Venezuela (04/01)

For the most current version of this Note, see Background Notes A-Z.

PROFILE

Official Name:
Republic of Venezuela

Geography
Area: 912,050 sq. km. (352,143 sq. mi.); slightly more than twice the size of California.
Capital--Caracas (metro. area pop. est. 2.8 million, 1990 census). Other major cities--Maracaibo, Valencia, Barquisimeto.
Terrain: Andes Mountains and Maracaibo Lowlands in northwest; central plains; Guiana Highlands in southeast.
Climate: Varies from tropical to temperate, depending on elevation.

People
Nationality: Noun and adjective--Venezuelan(s).
Population (2000 est.): 23.5 million.
Annual growth rate (2000 est.): 1.6%.
Ethnic groups: Spanish, Italian, Portuguese, Arab, German, African, indigenous people.
Religions: Roman Catholic 96%, Protestant 2%.
Languages: Spanish (official), numerous indigenous dialects.
Education: Years compulsory--9. Literacy--91.1%.
Health: Infant mortality rate--26.17 deaths/1,000 live births. Life expectancy--73.07 yrs.
Work force (9.9 million in 1999): Services--64%. Manufacturing--23%. Agriculture--13%.

Government
Type: Federal Republic.
Independence: July 5, 1811.
Constitution: December 30, 1999.
Branches: Executive--president (head of government and chief of state; 6-year term); Council of Ministers (cabinet, appointed by president). Legislative--unicameral congress (5-year term). Judicial--18-member Supreme Court (elected by Congress; 12-year term).
Subdivisions: 23 states, one federal district (Caracas), and one federal dependency (72 islands).
Major political parties: Fifth Republic Movement or Movimiento V Republica (MVR), Democratic Action or Accion Democratica (AD), Social Christian or Comite Organizador Politico por Elecciones Independientes (COPEI), Homeland for All or Patria Para Todos (PPT), Movement to Socialism or Movimiento al Socialismo (MAS), Radical Cause or La Causa R, Justice First or Primero Justicia, and the National Convergence or Convergencia.

Flag:

Economy  (2000)
GDP: $106 billion.
Growth rate: +3.2%
GDP per capita: $4,500.
Natural resources: Petroleum, natural gas, coal, iron ore, gold, diamonds, bauxite, other minerals, hydroelectric power.
Agriculture (5% of GDP): Products--corn, sorghum, rice, bananas, vegetables, coffee, beef, pork, milk, eggs, fish.
Petroleum industry (28% of GDP): Oil refining, petrochemicals.
Manufacturing (20% of GDP): Types--iron and steel, paper products, aluminum, textiles, transport equipment, consumer products, and petroleum refining.
Trade: Exports (f.o.b. 2000)--$34.0 billion; petroleum $28.7 billion, aluminum, steel, chemical products, iron ore, cigarettes, plastics, fish, cement, and paper products. Major markets--U.S. and Puerto Rico 37%, Colombia 16%, Brazil, Japan, Germany, Netherlands, Italy. Imports (f.o.b 2000)--$16.1 billion; machinery and transport equipment, manufactured goods, construction materials. Major suppliers--U.S. 53%, Colombia, Brazil, Japan, Germany, Italy, Canada, France.
Exchange rate (March 2001): 707 bolivars=U.S.$1.

PEOPLE AND HISTORY 
The Venezuelan people comprise a combination of European, indigenous, and African heritages. About 85% of the population live in urban areas in the northern portion of the country. While almost half of Venezuela's land area lies south of the Orinoco River, this region contains only 5% of the population.

At the time of the Spanish discovery, the indigenous people were mainly agriculturists and hunters living in groups along the coast, the Andean mountain range, and along the Orinoco River. The first permanent Spanish settlement in South America--Nuevo Toledo--was established in Venezuela in 1522. Venezuela was a relatively neglected colony in the 1500s and 1600s as the Spaniards focused on extracting gold from other areas of their empire in the Americas.

The Venezuelans began to grow restive under colonial control toward the end of the 18th century. After several unsuccessful uprisings, the country achieved independence from Spain in 1821 under the leadership of its most famous son, Simon Bolivar. Venezuela, along with what are now Colombia, Panama, and Ecuador, was part of the Republic of Gran Colombia until 1830, when Venezuela separated and became a sovereign country.

Much of Venezuela's 19th century history was characterized by periods of political instability, dictatorial rule, and revolutionary turbulence. The first half of the 20th century was marked by periods of authoritarianism--including dictatorships from 1908-35 and from 1950-58. The Venezuelan economy shifted after the first World War from a primarily agricultural orientation to an economy centered on petroleum production and export.

Since the overthrow of Gen. Marcos Perez Jimenez in 1958 and the military's withdrawal from direct involvement in national politics, Venezuela has enjoyed an unbroken tradition of civilian democratic rule. Until the 1998 elections, the Democratic Action (AD) and the Christian Democratic (COPEI) parties dominated the political environment at both the state and federal level.

GOVERNMENT
Hugo Chavez was elected President in December 1998 on a platform that called for the creation of a National Constituent Assembly to write a new constitution for Venezuela. Chavez's argument that the existing political system had become isolated from the people won broad acceptance, particularly among Venezuela's poorest classes, who had seen a significant real decline in their living standards over the previous decade and a half. The National Constituent Assembly (ANC), consisting of 131 elected individuals, convened in August 1999 to begin rewriting the Constitution In free elections, voters gave all but six seats to persons associated with Chavez's movement. Venezuelans approved the ANC's draft in a referendum on December 15, 1999. The political system described below is that defined by the 1999 Constitution.

The President is elected by a plurality vote with direct and universal suffrage. The term of office is 6 years, and a president may be re-elected to a single consecutive term. The President appoints the Vice President. He decides the size and composition of the cabinet and makes appointments to it with the involvement of the National Assembly. Legislation can be initiated by the executive branch, the legislative branch (either a committee of the National Assembly or three members of the latter), the judicial branch, the citizen branch (ombudsman, public prosecutor, and controller general) or a public petition signed by no fewer than 0.1% of registered voters. The President can ask the National Assembly to reconsider portions of laws he finds objectionable, but a simple majority of the Assembly can override these objections.

The National Assembly is unicameral, consisting solely of the Chamber of Deputies. Deputies serve 5-year terms, and may be re-elected for a maximum of two additional terms. These legislative agents are elected by a combination of party list and single member constituencies. When the Congress is not in session, its delegated committee acts on matters relating to the executive and in oversight functions.

The Constitution designates three additional branches of the Federal government--the judicial, citizen, and electoral branches.

The judicial branch is headed by the Supreme Tribunal of Justice, which may meet either in specialized chambers (of which there are six) or in plenary session. The justices are appointed by the National Assembly and serve 12-year terms. The judicial branch also consists of lower courts, including district courts, municipal courts, and courts of first instance.

The citizens branch consists of three components--the prosecutor general ("fiscal general"), the "defender of the people" or ombudsman, and the comptroller general. The holders of these offices, in addition to fulfilling their specific functions, also act collectively as the "Republican Moral Council" to challenge before the Supreme Tribunal actions they believe are illegal, particularly those which violate the Constitution. The holders of the "citizen power" offices are selected for terms of 7 years by the National Assembly.

The "Electoral Power," otherwise known as the National Electoral Council, is responsible for organizing elections at all levels. Its members are also elected to 7-year terms by the National Assembly.

NATIONAL SECURITY
In 2000, the Armed Forces enlisted 87,500 individuals in four service branches--the Army, Navy (including the Marine Corps), Air Force, and the Armed Forces of Cooperation (FAC), commonly known as the National Guard.  In 2001, a civilian was appointed Minister of Defense for the first time in many decades. His role is largely policy-oriented, and operational command remains with a uniformed services commander.

Principal Government Officials
President--Hugo Chavez
Foreign Minister--Luis Alfonso Davila
Ambassador to the United States--Ignacio Arcaya
Ambassador to the United Nations--Milos Alcaly
Ambassador to the OAS--Jorge Valero

The Venezuelan embassy in the United States is located at 1099 30th St. NW, Washington, DC 20007 (tel. (202) 342-2214). Venezuela maintains consulates in Boston, Chicago, Houston, Miami, New Orleans, New York, San Francisco, and Puerto Rico.

POLITICAL CONDITIONS
Venezuela's history of free and open elections since 1958 and its prohibition of military involvement in national politics earned it a reputation as one of the more stable democracies in Latin America.

In 1989, the prevailing political calm was shattered when Venezuela experienced rioting in which more than 200 people were killed--the so-called Caracazo, in response to an economic austerity program launched by then-President Carlos Andres Perez. Subsequently in February 1992, a group of army lieutenant colonels led by future President Hugo Chavez mounted an unsuccessful coup attempt, claiming that the events of 1989 showed that the political system no longer served the interests of the people. A second, equally unsuccessful,coup attempt by other officers followed in November in 1992. A year later, Congress impeached Perez on corruption charges. Deep popular dissatisfaction with the traditional political parties, income disparities, and economic difficulties were some of the major frustrations expressed by Venezuelans following Perez's impeachment. Hugo Chavez Frias won the presidency in December 1998, after campaigning for far-reaching reform, constitutional change, and a crackdown on corruption. His programs have alienated much of the upper and upper-middle class while retaining the enthusiastic support of poorer Venezuelans. There has been no social violence, however, and Venezuela remains a democracy.

ECONOMY
As 2001 proceeds, the Venezuelan economy is at a crossroads. By virtue of an extraordinary rise in oil revenue in 2000, the government was able to significantly expand its budget in an aggressive attempt to re-energize an economy that was emerging from a deep recession in 1998-99, in which the GDP contracted by 7.2%. Led by a 42% increase in government spending, the economy grew by 3.2% in 2000. The most serious challenge faced by Venezuela's government is the lack of sustained private investment outside of a few select sectors, specifically telecommunications, electrical generation, and oil.

By the close of 2000, the economy displayed numerous favorable macroeconomic indicators; falling inflation (14%), lower unemployment (15.8%), a strong foreign reserve position (almost $20 billion), and a positive current account balance due to the rise in global oil prices. Also, Venezuela's external debt had decreased from $21.1 billion in 1999 to $20.2 billion in 2000. At the beginning of the year, government and private sector economists had predicted real GDP growth of 4-5% for 2001, but these estimates have been slightly lowered in view of weakening oil prices. Oil exports account for nearly 80% of Venezuela's hard-currency earnings.

Venezuela now faces the challenge of maintaining economic growth through the up and down cycles of the global oil market. Officials must overcome problems associated with stagnant private investment and inefficiencies in resource allocation due to excessive government intervention. The government is hopeful that the economic reforms established in the new constitution would help stimulate the economy in 2001. The government is drafting new legislation concerning the conduct of the Central Bank, social security, land distribution, social security, and pensions. These laws are designed to meet the high level of expectations of the Venezuelan people who have faced declining real income for much of the last two decades. Although most Venezuelans still have a higher standard of living than their Andean neighbors, there is considerable income inequality. By Venezuelan standards ($700/month for a family of five), almost 80% of the population lives below the poverty line. The government faces a difficult task in meeting these expectations in a reasonable amount of time.

Petroleum And Other Resources
Economic prospects remain highly dependent on oil prices and the exportation of petroleum. A founding member of the Organization of Petroleum Exporting Countries (OPEC), Venezuela has reasserted its leadership within the organization during its year as OPEC's president, hosting the organization's Second Leadership Conference in 40 years, as well as having its former Minister of Energy, Ali Rodriguez, appointed as Secretary General. The collapse of oil prices in 1997-98 prompted the Chavez administration to expand OPEC-inspired production cuts in an effort to raise world oil prices. In 2000, this sector accounted for roughly a third of GDP, 80% of export earnings, and more than half of central government's operating revenues. Venezuela is the fourth-leading supplier of imported crude and refined petroleum products to the U.S.

The Government of Venezuela has opened up much of the hydrocarbon sector to foreign investment, promoting multi-billion dollar investment in heavy oil production, reactivation of old fields, and investment in several petrochemical joint ventures. Almost 60 foreign companies representing 14 different countries participate in one or more aspects of Venezuela's oil sector. The Venezuelan national oil company Petroleos de Venezuela, S.A. (PDVSA) and foreign oil companies have signed 33 operating contracts for marginal fields in three bidding rounds. New legislation dealing with natural gas and petrochemicals is further opening the sector. A new domestic retail competition law, however, disappointed investors who had been promised market-determined prices.

A range of other natural resources, including iron ore, coal, bauxite, gold, nickel, and diamonds are in various stages of development and production. In 1996, CVG, the state-owned mining firm, announced its first joint venture with a foreign company to develop the Las Cristinas gold mine. President Chavez personally inaugurated mine operations in May 1999, but low gold prices have forced the joint venture to put the project on hold. In April 2000, Venezuela's president decreed a new mining law, and regulations were adopted to encourage greater private sector participation in mineral extraction.

Venezuela utilizes vast hydropower resources to supply power to the nation’s industries. The recently enacted national electricity law is designed to provide a legal framework and to encourage competition and new investment in the sector. After a 2-year delay, the government is proceeding with plans to privatize the various state-owned electricity systems under a different scheme than previously envisioned.

Manufacturing, Agriculture, and Trade
Manufacturing contributed 20% of GDP in 2000. Manufacturing output increased 3.6% in 2000. The manufacturing sector continues to grow slowly, but remains hindered by a marked lack of private investment. Venezuela manufactures and exports steel, aluminum, textiles, apparel, beverages, and foodstuffs. It produces cement, tires, paper, fertilizer, and assembles cars both for domestic and export markets.

Agriculture accounts for approximately 5% of GDP, 10% of the labor force, and at least one-fourth of Venezuela's land area. Venezuela exports rice, cigarettes, fish, tropical fruits, coffee, cocoa, and manufactured products. The country is not self-sufficient in most areas of agriculture. Venezuela imports about two-thirds of its food needs. In 2000, U.S. firms exported $488 million worth of agricultural products, including wheat, corn, soybeans, soybean meal, cotton, animal fats, vegetable oils, and other items to make Venezuela one of the top three U.S. markets in South America. The U.S. supplies more than one-third of Venezuela's food imports.

Thanks to petroleum exports, Venezuela usually posts a trade surplus. In recent years, non-traditional (i.e., non-petroleum) exports have been growing rapidly, but still constitute only about one-fifth of total exports. The United States is Venezuela's leading trade partner. During 2000, the United States exported $5.6 billion in goods and services to Venezuela, making it the 25^th-largest market for the U.S. Including petroleum products, Venezuela exported $18.6 billion in goods and services to the U.S., making it our 13^th-largest source of goods. The Venezuelan Government is also attempting to revitalize the G-3 economic cooperation agreement between itself, Mexico, and Colombia. In hemispheric trade matters, Venezuela has taken a very cautious approach toward the proposed Free Trade Agreement of the Americas.

Labor And Infrastructure
Venezuela's labor force of about 10.45 million is growing faster than total employment. At the end of 2000, official unemployment was 15.2%, but unofficial estimates hover around 20%. The public sector employs 16% of the work force, while less than 1% work in the capital-intensive oil industry. About 18% of the labor force is unionized, and unions are particularly strong in the petroleum and public sectors. The "informal" sector is believed to account for some 50.5% of the work force or 4.39 million people.

In December 2000, international labor authorities declared that the Chavez administration violated freedom of association by using a public referendum to decide internal labor leadership issues. Since then, however, the government has consulted regularly with the International Labor Organization (ILO) in its ongoing effort to reform and reorganize the country's labor structure, including a multi-union dialogue and the preparation of a new labor law. Thus, 2001 will be a crucial year for determining the future direction of Venezuelan organized labor.

Venezuela has an extensive road system. With the exception of air service, transportation failed to keep pace with the country's needs. Much of the infrastructure suffers from inadequate maintenance. Caracas has a modern subway but only one functioning rail line serves the rest of the country. In late 2000, Venezuela launched a bold opening of its communications sector, holding open auctions in the WLL, LMDS, and 3G service areas. Over the next decade, the communications sector is expected to attract about $1 billion in investment per year, making it one of the most dynamic sectors of the Venezuelan economy.

FOREIGN RELATIONS
Venezuela's priorities in the international arena are:

• Respect for human rights;
• The right of all people to self-determination;
• Nonintervention in the internal affairs of other nations;
• Peaceful settlement of disputes between nations, including border disputes;
• The right of all people to peace and security; and
• Support for democracy.

Hemispheric cooperation and integration are two pillars of President Chavez's foreign policy. Venezuela worked closely with its neighbors following the 1997 Summit of the Americas in many areas--particularly energy integration--and championed the OAS decision to adopt an Anti-Corruption Convention. Venezuela also participates in the UN Friends groups for Haiti. It is pursuing efforts to join the MERCOSUR trade bloc to expand the hemisphere's trade integration prospects. The Venezuelan Government advocates an end to Cuba's isolation and a "multi-polar" world based on ties among third-world countries.

Venezuela has long-standing border disputes with Colombia and Guyana but seeks to resolve them peacefully. Bilateral commissions have been established by Venezuela and Colombia to address a range of pending issues, including resolution of the maritime boundary in the Gulf of Venezuela. Relations with Guyana are complicated by Venezuela's claim to roughly three-quarters of Guyana's territory. Since 1987, the two countries have held exchanges on the boundary under the "good offices" of the United Nations.

U.S.-VENEZUELAN RELATIONS
Major U.S. interests in Venezuela include promotion of U.S. exports and protection of U.S. investment, continuation of the economic reform program, preservation of Venezuela's constitutional democracy, closer counternarcotics cooperation, and continued access to a leading source of petroleum. Underscoring the importance of this bilateral relationship, Former President Clinton's October 1997 visit launched a "Partnership for the 21st Century" to promote common solutions for energy development, trade and investment, and protection of the environment, as well as a strategic alliance against crime and drug trafficking.

U.S.-Venezuelan commercial ties are close. The United States is Venezuela's most important trading partner, representing about half of both imports and exports. In turn, Venezuela is our third-largest export market in Latin America, purchasing U.S. machinery, transportation equipment, agricultural commodities, and auto parts. Venezuela's opening of its petroleum sector to foreign investment in 1996 created extensive trade and investment opportunities for U.S. companies. As a result, Venezuela is one of the top three suppliers of foreign oil to the United States. New legislation is expected to open up investment opportunities in natural gas and mining. The Department of State is committed to promoting the interests of U.S. companies in overseas markets. For contact information and a list of government publications, please refer to the last page of this document.

Venezuela is a minor source country for opium poppy and coca but a major transit country for cocaine and heroin. Money laundering and judicial corruption are major concerns. The United States is working with Venezuela to combat drug trafficking. In FY 2001, the United States is planning up to $4.7 million for counternarcotics assistance and about $400,000 for Venezuelan participants in the International Military Education and Training program. There is no USAID or Peace Corps mission in Venezuela.

Approximately 23,000 U.S. citizens living in Venezuela have registered with the U.S. embassy, an estimated three-quarters of them residing in the Caracas area. An estimated 12,000 U.S. tourists visit Venezuela annually. About 500 U.S. companies are represented in the country.

Principal U.S. Embassy Officials
Ambassador--Charles Shapiro
Deputy Chief of Mission--Frederick Cook
Political Counselor--Thomas Ochiltree
Economic Counselor--Gary Maybarduk
Commercial Counselor--Luis Santamaria
Consul General--Sandra Salmon
Administrative Counselor--Anita Schroeder
Regional Security Officer--John Davis
Public Affairs Counselor--Philip Parkerson

The U.S. Embassy is on Calle F and Calle Suapure, Colinas de Valle Arriba, Caracas (tel. 58-212-975-6411). Office hours are 8 a.m. to 5 p.m., Monday through Friday.

Other Government Contacts
Department of State
Bureau of Western Hemisphere Affairs
Venezuela Desk 202-647-1715
Overseas Citizens Services 202-647-5225

Department of Commerce
14th and Constitution Avenue, NW
Washington, DC 20230
Venezuela Desk: 202-482-0475
800-USA-TRADE

Venezuela-American Chamber of Commerce
Torre Credival, Piso 10
2nda Avenida de Campo Alegre
Campo Alegre, Apartado 5181
Caracas 1010A, Venezuela
Tel: 58-212-263-0833, Fax: 58-212-263-1829/0586
E-mail: Venam@ven.net

U.S. Government Publications
Consular Information Sheet 202-647-3000 (by fax)
Economic Trends Report 202-736-7760 (fax on demand)
Country Commercial Guide 202-736-7760 (fax on demand)

These publications are available through the State Department's World Wide Web page www.state.gov.