- GDP (PPP):
- $202.0 billion
- -35.0% growth
- -18.7% 5-year compound annual growth
- $5,990 per capita
- Inflation (CPI):
- FDI Inflow:
Venezuela’s economic freedom score is 24.7, making its economy the 177th freest in the 2021 Index. Its overall score has decreased by 0.5 point, primarily because of a decline in the score for government spending. Venezuela is ranked last among 32 countries in the Americas region, and its overall score is well below the regional and world averages.
Economic freedom has been suffocated in Venezuela under the Chávez and Maduro regimes. If a transitional government could take power and begin the long return to market democracy, it would have to end hyperinflation, restructure public debt, and rebuild institutions to restore confidence in the rule of law and promote investment. The first priority, however, would be to reestablish the cultural foundations of entrepreneurship and free markets.
IMPACT OF COVID-19: As of December 1, 2020, 901 deaths had been attributed to the pandemic in Venezuela, and the economy was forecast to contract by 25.0 percent for the year.
Venezuela’s modern democratic era lasted from the end of military rule in 1959 until the election of Hugo Chávez in 1999. His successor, Nicolás Maduro, completed the destruction of democratic institutions and established an authoritarian dictatorship in 2017. The deeply corrupt socialist government’s policies have led to one of history’s worst economic contractions and Latin America’s worst migration crisis. Following international censure of Maduro’s fraudulent 2018 reelection, then-head of the National Assembly Juan Guaidó became interim president in January 2019, but Maduro still exercises de facto control. More than 200 regime officials are under U.S. and Western sanctions for human rights abuses, drug trafficking, and corruption. The operations of Venezuela’s state-owned oil company PDVSA, which remains under U.S. sanctions, have deteriorated severely because of mismanagement and corruption.
Weak institutions and a thoroughly politicized judiciary undermine property rights in Venezuela, which ranked last among 128 countries in the World Justice Project’s 2020 Rule of Law Index. The near collapse of the economy, coupled with currency and price controls, has greatly increased public corruption. In March 2020, the U.S. government charged Nicolás Maduro and 14 other officials with narco-terrorism, corruption, drug trafficking, and other crimes.
The top individual income and corporate tax rates are 34 percent. Other taxes include a value-added tax. The overall tax burden equals 24.0 percent of total domestic income. Government spending has amounted to 35.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 19.3 percent of GDP. Public debt is equivalent to 232.8 percent of GDP.
The entry costs of starting a business have declined somewhat but remain very high. Venezuela’s socialist policies and practices have all but eliminated any labor freedom. The hyperinflation that began in 2017 forced the government, amid falling revenues from oil and a seven-year real economic contraction of over 80 percent, to expand already extensive price controls in 2020.
Venezuela has three preferential trade agreements in force. The trade-weighted average tariff rate is 12.6 percent, and 134 nontariff measures are in effect. Years of interventionist and market-distorting policies, including import restrictions, expropriations, and nationalizations, have discouraged investment and led to dire economic conditions. The financial system remains under heavy state interference and is hampered by a high degree of uncertainty.