From his election in 1998 until his death in March 2013, the administration of the late Venezuelan President Hugo Chávez proposed and enacted populist economic policies as part of his Bolivarian Revolution.
In the early 2000s when oil prices soared and offered Chávez funds not seen since the beginning of Venezuela's economic collapse in the 1980s, Chávez's government became "semi-authoritarian and hyper-populist" and consolidated its power over the economy in order to gain control of large amounts of resources. Domestically, Chávez used such oil funds for populist policies, creating the "Bolivarian missions", aimed at providing public services to improve economic, cultural and social conditions.
As Chávez's successor Nicolás Maduro began to increase domestic spending after the oil price collapse, high inflation, currency controls, an unfriendly environment with private businesses, as well as the risk of default, prevented the entrance of stronger foreign currencies into Venezuela. Previously, the Chávez government turned to China to fund its overspending on social programs. Despite warnings near the beginning of Chávez's tenure in the early 2000s, his government continuously overspent in social spending and did not save enough money for any future economic turmoil, which Venezuela faced shortly before and after his death. Other industries suffered as a result of the over-reliance on oil, with the share of manufacturing in GDP dropping from 17.4% in 1998 when Chávez took office to 14.2% in 2012. As a result of Chávez's overspending and policies such as price controls, there were shortages in Venezuela and the inflation rate grew to one of the highest in the world.
Government policies Petroleum and natural resources
Venezuela is a major producer of oil products, which remains the keystone of the Venezuelan economy. Under the Chávez government, crude oil production decreased from 3.12 million barrels a day when Chávez took office in 1999, to 2.95 million barrels a day in 2007,OPEC Annual Statistical Bulletin, online version, Oil and gas data, Table 38, Crude oil production in OPEC member countries since commencement (www.opec.org/library/ ) whilst oil prices increased 660%. Stephen Randall, Director of the University of Calgary's Latin American Research Centre, points out that during Chávez's years in power Venezuela increased its dependency on oil exports to 95% (2012) from 80% when he took power in 1999. Furthermore, before the financial crisis in 2008 Venezuelan oil was selling at $129/barrel. It then dropped to $43/bbl by March 2009. Instead of reining in spending Chavez responded to reduced revenues by introducing more exchange controls and continuing with nationalizations. A 2014 article by CNBC stated that under Chávez, oil production declined from 3.5 million barrels per day to 2.6 million barrels per day, though Venezuela only made a profit from 1.4 million barrels per day due to Venezuela giving large amounts of its oil away for free. CNBC continued stating that though oil production decreased, public spending increased to over 50% of the GDP, spending more than received in oil profits which led to foreign loans that amounted to over $106 billion as of 2012. Foreign investment flows by the end of his presidency in 2013 were half what they had been in 1999.
On 13 November 2001, under an enabling law authorized by the National Assembly, Chávez enacted the Hydrocarbons Law, through which it sought to gain greater state control over the oil industry. The law increased the transnational companies taxation in oil extraction activities to 30% and set the minimum state participation in "mixed companies" at 51%, whereby the state-run oil company, Petróleos de Venezuela S.A. (PDVSA), could have joint control with private companies over industry.
Chávez used PDVSA funds to support political projects. Chávez also explored the liquidation of some or all of the assets belonging to PDVSA's US-based subsidiary, Citgo, which received criticism amongst the Venezuelan public due to corruption. According to finance minister Nelson Merentes, the Venezuelan 2006 budget would get more income from taxation than from the petroleum industry, unlike formerly.
In 2012, analysts said that PDVSA was in a "crisis" since "in the last ten years, they haven't been able to grow production". Analysts and OPEC also disagreed with Venezuela's claims of oil output. Critics have also noticed that investments in oil and natural gas production only amounted to US$17.9 billion while the government spent US$30.1 billion on social programs and Russian fighter jets. The secretary general of the United Federation of Petroleum Workers of Venezuela (FUTPV) said "PDVSA is falling apart" and that "lack of direction, investment and maintenance are wrecking the oil and natural gas industries". Critics have also accused Chavez of letting loyalists run PDVSA instead of those qualified for the positions since the company only hires political supporters of the president. In 2013, PDVSA took more than US$10 billion in loans from China and Russia due to an alleged lack of hard currency and had a financial debt of US$39.2 billion.
Cooperatives and economic democratization Since Chávez was elected in 1998, over 100,000 worker-owned cooperatives—representing approximately 1.5 million people—were formed with the assistance of government start-up credit, technical training, and by giving preferential treatment to cooperatives in state purchases of goods and equipment. There has been an increase in the amount of cooperative enterprises that have tax incentives in the new 1999 constitution. As of 2005, approximately 16% of Venezuela's formally employed citizens were employed in a cooperative. However, a 2006 census showed that as many as 50% of the cooperatives were either functioning improperly, or were fraudulently created to gain access to public funds.
Additionally, several thousand "Communal Councils" (Consejos Communales) were created. In these Communal councils, citizens form assemblies to determine what will be done with government funds in their local area. Groups are made up of 150-200 or more families in urban areas, and starting at around 15-20 families in rural areas, and their decisions are binding to local government officials. 21,000 of these groups were created in 2007, and 30,179 by 2009. As of 2007, about 30% of state funds were directly controlled by communal councils, with a goal of eventually having them control 50%.
Banking laws passed in 2001 require that all banks set aside at least 3% of their capital for micro-loans.
Poverty reduction programs and social spending
One of the primary ways that the Chávez administration attempted to fix the problem of economic inequality was by wealth redistribution, primarily via land reform, and social programs. The Chávez government pursued a series of Bolivarian Missions aimed at providing public services (such as food, healthcare, and education) to improve economic, cultural, and social conditions. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), poverty rates fell from 49.4% in 1999 to 23.9% in 2012. Data from the National Institute of Statistics (INE) shows that Venezuela's poverty rate decreased between 1999 and 2013 from 48.7% to 32.1%. A 2010 OAS report criticizing Venezuela's human rights standards indicated achievements in addressing illiteracy, healthcare and poverty, and economic and social advances.
The Chávez government overspent in social spending, however, and did not save enough money for any future economic difficulties. On 31 March 2000, Chávez initiated policies that resulted with the Venezuelan government spending more than it received as oil prices began to rise. Poverty in Venezuela began increasing going into the 2010s.Charlie Devereux & Raymond Colitt. 7 March 2013. During Chávez's campaign before the 2012 presidential election, he tripled Venezuela's deficit while on a "spending spree". In 2014 El Universal reported that in the previous five years that included years under Chávez's policies, purchasing power for those with minimum wage jobs had dramatically decreased compared to other countries in the region, supposedly due to the high inflation rate and the multiple devaluations of Venezuela's currency.
Price controls The Venezuelan government also set price controls in 2003 on around 400 basic foods in an effort according to The Washington Post, to "counter inflation and protect the poor", and in March 2009, they set minimum production quotas for 12 basic foods that were subject to price controls, including white rice, cooking oil, coffee, sugar, powdered milk, cheese, and tomato sauce.The Washington Post, 8 February 2007, Meat, Sugar Scarce in Venezuela Stores However, the lack of free-floating currency meant that the government was overpaying for these foods, which led shortages as limited amount of these foods began to be imported, even while demand was growing.
Missions and other projects Chávez created many projects and missions during his presidency, though he often took credit for some started by his predecessors as well. Many projects initiated during his presidency have remained incomplete and have experienced difficulties due to funding issues, political costs, corruption and bad execution. As of late 2013, over 4,000 projects initiated remained incomplete with 25% of those projects beginning before 2006. Despite the investment of billions of dollars, such projects that were not completed and experienced multiple delays included repairs to the Parque Central Complex, moving the Las Mayas garbage center, the clean up of the Guaire River, a National Cancer Center, Plan Vargas 2005, and multiple transportation projects.
Chávez also initiated Mission Habitat, a Venezuelan government program to construct new housing units for the poor. The housing mission has also experienced difficulties with El Universal stating that one of the Chávez administration's outstanding weaknesses was the failure to meet its goals of construction of housing.Chávez' Government has built 24 percent of scheduled houses. El Universal (31 July 2006). Chávez promised to build 150,000 houses in 2006, but in the first half of the year, completed only 24 percent of that target, with 35,000 houses. In 2013, the Venezuelan government also failed to complete nearly 50% of projected homes. The housing market in Venezuela had also shrunk significantly. Developers have avoided Venezuela due to the massive number of companies who have had their property expropriated by the government.
According to the Venezuelan government, the "Miracle Mission" program had the Venezuela and Cuban governments collaborated to perform free eye care to over 1,139,798 people, with an average of 5,000 operations occurring on a weekly basis in 74 medical centers around Venezuela, as of July 2010.
Agriculture and land reform