti-government student-led protests in which over 40 Venezuelans were killed, many by government security forces or their proxies. Hugo Chávez’s legacy of free-spending social programs and socialist economic policies has led to skyrocketing inflation. There have been significant reductions in civil liberties and economic freedom. Under Chávez’s successor, Nicolás Maduro, the economy has collapsed, and personal security is at an all-time low. In mid-2014, Venezuela announced plans to raise the retail price of gasoline, currently the lowest in the world at 5 cents a gallon, but such reforms fall far short of what is needed to ameliorate an unsustainable financial and political situation.
Political power is concentrated in the executive, with many opportunities for corruption. Capital controls, for example, allow officials to purchase U.S. dollars at a fixed peg and then sell them on the black market for as much as a 1,100 percent profit. The government has expropriated nearly 1,300 businesses since 2002. The dysfunctional judiciary is completely controlled by the executive.
Venezuela’s top individual and corporate income tax rates are 34 percent. Other taxes include a value-added tax. The overall tax burden amounts to 13.6 percent of the domestic economy. Government expenditures, bolstered by oil revenues, are equivalent to 40 percent of domestic production, and public debt is equal to 50 percent of the domestic economy.
The overall freedom to engage in entrepreneurial activity is constrained by government control and inconsistent enforcement of regulations. Most contracts are awarded without competition. The labor market remains stagnant and controlled by the state. President Maduro has used dictatorial emergency decree powers to fight rampant inflation with price controls instead of addressing such causes as money printing and a fixed currency.
Venezuela’s average tariff rate is 8.6 percent. Non-tariff barriers limit competition from foreign companies and agricultural producers. Private investment remains hampered by state interference in the economy, and hostility to foreign investment, coupled with threats of expropriation, persists. The financial sector is tightly controlled by the state and often allocates credit based on political expediency.