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The Economic History of Venezuela describes the economic background of Venezuela, including development of economy from colonization to modern economic policies to manage financial crisis and the development of modern economy.

Early Ages (20,000B.C.E-1500 C.E)

Historians date the first appearance of the inhabitants was between 20000 to 15000 years ago, which mainly consists of Paleo-Indians, Meso-Indians and Neo-Indians. Paleo Indians (20000-5000 B.C.E) were the first inhabitants among the three. Archaeologists discovered the group were bunch of hunter gatherers who specialized in stone culture. However, there was no signs of development of agriculture and trading. With the end of Ice Age, it had changed the environment to a coastal structure and moved into a new era. The second inhabitants group, the Meso-Indians (5000 B.C.E-1000 C.E) utilized the environment such as using shells of the snails to make tools and weapons. Many began to explore to the sea due to the nearby coastal structure, finding islands to be kept safe from neighbours. Eventually, they found islands full of plants and rich vegetation where they begin to produce and manage resources. They developed the use of plantation such as medication and agriculture. In this era, inhabitants start to develop early agriculture and its economy. Lastly, the Neo-Indians (1000-1500 C.E) developed and transformed agriculture through the use of a tool called mano y metate.The tool was used to grind maize and it helped develop the maize culture and advance the technology. Eventually, the inhabitants separated into different tribal groups which lead to trading among each other. Thus, the early form of an economy was developed where different resources were being traded with each other. Thus, forming early form of economy where different resources are being traded with each other.

Discovery of Venezuela during Columbus third voyage

First contacts with Europe (16th century)

In 1498, the ship of Christopher Columbus was in shortage of water and food. Upon wondering, they had discovered a land and begin searching for supplies to refill. The land is now known as Venezuela. Columbus discovered the indigenous people and had discovered the existence of pearl through bartering with the locals.

Colonization (17-18th Century)

In 1512, exploration in Venezuela had found a huge reserves in pearl, which lead to regular trading with the locals for their valuable resources. The Spanish had decided to start slave trade in the country. The situation escalated in 1520, when all the Pearl was extracted and slave trade had become more frequent. In late 16th century, Venezuela had been colonized by the Spanish. By 1600, there was more than 20 settlements, which produced maize, beans and beef as food resources and exported sugar, cacao and tobacco to Europe to produce income. In 17th Century, Venezuela traded resources to different countries such as Britain and France. By the early 18th century, Spain had become the only export for resources to Europe.

Independence (19th Century)

Statue of Simon Bolivar Paris

Main article: History of Venezuela (1830–1908)

During 1808-1826, there was an independence movement in Venezuela. People began to suffer as Spain decided to put heavy taxation across colonies. This resulted into building up frustration of the people, ultimately leading to the movement of independence. The independence was lead by Simón Bolívar who was the son of a wealthy Criollo family in Venezuela. Eventually, Venezuela had won the war against Spanish army in 1821, but it left a devastating effects in the economy. Venezuela had the highest casualties among nations who fought in the independence and suffered from shortage of resources. This was largely due to heavy arm conflicts in the region, as well as the governance system of caudillos, which was groups of warlord who manage their region and forming Venezuela. The caudillos mainly worked for personal benefit rather than for the country as a whole. Furthermore, competition and rivalries between caudillos had lead to disorganized country, as each region work against each other. The problem had persisted during the independence, as Simón Bolívar was leading an expedition that made him unable to manage the country. Furthermore, his status was not high enough to control the caudillos due to his birth in colony rather than main land of Spain, which made his prestige lower according to the class system of Casta. These factors made huge impact on Venezuela’s economy, as they lacked resources such as labor force and materials meanwhile accumulated debt from funding of the war from independence movement.

José Antonio Páez Governance (1820s-1840)

In 1830s, Venezuela’s economy saw massive improvement due to the coffee boom in the time. Huge proportion of the Venezuelan economy comes from agricultural resources such as coffee. This boom made Venezuela the third largest export of coffee in the world. The ruler of the time, José Antonio Páez took the opportunity and improve the economy by introducing new policies such as free trade, removal of tax immunity and education monopoly of the church. He cooperated with large landowners and merchants to grow the agricultural industry that made the country stable and organized for a decade. Venezuela had made considerable economic progress in the decade and able to repay the debt due to the rising economy.

José Tadeo Monagas Governance (1840s-1850s)

In 1840s, José Tadeo Monagas was elected as of a new president. The economy had not seen much growth mainly due to poor agricultural management, political crisis, federal war and counter revolutions. His economic policy was deficit financing. He spends lots of government funding yet had not seen much growth as the economy only grew by 2 percent, meanwhile overspending leads to accumulation of debt. The stagnant growth of economy was caused by decline of agricultural activity by 32 percent. This lead to decrease in export by 25 percent, of which 44 percent are from coffee. This negatively impacted Venezuela’s economy a lot due to their reliance of coffee as their main source of export income. Over the following decade, the state of the economy worsen drastically due to the ongoing political crisis leading to a federal war.

Federal war (1859-1863)

The growing dissatisfaction of the dictatorship of Tadeo and its party made the country separate into two groups, Federals and Conservative as a civil war. Federalists were aiming to improve the current situation of On the other hand, conservative party were trying to maintain their power, causing the biggest and bloodiest civil war since the independence. The civil war left Venezuela’s economy damaged but not as devastated as during the independence. There were damage some damage to valuable agricultural plantation, such as tobacco plantation in Barinas and facilities across the Llanos. However, plantation which was located near coastal area were unharmed, since battles did not take place near coast. Important plantation such as coffee and cocoa which accounted for a large portion of export were left untouched. Thus, it was not hard for the economy to utilize the agricultural industry to grow following the war. During first half of the 1860s, economy had increased by 22 percent, largely due to the growing agricultural industry, with export increased by 55 percent.

Antonio Guzmán Blanco Governance (Late 18th Century)

During second half of 1860s, the economy had fallen by 18 percent as government activities struggled. As the economy plummeted, revolutions organized by Antonio Guzmán Blanco and yellow liberals were made in 1869-1870 to fix the economic crisis. Antonio Guzmán Blanco became the new ruler after the revolutions. He grew the economy by 50 percent in 1880s and doubled government activities. His policy focused on agricultural industry and mining industry. In 1880s, coffee and cocoa accounted for 50 percent and gold accounted for 17 percent of the export. Furthermore, his policy to mine gold, build railway and create banking institute in Venezuela had also played a role in the significant increase in the economy. He used the funding to build many basic infrastructure such as school and public building. This increased the public education level as well as the standard of quality of life, causing the country to experience a huge technological advancement.

Modern Venezuela (21st Century)

Main article: Crisis in Venezuela

Chávez presidency (1999-2013)

Hugo Chávez was elected to be president in December 1998. In 2000, the oil price increased, leading into massive flow of funds and investment into Venezuela. These funds mainly came from subsidizing oil from few countries in the region. The increase in funds allowed the government to invest in projects to improve standard of quality of life of citizen such as the launch of Bolivarian missions. Bolivarian mission such as increase in social welfare and education course resulted in household living below poverty line declined approximately 30 percent. Inequality was reduced, as GINI index from 2000 to 2006 declined from highest 52.4 to lowest 46.9. However, the economy quickly suffered as oil production was in rapidly declined from 2007. Media outlet speculate the cause of the decline was due to firing of PDVSA employee from 2002-2003 general strike. In 2007, there were conflict between international oil companies about agreements for control over oil projects, causing oil companies to leave Venezuela. This caused the oil production to decline as new employee replaced were not able to keep up to the production of the oil due to inexperience. From 2007 onwards, Venezuela suffered from economic problem, as economist linked the cause to the Dutch Diseases. Over reliance on Venezuelan oil industry had drag down the entire economy of the country. This was apparent as GDP growth have declined more than 10 percent in a year. The recession continued until 2013, as GDP growth rate continued to suffer and never achieved the same before 2007. His presidency shortly ended in 2013 as he died from cancer, leading into new presidency.

Maduro presidency (2013-Present)

Nicolas Maduro was elected since 2014. In the same year, oil prices fell and it resulted into lower government funds and spending, as 98 percent of export earning are accounted from oil. Although, he used a policy similar to Chavez economic policy, Venezuela’s economy rapidly decline to the point of facing an economic crisis. During his presidency, poverty rapidly increased from 30 percent to 90 percent. Citizen living under poverty had tripled during his presidency. Furthermore, inflation rate rises to all time high. The hyperinflation made the government to switch new currency called bolívar soberano in hopes to recover the economy.

Present Day

Inflation Rate in Venezuela to 2013

The problem got even worse with economist forecasting inflation rate rising up to 10,000,000 percent in 2019. In addition to these difficulties associated with the change to the new currency, there were also underlying economic problem such as food shortage, high unemployment rate and rising crime rate. Food shortage got worse progressively, as one of the economist from the country’s consulting firm address the problem. Real GDP had fallen by 17.7 percent in 2018 and it had been mentioned further 25 percent drop in GDP were forecasted by the world bank, which accounts for cumulative 60 percent drop in real GDP from 2013. Unemployment rate is forecasted to rise to 44 percent in 2019 which will further lower the total production of the country, which lead to higher debt In fact, foreign reserves in Venezuela fell to 8.2 million from 25 million since 2014. Although, central bank is trying to grow the economy by releasing new petro cryptocurrency, and trading of oil. U.S denies the policies by releasing sanction over export and import on oil. The numerous economic problems lead to higher government debt, as the country defaulted numerous debt such as 20 international bond.