Economy of Venezuela

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The economy of Venezuela is largely based on the petroleum sector, which accounts for roughly a third of the country┬┤s GDP, around 80% of total exports, and more than half of the government operating revenues. Venezuela is the fifth largest member of OPEC by oil production. From the 1950s to the early 1980s the Venezuelan economy experienced a steady growth that attracted many immigrants. During the collapse of oil prices in the 1980s the economy contracted. With high oil prices and rising government expenditures, Venezuela's economy grew by 9% in 2007 but is expected to have shrunk by 2.9% in 2009 and further in 2010. Venezuela has one of the highest inflation rates in the world with 35% (2010),[5] according to Central Bank of Venezuela, the government received from 1998 to 2008 around 325 Billion USD through oil production and export,[6] and according to International Energy Agency, to June 2010 has production of 2.2 million of barrels per day, 800 thousand of whom go to the United States of America.[7]

In January, 2010, Hugo Chavez announced a fixed dual exchange rate system for the bolivar. The system offers a 2.6 bolivar per USD rate for imports of essential items such as food, medicine, and industrial machinery, and a 4.3 bolivar per USD rate for imports of other products, including cars and telephones.[1] CADIVI, the government body which administers currency exchange, will continue as the only administrator of the foreign currencies and executor of this devaluation.[8] Currently Venezuela imports almost all of its clothing, food, cars and electronic items.[9]

The International Energy Agency shows how Venezuela's oil production has fallen in the last years, producing only 2,300,000 barrels (366,000 m3) daily, down from 3.5 million in 1998,[citation needed] but with the recent currency devaluation the oil incomes will double its value in local currency, allowing the government to spend more.[10]

A recent International Monetary Fund (IMF) study qualified as "delayed and weak" the economic recovery of Venezuela in comparison with other countries of the region that had emerged from the world economic crisis "comparatively well" and were now recovering to a "strong rhythm". It forecast regional growth of an average of 4.0 percent this year and in 2011, while Venezuela┬┤s economy will shrink by 2.6% in 2010.[11]

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