Venezuela is a country in South America which is a federal presidential republic consisting of 23 states and bordering the Caribbean Sea and the North Atlantic Ocean. Being an oceanic country, since pre historic period, it became a land of plantations, where African slave labourers used to work on cocoa, cotton, sugar, coffee, and tobacco plantations. Crude oil was then discovered, where currently, the country relies on it. Brazil is a country in the same region with Venezuela but more developed than Venezuela. This paper will look at the historical background, its current and future economy, and future development of the country, and then compare it with Brazil.
Past development and economy of Venezuela
In the eighteenth and early nineteenth centuries, Venezuela country was conquered by Spain and its economy was driven by coffee and cocoa and economy crisis were there due to war of independence. Until 1821 when Bolívar became the leader of a Venezuela after independence, the country discovered oil and the first commercial drilling of oil was in 1917 and the oil boom started in 1920s which brought to a close the coffee era that transformed Venezuela from a relatively poor agrarian society into Latin America's wealthiest state. During this period physical infrastructure, agriculture, and industry expanded at a higher rate, yet the only source of income was oil industry. For social development a lot of money was used on education, health, electricity, potable water, and other projects. By 1973, the country's real per capita output increased by 25 percent. Later, oil revenues could no longer these government projects thus ended up increasing foreign debt burden. The dependence of oil only was the cause of economy crisis of Venezuela’s government and as oil prices fell, so did the Venezuelan economy.
Current development and economy of Venezuela
In 2008 poverty in Venezuela stood at 28 percent down from 55.44 percent in 1998 before Chávez President got into office. Since Hugo Chávez was elected in 1998, the government has been striving to improve their economy by using sectors such as steel industry, telecommunication and having more control over the oil sector. Currently, GDP has nearly doubled, growing by 94.7 percent in 5.25 years, or 13.5 percent annually and between year 2009-2010, Venezuelan economy have shrank rigorously , but in 2011 growth was up with 3.3 percent . Currently, the country has owned petroleum sector that dominates the economy with oil revenue accounting for r one third of the GDP .
The current value of Gross Domestic Product per capita is $ 12,700 which is derived from adding sum of Consumption, Investment, Government Spending and Net Exports. The total is then divided by total population of the country to get GDP per capita. Brazil being a country in the same region with Venezuela is one of the fastest-growing economies in the world with a great annual GDP growth rate.
Venezuela, being located just an hour's flight from Miami, it should be destination for tourists, but due to security concerns and the impact of government policies under President Chavez it has challenges unlike Brazil who have abundant natural resources. Brazil has great developed agricultural, mining, manufacturing, and service sectors, which outweigh all other South American countries including Venezuela. Venezuela is highly dependent on oil revenues only which has made them slack behind.
Future development and economy of Venezuela with convergence with the developed country
After Chavez succumbed to cancer on March, 2013, Nicolás Maduro was elected the president. According to currently, crime is rampant, increment of food shortages, daily electrical brownouts and blackouts are occurring daily, claiming that there is worse ahead. In addition, the state-run oil company is crumbling. Since the new president took over, the economy is slow moving and having high inflation with food shortages which indicate shaky future economy of the country. Presidents of Brazil and Venezuela are cooperating and being inspired in order to strengthen South American integration. The convergence is related to oil price, GDP per capita, and growth rates differences. Venezuela is one of the Organization of Petroleum Exporting countries (OPEC).
Differences between Venezuela and Brazil
With Venezuela, there is huge gap with the developed country that is Brazil. With Brazil having great development in agricultural, mining, manufacturing, and service sectors, Venezuela is basing her economy on petroleum and steel manufacturing sectors which have made Venezuela have poor economy. In addition, Venezuela has one of the highest inflation rates in the world while Brazil is the best in the market in the world with the largest economy in Latin American nations. GDP components of Brazil are service, agricultural, and industry sectors, while component of GDP of Venezuela is oil and steel manufacturing sectors.
The economic development of Brazil has steadily grown over the past few years. This cannot be compared to that of Venezuela where the economy depends on only oil exports. The economy of Brazil is well ahead of most South America’s economies. Brazil has been stable economically by way of increasing the oil reserves and shifting the debt weight to the real denominated and instruments which are held locally. The rating of the GDP basing on purchasing power parity of Brazil is 2.362 trillion USD (this is 2012 estimates) compared to Venezuela’s 402.1 USD billion of the same period. The real growth rates of the two countries are 1.3% for Brazil and 5.7% for Venezuela. The GDP per capita measurement of Brazil is $12,000 while that of Venezuela is $13,200. Any change in oil prices greatly affects the economy of Venezuela as it was recorded in 2009/2010. This is what makes the economic development of Venezuela lag when compared to Brazil which is seen to be developing economically. The reason for high economic development in Brazil is that there is high interest rate which has attracted many investors into the country.
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McClatchy-Tribune. Nation Multimedia. 23 April 2013. Website. 10 June 2013.
Wikipedia. Economy of Brazil. 10 June 2013. website. 10 June 2013.