Venezuela country brief

Overview

Australia and the Bolivarian Republic of Venezuela have cordial relations with modest commercial cooperation. Australia’s first Ambassador to Venezuela, F.T. Homer presented credentials in July 1973. The two countries celebrated 40 years of diplomatic relations in 2013.

The Australian Embassy in Santiago, Chile, is responsible for Venezuela. Venezuela opened its Embassy in Canberra in July 1978.

Venezuela is a country on the north coast of South America, sharing land borders with Colombia to the west, Brazil to the south and Guyana to the east. Venezuela is slightly smaller than South Australia and lies entirely within the tropics. In its west, Venezuela contains the northern stretches of the Andes mountain range, to the south and east the Guiana Highlands and in the centre the plains surrounding the main river in the country, the Orinoco. The world's tallest waterfall, Angel Falls, is located in the south west of the country.

Venezuela's population is approximately 30.9 million (2015 est). Venezuela's population is made up of a range of ethnicities, including Indigenous peoples, Europeans and Africans, as well as more recent immigrants from Asia. Roman Catholicism is the main religion.

Political overview

Background

The Spanish expedition led by Alonso de Ojeda in 1499, which sailed along the northern coast of South America, gave the name Venezuela (“little Venice” in Spanish) to the Gulf of Venezuela because of its similarity to the bay of Venice.

Spain colonised the north-east coast of Venezuela from 1521. Caracas was established as the capital of the province in 1577, which came under the jurisdiction of the Viceroyalty of New Granada (modern Colombia).

Independence from Spain was declared on 5 July 1811, when the area was included in the Republic of Gran Colombia, with Ecuador, Panama and New Granada. Venezuela seceded from Gran Colombia in 1830.

System of government

Venezuela is a federal republic, made up of 23 states, one Capital District (Caracas) and the Federal Dependencies (Venezuela's islands in the Caribbean Sea and the Gulf of Venezuela).

Under the 1999 Constitution, the Venezuelan government consists of a democratically elected representative system with a strong executive. The president, who is head of state and head of government, is elected for a period of six years (previously five).

Venezuela has a unicameral parliament known as the National Assembly and is comprised of 165 seats, with members elected for five-year terms. In 2009, the Venezuelan constitution was amended by national referendum to remove term limits on all elected officials, including the presidency.

Recent developments

Hugo Chávez was elected President of Venezuela for a third six-year term in October 2012. He passed away on 5 March 2013. Presidential elections took place on 14 April 2013. President Chávez's preferred successor, Nicolás Maduro, ran as the candidate for the ruling Partido Socialista Unido de Venezuela (PSUV) against Capriles, and won by a narrow margin.

The opposition party, Roundtable of Democratic Unity (MUD), won the 6 December 2015 National Assembly election, winning 112 of 167 seats, with 56 per cent popular vote.. The United Socialist Party of Venezuela (PSUV – Maduro's party) retained 55 seats, a loss of 44 seats. President Maduro's term will expire in late 2018.

Amidst severe shortages of food, basic goods and medicines, 2016 saw large scale public demonstrations and an attempt to seeking the recall of President Maduro via referendum.

Venezuela approved the Venezuelan National Plan of Human Rights in March 2016. In November 2016, at the 33rd Session of the Human Rights Council, a Joint Statement on the Human Rights Situation in Venezuela was delivered on behalf of 29 nations including Australia. This was followed by the 2016 Universal Periodic Review Process on Venezuela.

After two years of voluntary self-suspension from the Kimberley Process (Rough Diamond Trade) Certification Scheme, on 17 November 2016 Venezuela  resumed participation in the Scheme.

Foreign policy

The foreign policy settings under the Maduro government have shown strong continuity with the previous administration. President Chávez identified with the ‘global south' favouring a fundamental shift in international political economy and the re-emergence of a multipolar world in order to constrain the United States, which still remains Venezuela's main trading partner.

President Chávez strengthened relations with many of Latin America's left-leaning administrations, including Bolivia, Ecuador, Nicaragua and Cuba, through the creation of the Bolivarian Alliance for the Peoples of Our America (ALBA). It was proposed by President Chávez as an alternative to the Free Trade Area of the Americas (FTAA), based on cooperation through social, political and economic integration of these like-minded countries. Venezuela has extended its relations with select Latin American and Caribbean countries through the 2005 signing of an Energy Cooperation Agreement called Petrocaribe.

President Chávez also sought to deepen Venezuela's foreign and strategic relations with states not allied to the United States, such as China, Russia, Vietnam and Iran. Evidence of this includes Venezuela's offer of support to Russia during its 2008 war against Georgia in South Ossetia and Abkhazia. China has been an important source of financial capital for Venezuela. President Chávez also publicly supported Iran's nuclear program, by claiming that Venezuela would 'not be indifferent' should a pre-emptive attack be launched against Tehran.

In addition to closer political ties, Venezuela has materially benefited from its strategic relationship with Russia. Russian-Venezuelan talks in July 2013 expressed a common desire to continue strategic bilateral cooperation.

Venezuela was a non-permanent member of the UN Security Council during the period, 2015-2016.

Bilateral relations

In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America. For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

People to people links

Though small numbers of Venezuela-born people have migrated to Australia since the 1960s, they are relatively new migrants to Australia. The latest Census in 2011 recorded 3,404 Venezuela-born people in Australia, an increase of 122 per cent from the 2006 Census. More information on the Venezuela-born community in Australia can be found at the Department of Social Services Community Information Summary page.

There were 1,537 Venezuelan student enrolments in Australia as at December 2015 (year to date), up from 924 in  December 2013.

In 1993 a Treaty on Extradition between Australia and the Republic of Venezuela entered into force.

Development assistance

From 2010 to 2014, Australia provided $100 million in official development assistance to Latin America, including 250 Australia Awards scholarships. Venezuela received six Australia Awards Scholarships. From 2011 – 2015 three Venezuelan scholars have been sponsored under Australia's Endeavour program – in 2015 through 1 Postgraduate Scholarship, and in 2011 through 1 Research Fellowship and 1 Vocational Education and Training Scholarship.

Economic overview

At a glance

For latest economic data refer to the Venezuela fact sheet [PDF 29 KB].

Background

Venezuela's economy is largely based on its petroleum sector, which accounts for roughly a third of the country's GDP and around 95 per cent of its export earnings. Like other oil-dependent economies, Venezuela has suffered from the rapid reduction in the international price of oil. Skyrocketing inflation, severe capital controls and a problematic exchange rate system have led to a scarcity of basic goods and medicines. Political uncertainty and a deteriorating security situation have deterred investors. Heavy state subsidization, a major drain on dwindling state revenue, means Venezuela has the cheapest petro in the world – around 10 US cents a litre.

Venezuela is heading for hyperinflation. Annual inflation soared to around 481 per cent (year on year) in 2016, rising from 21 per cent in 2012 as a result of deteriorating domestic productive capacity, tight currency restrictions, high fiscal spending and several currency devaluations.

In July 2012, Venezuela joined Mercosur, the Southern Common Market formed in 1991 between Argentina, Brazil, Paraguay and Uruguay. Venezuela's membership of Mercosur expanded the market to 217 million people (2014) with a gross domestic product worth US$2 trillion (2015).  In December 2016 Venezuela will lose its Mercosur voting rights but will continue as a member, on the basis that Venezuela has not fully incorporated all of the group's rules and regulations.

Economic outlook

Venezuela's main source of income continues to be Petróleos de Venezuela (PDVSA), the state-owned oil company. GDP contracted eight per cent in 2016. High inflation, falling public expenditure due to low oil prices, a weak investment outlook, deteriorating infrastructure and a major breakdown in security are contributing factors to this slowdown.

The United States is PDVSA's main full cash export market. The company has also revived plans to expand natural gas production for export to Argentina.

Also, while Venezuela boasts one of the region's more developed physical infrastructure, the quality has deteriorated in recent decades because of underinvestment—in spite of a prolonged oil bonanza—stemming largely from a lack of effective administrative capacity. This has been most evident in the electricity sector, where a failure to invest in extra capacity and in improved distribution networks has left the country facing regular electricity rationing, but it is also evident in the deteriorating quality of roads and ports.

Bilateral economic and trade relationship

In 2015 Australian merchandise exports to Venezuela reached A$31 million consisting predominantly of ships and boats, up from A$8 million in 2014.  Merchandise imports from Venezuela remained relatively stable at A$2 million, consisting primarily of crude animal matter, alcoholic beverages, telecom equipment and parts, and computers. Australia's export of services to Venezuela in 2015 reached A$44million, up from A$26 million in 2010. Imports of services from Venezuela were A$4 million in 2015.

Trade and Investment

Australian companies have some A$927 million invested in Venezuela (2015), close to double the 2014 figure of A$592 million. Despite abundant mineral wealth and some of the world's largest reserves of iron ore, aluminium, nickel and gold, Venezuela's mining industry is underdeveloped and accounts for less than one per cent of GDP. The government has identified the mining industry as a key sector in the diversification of the economy away from petroleum, particularly as a source of export revenue and inputs for domestic industry.

Excel Mining and RFC Finance Corporation are involved in two mining projects in Venezuela: a diamond project in the Guaniamo region and the Cosila coal mine.

The government's strategy to nationalise strategic industries (including banks and food producers) that do not comply with government regulations have raised sovereign risk concerns. Government policy is favouring ties with state-owned firms linked to governments that are either close allies of the administration or countries the administration wants as allies. The imposition of foreign-exchange controls requires all persons in Venezuela to obtain government approval to send funds overseas. The difficulty in receiving payment in foreign currencies such as the US Dollar or the Euro has discouraged many small to medium sized Australian companies from exporting to Venezuela.

High level visits

January 2012: Then Parliamentary Secretary for Foreign Affairs, the Hon Richard Marles visited Venezuela.

 

Note: Currency is in Australian dollars unless otherwise stated.

Last Updated: 28 November 2016