2016 Index of Economic Freedom

Venezuela

overall score33.7
world rank176
Rule of Law

Property Rights5.0

Freedom From Corruption19.0

Limited Government

Government Spending56.7

Fiscal Freedom74.9

Regulatory Efficiency

Business Freedom45.3

Labor Freedom29.5

Monetary Freedom33.8

Open Markets

Trade Freedom63.2

Investment Freedom0.0

Financial Freedom10.0

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Quick Facts
  • Population:
    • 30.5 million
  • GDP (PPP):
    • $538.9 billion
    • -4.0% growth
    • 1.1% 5-year compound annual growth
    • $17,695 per capita
  • Unemployment:
    • 8.6%
  • Inflation (CPI):
    • 62.2%
  • FDI Inflow:
    • $320.0 million
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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.

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Background

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.

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

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.

Limited GovernmentView Methodology

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 EfficiencyView Methodology

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.

Open MarketsView Methodology

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.

Country's Score Over Time

Bar Graph of Venezuela  Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile77.7-0.8
2The Bahamas70.92.2
3Colombia70.8-0.9
4Saint Lucia70-0.2
5Saint Vincent and the Grenadines68.80.8
6Uruguay 68.80.2
7Barbados68.30.4
8Jamaica 67.5-0.2
9Peru67.4-0.3
10Costa Rica 67.40.2
11Dominica670.9
12El Salvador 65.1-0.6
13Panama 64.80.7
14Trinidad and Tobago62.9-1.2
15Guatemala 61.81.4
16Paraguay 61.50.4
17Dominican Republic610.0
18Nicaragua 58.61.0
19Honduras 57.70.3
20Belize57.40.6
21Brazil56.5-0.1
22Guyana55.4-0.1
23Suriname53.8-0.4
24Haiti51.30.0
25Ecuador48.6-0.6
26Bolivia47.40.6
27Argentina43.8-0.3
28Venezuela 33.7-0.6
29Cuba29.80.2
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