Venezuela Oil. Introduction. Venezuela is one of the world largest exporters of crude oil and the largest in the Western Hemisphere. Population about 26 million People and Venezuela is twice as large as California In 2008, the country was the eighth-largest net oil exporter in the world.
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Introduction • Venezuela is one of the world largest exporters of crude oil and the largest in the Western Hemisphere. • Population about 26 million People and Venezuela is twice as large as California • In 2008, the country was the eighth-largest net oil exporter in the world. • Current President Hugo Chavez- 10 years in Power. • Ranks 162 out of 179 countries ranked on Transparency International's corruption index
Oil Background • 1900s: Oil was discovered, but the country’s leaders kept wealth for themselves. • Oil exportation began in early 1920s. • 1960s: Oil production made a few wealthy; the majority of the rest lived in poverty in cities or shacks on the outskirts. • 1980s: The price of oil dropped. People suffered economically. The price of oil recovered in 1990s. • Venezuela joined Organization of Petroleum Exporting Countries (OPEC) that tries to keep oil prices stable.
Industry • Nationalize • Major export: Oil (PDVSA) • 5th largest oil producer in the world • 80% of export earning come from oil • Accounts for 50% of the Gov. Revenue • One-third of the country’s gross domestic product (GDP) • U.S is the biggest trading partner • Major import: Raw materials
Dutch Disease • This economic disease is caught whenever a commodity brings a sudden increase of income in one sector of the economy, which is not matched by increased income in other sectors of the economy. • Manufacture & agricultural production began to decrease dramatically • The increased demand for imported goods and domestic services has caused a general inflation of wages and prices. Ignored serious social problems, including education, health, infrastructure, agriculture, and domestic industries, causing Venezuela to fall well behind other industrialized countries.
Nationalization • Takeover of privately owned corporations, industries, and resources by a government with or without compensation • (1) Prevention of unfair exploitation and large-scale labor layoffs • (2) fair distribution of income from national resources, • (3) to keep means of generating wealth in public control. • Birth of PDSA in 1976 • In 2006, Chavez announced a nationalization of oil fields managed by foreign companies, which resulted in an increase of the government’s shares in these projects from 40 percent to 60 percent. • Potentially burden PDVSA with investment costs. • Hurt agriculture, Manufacture and Other industries.
PDVSA • PDVSA (Petróleos de Venezuela, S.A.), Venezuela’s state-owned petroleum company, oversees the exploration, production, refinement, and export of oil as well as the exploration and production of natural gas. • It is the world's third-largest oil company, behind Saudi Aramco and ExxonMobil. • In 1980, PDVSA acquired CITGO, a U.S.-based refinery, and it is now one of the world's largest refiners.
Issues • 60% live under “extreme poverty” • Issue with Gov. Revenue • Tax • Corruption • Chavez take more control of Gov. • Newspapers • Television • Companies
Conclusion • Nationalization • Depended to heavily on oil as their main source of revenue. • Oil income was not invested wisely and industry was mired in corruption. • The country's wealth is unequally distributed among the population. The unemployment rate has reached 8.6% in 2010 and almost 60% of the population lives below the poverty line.