Located in the north of South America, with a long Caribbean coastline, Venezuela has a vast central plain drained by the Orinoco, while the Guiana Highlands dominate the southwest of the country. A Spanish colony until 1811, Venezuela was lauded as Latin America's most stable democracy until its recent political upheavals. Although the country has some of the largest known oil deposits outside the Middle East, much of Venezuela's population still lives in shanty-town squalor.

Venezuela is one of the most highly urbanized societies in Latin America, with most of its population living in cities, mainly in the north. A historic "melting pot," it has experienced large-scale immigration from Italy, Portugal, Spain, and all over Latin America. There remains little of the white Hispanic aristocracy that survives in Colombia and Ecuador. The small number of native Amerindians, such as the Yanomami and Pemón, live in remote regions now threatened by illegal settlers. Most of the black population, who are descended from Africans brought over to work in the cacao industry in the 19th century, live along the Caribbean coast.

Oil wealth has brought comparative prosperity, but life in the barrios (shanty towns) which sprawl over the hillsides around Caracas is one of extreme poverty. Discontent peaked in the food riots of 1989 and 1991, which left scores dead along with the country's reputation for being a model democracy. The oil boom accelerated change for women, who today are to be found in all the professions. Politics, however, remains a largely masculine preserve. Oil wealth has also brought a measure of Americanization – boxing and baseball are among the most popular sports.

Strengths

The largest proven oil deposits outside the Middle East and the CIS. World oil prices soared in 2000, but dipped in 2001–2002. Massive reserves of coal, bauxite, iron, and gold, and successful development of new bitumen fuel which has attracted considerable foreign investment. New foreign investment, including banking, telecoms, iron, and steel. Producer of high-grade aluminum. More flexible labor market.

Weaknesses

Huge, cumbersome state sector; despite some privatization, large areas of the state sector are still overmanned and inefficient and subject to widespread corruption. Poor public services which, despite Venezuela's wealth during the oil-boom years, have been badly maintained. Major infrastructure renewal is now long overdue. Widespread tax evasion. Weak currency.

Profile

Venezuela is an economic paradox. While it has one of the strongest economies in Latin America, its government finances have habitually been in crisis due to a culture of nonaccountability and politically motivated patronage in state-owned industries and government bureaucracies. To date, privatizations and government cuts have failed to solve the problem. Promises by President Chávez to deal with excesses and diversify the economy, by lowering dependence on crude oil exports and promoting domestic processing industries, have received a mixed response from investors, who favor more market-oriented reforms.

Venezuela is a democracy, with multiparty elections.

Profile

Official corruption, austerity, rising poverty, and anti-price-rise riots in Caracas were the backdrop for two coup attempts in 1992. One of these was led by Chávez, whose election as president in 1998 broke the stranglehold on power of the traditional parties. He raised high expectations among the poor, but his increasingly autocratic style has attracted growing opposition.

Main Political Issues

Political stability

President Chávez's fiery rhetoric and populist stance won him the support of the poor as he embarked on root and branch reform of the political and judicial system, calling elections to a new Constituent Assembly which temporarily replaced the existing Congress. A new "Bolivarian" constitution, approved by referendum, allowed fresh elections in 2000, which gave Chávez a renewed mandate. However, his command-style running of the country increased political opposition and deterred foreign investment. A military coup in April 2002 installed business leader Pedro Carmona as president for a day, but middle-ranking officers changed tack following mass demonstrations and the generally unfavorable international response. Restored to office, Chávez displayed a conciliatory response to his opponents, recognizing the danger of further upheavals.

Oil policy

Support of oil prices and quotas within OPEC remain central, despite Chávez's wish to use oil revenue to build a broader economy.

A traditionally pro-US orientation was challenged by Chávez, with his personal friendship with Cuba's Fidel Castro, visits to Libya and Iraq, and opposition to "Plan Colombia." The Bush administration acknowledged the new interim government during the April 2002 military coup, but denied helping to install it, although the main coup participants had made very public visits to the US State Department in preceding months. The OAS announced opposition to the coup, as did all of Venezuela's neighbors. Better regional economic integration with the Caribbean, Central, and South America are important.

Chávez led officers opposed to austerity and corruption in a 1992 coup attempt. Military leaders claimed civil unrest forced them to oust him in April 2002, but they backed interim president Pedro Carmona who dissolved the National Assembly and Supreme Court by decree. Middle-ranking officers got cold feet and reinstalled Chávez after protests.

Venezuela has a remarkable diversity of resources. It has proven oil reserves of 77 billion barrels, vast quantities of coal, iron ore, bauxite, and gold, and cheap hydroelectric power. Huge investment programs are currently under way to raise production in all these sectors as well as in oil refining capacity. However, the Chávez government wants to cut the investment budget of the state oil company, PDVSA, reduce its output, and increase its contributions to the exchequer. Such uncertainty has deterred private investors.

Venezuela has begun exploitation of Orimulsion, a new bitumen-based fuel from the Orinoco; commercially exploitable reserves are estimated at 270 billion barrels. Venezuela's aim to be the world's largest aluminum producer is threatened after difficulties associated with privatizing the sector.

Flooding and mudflows, exacerbated by overdevelopment of the coastal strip, caused thousands of deaths in late 1999.

Massive road building from the 1960s onward has benefited the oil and aluminum industries.The French-designed Caracas subway was completed in 1995. Work on the Centro–Occidental highway and other major roads is ongoing, as is rail development.

The health service suffered along with other public services from poor management in the 1970s and severe cuts in the 1980s and 1990s. Most health care is concentrated in the towns, and people from indigenous communities often have to travel long distances to receive treatment. Medicines, which have to be paid for, are expensive, and preventable diseases are recurring. Hospitals need modernization.

An additional $1 billion in social spending approved in 2000 includes spending on health.

An extra $1 billion in social spending approved in 2000 includes raising entitlement in the state sector. Education is characterized by teacher shortages and a high drop-out rate; the quality of education at state universities is low. The private sector is growing.

Urban robberies and violence involving young delinquents are major problems, as is narcotics-related crime. Cattle-smuggling to Colombia is rife.

The oil boom years of the 1970s largely benefited those already rich, with middle-income consumers doing well out of government-sponsored improvements in health and education and subsidized goods, largely at the expense of the poor.

The collapse of world oil prices, economic austerity measures, high inflation, and the devaluation of the bolívar in the 1980s and 1990s has squeezed the middle class and in addition seriously eroded the living standards of working-class households. In 2001, 20.7% of people were living in extreme poverty, according to official figures. Two million were unemployed and 59% of those working were in the informal sector.

Tourism is still a relatively minor industry in Venezuela, but one with enormous potential. Venezuela has many beaches that are the equal of any Caribbean island's, and a fascinating jungle interior which is a target for tourists. For many years, the high value of the bolívar made Venezuela an expensive destination, but, after recent devaluations, it has become one of the cheapest in the Caribbean. Privatizing state-run hotels was part of a drive to attract foreign investment.

Venezuela was the first of the Spanish imperial colonies to repudiate Madrid's authority under the guidance of the revolutionary, Simón Bolívar, in 1811.

• 1821 Battle of Carabobo finally overthrows Spanish rule and leads to consolidation of independence within Gran Colombia (Venezuela, Colombia, and Ecuador).
• 1830 Gran Colombia collapses. José Antonio Páez rules Venezuela; coffee planters effectively in control.
• 1870 Guzmán Blanco in power. Rail system constructed.
• 1908 Gen. Juan Vicente Gómez dictator; oil industry developed.
• 1935 Gómez falls from power. Increasing mass participation in political process.
• 1945 Military coup. Rómulo Betancourt of AD takes power as leader of a civilian–military junta.
• 1948 AD wins elections, with novelist Rómulo Gallegos as presidential candidate. Military coup. Marcos Pérez Jiménez forms government, with US and military backing.
• 1958 General strike. Adm. Larrázabal leads military coup. Free elections. Betancourt, newly returned from exile, wins presidential election for AD. Anticommunist campaign mounted. A few state welfare programs introduced.
• 1960 Movement of the Revolutionary Left (MIR) splits from AD, begins antigovernment activities.
• 1961 Founder member of OPEC.
• 1962 Communist-backed guerrilla warfare attempts repetition of Cuban revolution in Venezuela; fails to gain popular support.
• 1963 Raúl Leoni (AD) elected president – first democratic transference of power. Antiguerrilla campaign continues.
• 1966 Unsuccessful coup attempt by supporters of former president, Pérez Jiménez.
• 1969 Rafael Caldera Rodríguez of COPEI becomes president. Continues Leoni policies.
• 1973 Oil and steel industries nationalized. World oil crisis. Venezuelan currency peaks in value against the US dollar.
• 1978 Elections won by COPEI's Luis Herrera Campíns. Disastrous economic programs.
• 1983 AD election victory under Jaime Lusinchi. Fall in world oil prices leads to unrest and cuts in state welfare.
• 1988–1989 Carlos Andrés Pérez wins elections for AD. Caracas food riots; 1500 dead.
• 1993–1995 Andrés Pérez ousted on charges of corruption; Caldera Rodríguez reelected. More social unrest.
• 1998–2000 Hugo Chávez embarks on radical change after his Patriotic Front coalition defeats COPEI-led coalition in elections. Constituent Assembly approves new constitution, later endorsed by referendum. Chávez mandate confirmed by presidential elections. New National Assembly.
• 2002 April, Chávez ousted in military coup. Business leader Pedro Carmona president for a day. Chávez reinstalled after foreign and domestic protests.