Venezuela and Oil

Higher Business Management

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Source: BBC News

• Venezuela has some of the world's largest proven oil deposits as well as huge quantities of coal, iron ore, bauxite and gold.

• Most Venezuelans live in poverty, many of them in shanty towns, some of which sprawl over the hillsides around the capital, Caracas.

• Venezuela's president, Hugo Chavez, says he is leading the country - which is enjoying a windfall from high oil prices - through a socialist revolution.

Hugo Chavez

• Venezuelan President Hugo Chavez has celebrated 10 years in power, telling supporters a new era is under way in Latin America and the Caribbean.

• Venezuela is particularly vulnerable to oil prices. It is the Western hemisphere's largest oil exporter. More than 90% of its export revenue and more than half of the government's annual expenditure comes from oil.

• The Venezuelan economy is set to grow for the fourth year running this year on the back of strong oil prices. Last July the price reached more than US$147, but has slumped at one point recently to below US$60. Oil analysts Goldman Sachs say it could drop to US$50 in the event of a world recession.

• The former head of the Venezuelan central bank, Domingo Maza Zavala, thinks that anything less than US$70 a barrel would mean current levels of economic activity could not be sustained.

• The Chavez government has been running an expansionary fiscal policy in order to pay for many of the social programmes for the poor known as "missions".

• This is one of the reasons why Mr Chavez remains popular, but the fiscal deficit has mushroomed in the first half of 2008.

• Inflation is running at 36% in the last 12 months, the highest in Latin America.

• And the balance of payments is heavily in deficit despite an estimated US$85bn in oil revenues this year. This is because a record amount of imports, nearly half from the US, has been sucked in to fuel a mini-consumption boom.

• The question of whether the past 10 years in Venezuela should be considered a success or a failure depends very much on one's political viewpoint.

• One of the key difficulties is that in Venezuela, unlike some other political debates in Latin America, neither side is prepared to concede a point to their opponents.

• Similarly, both sides claim to have compelling evidence to back up their arguments.