Venezuela's Exports: The Cost of Oil Dependence

Have you ever heard of the resource curse? It’s a real thing.

The resource curse is a phenomenon in which many of the most resource-endowed countries in the world are significantly less economically stable or developed than their peers. While there are clear exceptions such as Norway or the United States, it’s a widely-noticeable trend around the world in developing countries such as the Democratic Republic of the Congo.

Which brings us to Venezuela. As we’ve discussed before, the country has the world’s largest oil reserves, which you’d think would mean it’s doing quite well in a year where oil prices are so high.

However, the country’s vast oil wealth is definitely more of a curse. As part of what’s been called Dutch disease, in which greater development of a certain sector negatively impacts other sectors and harms a country’s economic diversification, Venezuela has never seen its record oil profits in past years actually reinvested into developing the rest of its economy.

Instead, expensive social programs – designed to boost the popularity of its populist leaders – were prioritized, and when oil prices collapsed in 2014 the country’s economy did as well.

Going off official data tracked by our friends at OEC World, we can see that by 2021 Venezuela’s exports were in shambles. While some reports have emerged in years past of oil circumventing sanctions to wind up in China, no doubt the country’s finances have taken a major hit. The country went from having one successful export to none, and the millions of Venezuelans who have fled the country provide the result.

Is there perhaps an end to the short-term disaster on the horizon, either in the form of free and fair political elections in 2024 or broad sanctions relief? Perhaps. But so long as Venezuela lives and dies by oil alone, the country will never truly escape its curse.