Venezuela is an oil-based economy. Oil represents a third of GDP, three quarters of exports, and more than half of government revenue, and as a result the economy is heavily dependent on this and other natural resource exports. Although it is an important member of Mercosur, Venezuela is poorly integrated into world markets. In terms of governance, a relatively ineffective bureaucracy and poor regulation have severely limited the possibilities for capital accumulation and productive investment.
Foreign direct investment is a minor contributor to GDP, as economic openness is curtailed by restrictions on foreign trade and investment, and by perceived maltreatment of investors in some sectors. The value of the country’s total international merchandise trade, despite high oil exports, is equivalent to just over half of its GDP (56.9%). If judged by relative movements in consumer and producer price ratios, Venezuela achieves a high level of competitiveness in domestic markets, but struggles in some sectors.
Even by Latin American standards, the level of education achieved by the average Venezuelan in the workforce is exceptionally poor. This contributes to an inability to commercialise innovation. In addition, and perhaps as a result, Venezuela exports a negligible quantity of high-technology goods.