Venezuelan Economy: Oil, Investment, and Social Classes

Posted on Mar 18, 2025 in Economy

Venezuelan Economic History: Key Periods and Transformations

Agricultural Period Constitutions

  • 1857: Enacted by Congress on April 16, 1857, and promulgated by President José Tadeo Monagas. Its political objective was to allow immediate connection and meet the aspirations of the President.
  • 1874: Enacted in Caracas on May 23, 1874, and promulgated by President Antonio Guzmán Blanco on the 27th of the same month.
  • 1901: Enacted by Cipriano Castro on March 23, 1901. This constitution, along with the 1904 constitution, did not introduce fundamental changes to previous constitutions.

Contemporary Period Constitutions

  • 1947: Established direct, universal, and secret suffrage to elect the President of the Republic.
  • 1953: Addressed for the first time the issue of the continental shelf and the seabed. It also changed the country’s official name from “United States of Venezuela” to “Republic of Venezuela”.

Foreign Investment in Venezuela

In economics, investment has several meanings related to saving, the allocation of capital, and the postponement of consumption. The term is used in business management, finance, and macroeconomics.

  • Direct Foreign Investment: The long-term placement of foreign capital in a foreign country for the creation of agricultural, industrial, and service businesses, with the goal of internationalization.
  • Indirect Foreign Investment: A set of loans that a country receives from abroad, also called portfolio investment. Foreign investment is made indirectly through loans from international organizations to governments or public enterprises, the placement of securities of the host country’s official credit in the stock markets of their own country, or the extension of credit.

Transformation of Oil Exploration

Key Indicators

  • Oil accounts for 95% of the value of Venezuela’s exports.
  • Oil represents approximately 55% of the country’s Gross Domestic Product.
  • Oil directly contributes 70% of the country’s income.
  • Oil contributes 60% of all foreign currency entering the country.

Features of the New Economic Structure

  • Mono-production: By 1936, Venezuelan oil production represented more than 50% of the value of agricultural, industrial, and mining production. By 1972, despite agricultural and industrial growth, this percentage had decreased to 47%.
  • Dependence: The dependent nature of the Venezuelan economy is accentuated and diversified. A vital area of the economic structure is owned by foreign companies.
  • Structural Heterogeneity: The process of decomposition of the old structure was so slow that a backlog continues to this day. Venezuela remains a country with a crop-based and dependent structure where the poor are increasingly affected.

Traditional Social Classes in Venezuela

  • Peasantry: The history of the Venezuelan peasantry is marked by numerous struggles over centuries to improve their living conditions. During the colonial period, the peasantry was composed of slaves and indigenous people. After the liberation of slaves in 1854, a new economic structure emerged where the peasantry was essentially tied to feudal serfdom.
  • Commercial Bourgeoisie: With the crisis of traditional agriculture and the rise of imports, the commercial bourgeoisie lost its dual role (exporter and importer). This class was politically strengthened with the decline and death of General Gómez, becoming the most important social factor in the government of President López Contreras.
  • Artisans: Between 1920 and 1936, this class experienced a population boom and participated in many of the struggles of the era alongside the emerging working class, which developed within the new processes generated by oil exploration.

New Social Classes

  • Foreign Capitalist Class: The penetration of foreign companies and their control of key sectors of the new economic structure led to the introduction of the foreign capitalist class. This is a reactionary class in national terms because their interest is to move profits abroad.
  • National Capitalist Class: Not described in the original text.
  • Workers: As a consequence of the migration of peasants to urban areas, the number of workers, especially domestic farm workers (women), increased significantly.