Venezuela is located in northern South America and borders the North Atlantic Ocean and the Caribbean Sea, between Guyana and Colombia. It covers an area of 912,050 km2 and its total population is 31.3 million, according to 2017 estimates. The climatic conditions vary from tropical to humid and are moderate in the highlands.
The GDP of the country was $389.4 billion as of 2017. The country largely depends on oil revenues, which accounts for about 98% of the export value and around 8% of the country’s GDP value. The country accounted for 3.3% of the world’s petroleum production in 2014.
After a major economic slowdown in the period of 2009 to 2010, the country recovered with an increase in the GDP growth rate by 4.2% in 2011. By 2017, Venezuela was in a period of negative growth that had lasted for several years, with the economy contracting by -14%. The recent highly reported political and economic crisis has only further served to destabilize this nation and the outlook, currently, is uncertain.
Venezuela’s top export destinations are the United States, China, India, Singapore, and Spain.
Overview of Resources
Venezuela has rich resources of gold, nickel, iron ore, steel, diamond, alumina, coal, bauxite, asphalt, natural gas, and petroleum. In 2014, the extraction of minerals from mines and quarries accounted for about 26% of GDP.
The Map of Venezuela. Image Credits: CIA Factbook
The major mineral resources produced in the country are:
- Direct-reduced iron
In recent years, Venezuela’s mining and fuel resource sectors have been significantly affected by high inflation and decreasing prices for natural resources.
Metal mining is an important part of the Venezuelan economy and Venezuela has 32 goldfields. Gold production for 2017 was the lowest since 1997, at 480kg, decreasing from 558kg in 2016.
Iron ore is another important mineral resource in Venezuela and is the 5th largest export with a total export value of US$258 million.
Despite a rise in production of around 16% in 2014, bauxite production in Venezuela is close to historic lows. Aluminum accounts for 20% of all metal exports.
Mount Roraima. Image Credits: CIA Factbook
After being the second-largest Latin American coal producer for about a decade, production dropped off sharply in 2006. In 2015, the Venezuelan government finalized a $2-billion agreement that would expand coal mining in the Guasare and Socuy Basins for the Chinese state-run Sinohydro Corp.
The 5.6 trillion m3 natural gas reserves in Venezuela are the second largest in the Western Hemisphere. In2014, the production of natural gas in the country was 76,717 million m3. The total amount of natural gas marketed in the country that year was 21,878 million m3.
The country’s crude oil production in 2014 amounted to about 985.56 million 42-gallon barrels and petroleum exploration appeared to be increasing. In 2014, the number of active rigs rose by 19%, to 221.
Venezuela’s economy is mainly based on its supply of petroleum products and hence it was greatly affected by a sudden fall in oil prices during the global recession. The Venezuelan government has implemented tax incentives for small and large companies that had invested in the country’s mining sector, in an attempt to boost the economy.
Despite having abundant resources like gold, aluminum, and petroleum, the country’s mining industry is still underdeveloped. Few Australian companies play a vital role in the mining industry of Venezuela. Excel Mining and RFC Finance Corporation are the companies involved in two mining projects in the country. However, the government has nationalized many industries that have major control over the country’s natural resources. The government has invested about US$5.81 billion to develop its mining industry. It has also approved US$159 million for the workers in the country's heavy industries that extract and manufacture gold, bauxite, iron, and other mineral resources.
The country’s large reserves of crude petroleum are more likely to attract investment from countries like Russia, Italy, Iran, and China in the future, despite its uncertain economic condition and nationalization initiatives. In addition, PDVSA’s plans for exploration and production of natural resources could ensure development of Orinoco hydrocarbon resources. Also, the plans for building new crude oil refineries could encourage the country’s strategic alliances with other strong economies. In addition, the development of Las Cristinas is expected to generate huge revenues. Thanks to all these ambitious development plans, Venezuela's mining sector will likely improve in the future and contribute more to the country's economy.
Disclaimer: The author of this article does not imply any investment recommendation and some content is speculative in nature. The Author is not affiliated in any way with any companies mentioned and all statistical information is publically available.
Sources and Further Reading
This article was updated on 27th February, 2020.