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- GDP (PPP):
- $374.1 billion
- 4.2% growth
- 2.6% 5-year compound annual growth
- $12,568 per capita
- Inflation (CPI):
- FDI Inflow:
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.
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.
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.
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 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.
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.