Venezuela has a land area of only 912,000 km2, but it has the largest hydrocarbon resources in the region. The country is a founding member of OPEC. Like most of Latin America, Venezuela is a country of social and economic contrasts. Venezuelans are a diverse people with a mixture of European, African, and Indian ancestry. 1 Culturally, it has much in common with its Caribbean neighbors. The country has one of the highest population growth rates among Western Hemisphere countries and, in terms of socio-economic indicators (such as urbanization and life expectancy), it ranks among the region's more developed economies.
The Venezuelan economy has exhibited substantial growth over the past several years, although there was a sharp recession in 1989. In 1990, GDP grew 5.3 percent and in 1991 reached the highest rate (9.7%) achieved thus far in Latin America. After 1992, however, the economy sharply worsened. GDP growth was down to 6.8 percent in 1992, and real GDP even fell by 1 percent during 1993. The inflation rate rose from over 31 percent in 1992 to 38 percent in 1993 and is expected to remain at the level of 40 percent for the the next few years. 2 Meanwhile, Interim President Velásquez's government is trying to implement a series of reforms by decrees. The long-delayed value added tax law went into effect on October 1, 1993. The government has ordered big increases in stamp taxes and is expected to permit foreign investors to buy shares in existing banks and to establish local operations. 3 The monetary policy has been tightened again. The government is attempting to diversify the economy away from oil by emphasizing growth and exports in other industries such as aluminum, steel, iron ore, and coal; in addition, Venezuela is trying to increase value added by promoting exports of petroleum products rather than crude. The petroleum industry remains the most important contributor to GDP (28%) and to exports (80%). Crude and product exports were valued at nearly US$11.2 billion in 1992. The United States is Venezuela's most important trade partner, followed by Germany and Japan.