2013 Index of Economic Freedom

Venezuela

overall score36.1
world rank174
Rule of Law

Property Rights5.0

Freedom From Corruption19.0

Limited Government

Government Spending50.6

Fiscal Freedom75.6

Regulatory Efficiency

Business Freedom45.6

Labor Freedom34.5

Monetary Freedom47.3

Open Markets

Trade Freedom58.8

Investment Freedom5.0

Financial Freedom20.0

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Quick Facts
  • Population:
    • 29.8 million
  • GDP (PPP):
    • $374.1 billion
    • 4.2% growth
    • 2.6% 5-year compound annual growth
    • $12,568 per capita
  • Unemployment:
    • 8.2%
  • Inflation (CPI):
    • 26.1%
  • FDI Inflow:
    • $5.3 billion
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Venezuela’s economic freedom score is 36.1, making its economy the 174th freest in the 2013 Index. Its score has decreased by 2.0 points since last year, reflecting deteriorations in business freedom, labor freedom, and freedom from corruption and an explosive increase in government spending in the run-up to 2012 elections. Venezuela is ranked 28th out of 29 countries in the South and Central America/Caribbean region, and its overall score has recorded one of the 10 largest declines in the 2013 Index.

The foundations of economic freedom in Venezuela continue to deteriorate, severely hampered by structural and institutional problems. With the judicial system increasingly vulnerable to political interference, corruption is prevalent, and the rule of law is weak across the country.

The state’s presence in economic activity has increased through nationalization of industry. Heavily dependent on the oil sector, which accounts for 95 percent of exports, the economy suffers from a lack of dynamism. Inefficient and non-transparent regulatory and judicial frameworks obstruct prospects for long-term development. The lack of access to financing precludes entrepreneurial growth, and the investment regime lacks transparency and remains under tight state control.

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Background

In 1999, Hugo Chávez won the presidency, vanquished the traditional party system, and launched his Bolivarian Revolution aimed at “Socialism for the 21st Century.” Chávez styles himself the leader of Latin America’s anti–free market forces and has made alliances with China, Cuba, Russia, and rogue states like Iran. He has persecuted his political adversaries and critics, restricted media freedom, undermined the rule of law and property rights, militarized the government, and tried to destabilize neighboring Colombia. The national assembly, which he controls, passed a 2009 constitutional amendment allowing him to seek yet another presidential term, and he won re-election in October 2012. Venezuela has Latin America’s highest inflation rate (currently nearly 30 percent); chronic electricity, food, and housing shortages; and skyrocketing crime rates.

Rule of LawView Methodology

Property Rights 5.0 Create a Graph using this measurement

Freedom From Corruption 19.0 Create a Graph using this measurement

The judiciary is dysfunctional and completely controlled by the executive. Politically inconvenient contracts are abrogated, and the legal system discriminates against or in favor of investors from certain foreign countries. The government expropriates land and other private holdings across the economy arbitrarily and without compensation. Corruption, exacerbated by cronyism and nepotism, is rampant at all level of government.

Limited GovernmentView Methodology

The top income and corporate tax rates are 34 percent. Other taxes include a value-added tax (VAT). The overall tax burden is estimated to equal 11.3 percent of total domestic income. Budget deficits have fluctuated depending on changes in the price of oil. Government spending has risen to 40.6 percent of GDP, spurred in part by oil profits, and public debt has risen to over 45 percent of total domestic output.

Regulatory EfficiencyView Methodology

Regulatory encroachment on private businesses continues to increase, with heavy government control and intervention discouraging entrepreneurship. There is little transparency in decision-making, and most contracts are awarded without competition. There is no minimum capital requirement for establishing a business, but the process takes over 100 days. The labor market remains controlled by the state. Inflation continues to be extremely high.

Open MarketsView Methodology

The trade-weighted average tariff rate is relatively high at 10.6 percent, and extensive non-tariff barriers further distort the free flow of goods and services. 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 credit is often allocated on the basis of political expediency.

Country's Score Over Time

Bar Graph of Venezuela  Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Venezuela  to other economic country groups

Regional Ranking

rank country overall change
1Chile790.7
2Saint Lucia70.4-0.9
3The Bahamas70.12.1
4Uruguay 69.7-0.2
5Colombia69.61.6
6Barbados69.30.3
7Peru68.2-0.5
8Costa Rica 67-1.0
9Jamaica 66.81.7
10El Salvador 66.7-2.0
11Saint Vincent and the Grenadines66.70.2
12Dominica63.92.3
13Panama 62.5-2.7
14Trinidad and Tobago62.3-2.1
15Paraguay 61.1-0.7
16Guatemala 60-0.9
17Dominican Republic59.7-0.5
18Honduras 58.4-0.4
19Brazil57.7-0.2
20Belize57.3-4.6
21Nicaragua 56.6-1.3
22Guyana53.82.5
23Suriname52-0.6
24Haiti48.1-2.6
25Bolivia47.9-2.3
26Ecuador46.9-1.4
27Argentina46.7-1.3
28Venezuela 36.1-2.0
29Cuba28.50.2
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