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ECONOMY OF VENEZUELACurrency : Bolvar fuerte (VEF)GDP : $349.3 billion (2009 est.)

GDP per capita :$13,000 (2009 est.)GDP growth Rate : -3.3% (2009 est.)GDP composition by sector :

Agriculture : 4%Industry : 36.8%Services : 59.2%

Labor Force by occupation :agriculture: 13%industry: 23%services: 64%

Unemployment Rate: 7.9%Population below poverty line : 37.9%

Investment : 22.1% of GDPBudget :revenues : $66.37 billionexpenditures : $ 86.47 billion

Public debt : 18% of GDPInflation rate : 27.1 % (2009)

Oil production : 2.472 million bbl/dayOil reserve : 99.38 billion bbl

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INTRODUCTIONeconomy largely based on petroleum sector

1/3 rd of country GDP80% of total exportsmore than of govt operating revenues

5th largest member of OPEC by oil production

1950s-1980s : steady economic growth

1980s : economy contracted

Fuelled by high oil prices, record government spending helped to boost GDPby about 10% in 2006, 8% in 2007, and nearly 5% in 2008, shrunk by 2.9% in2009 (est) & further in 2010 due to financial crisis

Inflation rates : 35% (2010)

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GLOBAL FINANCIAL CRISIScaused by collapse of large financial institutions, triggered by a liquidityshortfall in the United States banking system caused by George W. Bush

oil prices collapsed from $140 a barrel to $40 a barrel

Venezuelan economy largely was betting on oil exports as its lifeline

hit by recession in 2009 the economy contracted of 2.9% with 25%inflation and further devaluation of Bolivar took place

Recession also contracted the exports sector which shrank in 2009

undermined governmental capacity for spending spree on the social sector

imports bill got inflated due to the change in consumption pattern

inflation rate increased significantly to 30%

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MEASURES TAKENFirms in the agribusiness, banking, tourism, oil, cement, steel sectors,

petroleum, communications, and electricity sectors were nationalisedby Chavez regime in 2008-2009 .

huge governmental spending, and recent minimumwage hikes and improved access to domestic credit, aconsumption boom swept the domestic markets

govt. announced a dual exchange rate system for the fixed rate Bolivar

The system offers a 2.6 Bolivar per dollar rate for imports of essentials,including food, medicine, and industrial machinery, and a 4.3 Bolivar perdollar rate for imports of other products, including cars and telephones.

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THE PRESENT STATE

Venezuela tops most nations in the world (surprisingly the United Statesand Canada inclusive) with the biggest international reserves (IR) percapita ($34 billion total).

Al Rodrguez Araque, presented the national budget proposal for the year

2010 with more than 45% of the total directed towards social spending.

IMF projected the GDP growth for 2010 at -0.4%, the lowest in the region.

IMF projected strong recovery and forecast regional growth of an averageof 4.0% this year and in 2011

Because of $82 billion in reserves, it could finance a modest currentaccount deficit for some time - e.g. even if oil prices were to remain at theircurrent depressed levels for the next two years.

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SUGGESTIONS

to come up with an adequate fiscal stimulus package

adjust its exchange rate to a more a competitivelevel, in order to diversify its economy away from oil

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PESTLE Analysis

PoliticalGovt. Conservative and Protectionist policy.Low investment in various sectors.Severe budget cuts to control inflation.Devaluation of Currency to promote exports.Resistance to embrace liberalization and

globalization.

EconomicLack of sustainability in the economic policyHigh inflation rates.Uneven distribution of wealth.Continuous declining of Per-capita GDP.

S ocialRapid growth of Population.Rapid changing of rural to urban population.Population comprise mainly of immigrants.

TechnologicalExpansion of Technical education facilities.Recruitment of skilled foreign technicians.Overdependence on traditional technology.Lack of investments in technological up-gradations.

LegalViolation of wage control act.No regulation on Capital Flight.

E nvironmentalLack of Competitiveness especially in privatesector.Absence of health & Safety acts.