Venezuela’s descent into economic and political chaos in recent years is a cautionary tale of the dangerous influence that resource wealth can have on developing countries.
Last updated January 24, 2019
Venezuela, home to the world’s largest oil reserves, is a case study in the perils of petrostatehood. Since its discovery in the 1920s, oil has taken Venezuela on an exhilarating but dangerous boom-and-bust ride that offers lessons for other resource-rich states.
Decades of poor governance have driven what was once one of Latin America’s most prosperous countries to economic and political ruin. If Venezuela is able to emerge from its tailspin, experts say that the government must establish mechanisms that will encourage a productive investment of the country’s vast oil revenues.
What is a petrostate?
Petrostate is an informal term used to describe a country with several interrelated attributes:
- government income is deeply reliant on the export of oil and natural gas,
- economic and political power are highly concentrated in an elite minority, and
- political institutions are weak and unaccountable, and corruption is widespread.
Countries often described as petrostates include Algeria, Cameroon, Chad, Ecuador, Indonesia, Iran, Libya, Mexico, Nigeria, Oman, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.
What’s behind the petrostate paradigm?
Petrostates are thought to be vulnerable to what economists call Dutch disease [PDF], a term coined during the 1970s after the Netherlands discovered natural gas in the North Sea.
In an afflicted country, a resource boom attracts large inflows of foreign capital, which leads to an appreciation of the local currency and a boost for imports that are now comparatively cheaper. This sucks labor and capital away from other sectors of the economy, such as agriculture and manufacturing, which economists say are more important for growth and competitiveness. As these labor-intensive export industries flag, unemployment could rise, and the country could develop an unhealthy dependence on the export of natural resources. In extreme cases, a petrostate forgoes local oil production and instead derives most of its oil wealth through high taxes on foreign drillers. Petrostate economies are then left highly vulnerable to unpredictable swings in global energy prices and capital flight.
La oposición política venezolana, con el apoyo de Washington y otras capitales del mundo, está liderando un frente común para sacar a Nicolás Maduro del poder. La osadía del nuevo presidente de la Asamblea Nacional, Juan Guaidó, de juramentarse como presidente encargado de Venezuela ha sido recompensada con un importante reconocimientointernacional. Guaidó ha logrado transmitir su entusiasmo a muchos venezolanos traduciéndose en grandes movilizaciones por el país en días previos y posteriores al 23 de enero, con una respuesta violenta por parte del régimen. Washington ha impuesto sanciones contra Maduro apuntando al estratégico sector del petróleo venezolano. La incertidumbre se mantiene a la espera del posicionamiento de la cúpula castrense en esta crisis. NOVEDADES DE @RIELCANO
Embajada de Estados Unidos
Unidad de Análisis y Estudios Ÿ Diplomacia Pública
Difusión selectiva de documentos electrónicos sobre Venezuela
Artículo de opinión del Embajador Duke Buchan III: Llegó la hora de la transición en Venezuela El Mundo 31 de enero de 2019
“La esperanza ha regresado a las calles de Venezuela por primera vez en muchos años. La oposición democrática pacífica se ha reunido en torno al presidente interino Juan Guaidó para poner fin a la opresión, la corrupción y el hambre impuestos al pueblo de Venezuela por el régimen de Maduro. Es la hora de que la comunidad internacional defienda a los venezolanos contra un sistema fraudulento y diga: “¡Basta ya! ¡Es el momento de la transición!””
“Today, I am officially recognizing the President of the Venezuelan National Assembly, Juan Guaido, as the Interim President of Venezuela. In its role as the only legitimate branch of government duly elected by the Venezuelan people, the National Assembly invoked the country’s constitution to declare Nicolas Maduro illegitimate, and the office of the presidency therefore vacant. The people of Venezuela have courageously spoken out against Maduro and his regime and demanded freedom and the rule of law./../”
VIDEO – Statement Recognizing Juan Guaido as the Interim President of Venezuela by Mercedes Schlapp, Assistant to the President and Senior Advisor for Strategic Communication The White House January 24, 2019
Fact Sheet – President Donald J. Trump Supports the Venezuelan People’s Efforts to Restore Democracy in Their Country The White House January 29, 2019
“The people of Venezuela have courageously spoken out against Maduro and his regime and demanded freedom and the rule of law.”
Press Statement by Secretary of State Pompeo January 28, 2019
Today, the United States has taken necessary actions to prevent the illegitimate former Maduro regime from further plundering Venezuela’s assets and natural resources.
The United States has determined that persons operating in Venezuela’s oil sector may now be subject to sanctions pursuant to Executive Order (E.O.) 13850 signed by President Trump on November 1, 2018. Petroleos de Venezuela, S.A. (PDVSA) has been designated for operating within this sector./../
Remarks by Secretary of State Pompeo at a United Nations Security Council Meeting on Venezuela United Nations, New York City, U.S. Department of State January 26, 2019
“The United States stands with the Venezuelan people. So far, many other nations have chosen to do the same and they too have recognized the legitimate government of interim President Guaido. The United States stands proudly with you as we stand together in support of Venezuela. You knew the Venezuelan people did not have a moment to spare.”/../
United States Is Ready To Provide Urgent Humanitarian Aid to the People of Venezuela U.S. Department of State January 24, 2019
Today, Secretary of State Pompeo announced that the United States is ready to provide more than $20 million in initial humanitarian assistance to the people of Venezuela as they struggle to cope with severe food and medicine shortages and the other dire impacts of their country’s political and economic crisis caused by the illegitimate Maduro regime./../
. . . . . . . . . . . . . . . . . . . . . . . . .
Unidad de Análisis y Estudios
Embajada de Estados Unidos