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Importance of oil in the economy


Caracas city in Venezuela
Caracas city in Venezuela

The economy of Venezuela is built upon the nation’s rich petroleum and mineral resources. However, its reliance on petroleum leaves the nation vulnerable to fluctuations in world markets. The government has made numerous efforts to diversify the economy but without success. At the beginning of the 21st century, the economy suffered from inflation and high unemployment and underemployment. In addition political instability had a negative effect on the economy. Opposition to President Hugo Chávez led to a general strike in late 2002 and early 2003 that worsened the country’s already weak economy.

Despite the strike that slowed oil production in the early 2000s, oil revenues rose as a result of an increase in oil prices. Chávez pledged to spend the money on social welfare, including health and education. With the increase in oil revenues beginning in 2004, Venezuela’s economy improved. However, critics said government spending was out of control.

The national budget in 2005 included revenues of $36.5 billion and expenditures of $41.1 billion. The gross domestic product (GDP), the total of all goods and services produced within a country, in 2007 was $228.1 billion. "Venezuela" © Emmanuel BUCHOT, Encarta, Wikipedia

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