Venezuela's Economic Analysis Research Assignment Paper (Research Paper Sample)

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Venezuela’s Economic Analysis
Venezuela’s Major Economic Indicators
Introduction
Venezuela is the one of the world’s leading exporter and producer of crude oil with over ninety percent of its export being made up of crude oil and its components. The nation has had many changes in the trade sector and the trade policies have been revised many times, especially after hard economic times or after a national crisis. Venezuela’s trade agreements are majorly due to an interest in crude oil and the nation is usually very keen in selecting its trading partners (partly due to the World Trade Organization (WTO) and the fact that it resists capitalism in any manner very strongly). This paper sets to explain the major economic indicators specific to Venezuela’s economic conditions and also analyzes the trade data for fifteen years (2000-2014). Moreover, analysis of the data is integrated with trade theories that try to explain the patterns. Venezuela’s trade policies are quite many but the paper tries to state the most important of them all while explaining the situations that might have caused such policies to be put in place.
GDP Per Capita
Venezuela’s GDP per capita was recorded as $6,401.9 in 2014. It is actually close to fifty percent of the world’s average figure. The highest figure for GDP per capita was recorded in 1977 with the figure being $7,138.21 and the lowest GDP per capita figure was $4,321.56 in 2003. This drop in GDP can best be explained by the World Bank and IMF’s practices that saw the nation be led by capitalists and this led to massive disequilibrium in the labor market. The gap between the rich and the poor was very wide between 1983 and 2003. The GDP figures mentioned are derived by dividing the gross domestic product of Venezuela by the country’s GDP per capita (World Bank). The GDP per capita for Venezuela was shrinking at a rate of 2.76 percent per year before CIRELA was introduced. It was only in 2004 that is started to gain stability. 2004 is usually Venezuela’s base year of determining the rise and falls of GDP per capita since in that year, GDP remained almost constant for quite some time. This was the year that President Chaves’ administration started to gain control over the national oil revenues.
Inflation Rate
Venezuela’s inflation rate was recorded to be approximately 68.50 percent as at December 2014. The nation’s inflation rates recorded an average of 27.55 percent since 1973 to present. The highest ever inflation rate was in 1996 when it reached 115.18 percent and the lowest recorded inflation rate was 3.22 percent in 1973. The most common source of inflation in Venezuela was caused by scarcity of food products (World Bank). This was seen especially when President Carlos Andreas was urged by the IMF to implement the IMF’s economic package and this caused a great rise in petrol and transport costs and a consequent increase in the food prices as well. People even decided not to invest because the interest rates went too high. Hoarding also accelerates the situation since people buy more than they are to spend in future. Regardless, inflation in Venezuela seems inevitable due to the large sums of money that flow in (money supply) from the ever differing prices of oil.
Population
Venezuela’s population was 30.3 million people in 2014 and 7.5 million people in 1960. This is a gigantic increase in population. The increase in the last 50 years is, therefore, approximately 300 percent. According to the nation’s National Institute of Statistics, the population level has been on a steady increase recording 28.5 million people in 2011, 28.94 million people in 2012, 29.36 million people in 2013, and 30.3 million people in 2014. This is quite a steady rise. The population is made up of many different ethnic groups such as Spanish citizens African Americans, and Europeans who actually changed a lot of the cultural aspects in Venezuela. Regardless, the population of Venezuela has always been steadily growing with no particular over population or under population periods. The population in this particular nation seems very balanced and controlled.
Unemployment
Venezuela’s unemployment rate is at 7.9 percent in the first quarter of 2015. The highest ever recorded unemployment rate was recorded in 2003, specifically on February. The lowest ever recorded inflation rate was the previous year (2014) in which the employment rate was as low as 5.5 percent, specifically in December. The reason for this, according to the President of National Statistics in Venezuela (Elias Eljuri) is that the nation has become independent of financial bodies which indirectly control the economy (World Bank and International Monetary Fund) and has been on a steady recovery from the economic recession. The figures are obtained by calculating the number of individuals looking for a job divided by the total labor force. This leads to a puzzle as to what caused the sudden rise of unemployment even though the average rate has been ranging from 10.92 percent from 1998 to 2015 (World Bank). The reason for this is that many people recently dropped from the informal sector anticipating to join the formal sector since emerging companies have been on the rise in Venezuela.
Level of Education
Venezuela has a very high literacy rate and is in fact one of the highest in its region. It is reported that almost 94 percent of children above the age of 15 years can read and write. The level of education is, therefore, quite high. Venezuela’s government has also been supportive of the education sector with free education being entitled to every child for nine years. Regardless, their education is widely underfunded yet overextended. Consequently, there is a tradeoff between the quality of education and the number of students. The country had about 95 higher education institutions and approximately 6.27 million students. Higher education is also free and has a dedicated 36 percent of the total education budget (World Bank). With regard to the education population, most of them come from the wealthy class and constitute 70 percent of the total students and leaves the education levels quite unbalanced. However, the newly introduced Bolivarian University System will counter all those issues.
Resources and Productivity
Venezuela is a high labor intensive economy rather than a capital intensive economy. The former comes with reduced efficiency but increased employment rates. The total work force being 14.02 million as of 2013, this is almost half the population at that time and is quite high considering that the age bracket 1-15 comprise almost a third of the population. With the human capital outdoing the physical capital, technological concerns remain. All in all, the nation is doing its level best to ensure that labor augmentation (labor mixed with technology) is implemented in at least all fore front sectors of the economy (World Bank).
Government Debt to GDP
The government of Venezuela reached a total Government Debt to GDP ratio of 49.7 percent in 2014. This was a rough addition to the average rate since 1994. The average government debt to GDP ratio is usually around 42.4 percent. The highest ever recorded was 71.8 percent in 1994 and the lowest was 26.4 percent in 2008 (World Bank). It is important to note that the nation recorded the lowest government debt ratio in the period when almost all nations (except China) were getting affected by the global economic crisis/the recession that started on July 2008. This made it a favorable investment spot even in the recession and it was able to weather the recession through this, although it was still affected to a point when the debt rose to 36.3 percent of the GDP in the start of 2010.
Budget Deficit
Budget deficits occur when government gets more money than it actually spends. The converse is true for a government surplus. Venezuela has a very attractive budget deficit rate to potential investors and to the government itself. In the start of 2014, the deficit was 11.5 percent of the total GDP. The average government deficit for Venezuela is -1.96 percent and has been that way since 1990. The lowest ever recorded was the budget deficit for the fiscal year 2013-2014 reaching 11.5 percent, as said before (World Bank). The highest deficit was just 3.06 percent which is actually negligible compared to other nations in the world. However, the nature of Venezuela’s budget is such that the manufacturing sectors and the education sectors do not have technology largely accounted for and that is why the deficit has a large margin compared to other parts of the world.
Consumer Price Index
The CPI measures any changes in price paid by consumers for goods and services paid as a bundle or in individual components. The nation’s consumer price index recorded 826.4 points at the end month of the previous year (2014) and the average points are 64.67 from 1975. In most cases, the CPI is measured per quartile (after every 3 months) and the lowest points were 0.10 in the start of the second quartile in 1975 (April).
Balance of Payments
Venezuela’s favorable balance of payments is accredited to the equalized income from exports and the imports’ expenditure (World Bank). The nation has been having difficulties in the foreign exchange problems due to the ever fluctuating and rising oil prices (as expected). Ever since the year 2003, Venezuela has faced an increase of private consumption as a ratio of the GDP and consequently, the exports of goods and services has been falling. Oil is largely depended upon to bring the BOP to a near equilibrium level compared to all other commodities.
Data over the past Fifteen Years of the Top Imports and Exports
Data in t...