Dutch Disease

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					   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
   Current President Hugo Chavez- 10 years in Power.
   Ranks 162 out of 179 countries ranked on Transparency
    International's corruption index
   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.
   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
• 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                       Ignored serious social problems,
• The increased demand for           including education, health,
  imported goods and domestic        infrastructure, agriculture, and domestic
  services has caused a general      industries, causing Venezuela to fall well
  inflation of wages and prices.     behind other industrialized countries.
   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 (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.
   60% live under “extreme poverty”
   Issue with Gov. Revenue
   Tax
   Corruption
   Chavez take more control of Gov.
    ◦ Newspapers
    ◦ Television
    ◦ Companies
   Nationalization
   Depended to heavily on oil as their main source of revenue.
   Oil income was not invested wisely and industry was mired in
   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.

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