Venezuela

The South American country of Venezuela, which shares borders with Colombia, Brazil, and Guyana, is one of the major oil producers in the Americas. It was taken over by the Spanish in the early 16th century, initially controlled from Santo Domingo (in the modern-day Dominican Republic), and from 1717 from Bogotá as a part of the Viceroyalty of New Granada. Part of the campaign for independence in Latin America started in Venezuela in 1806, with independence for Gran Colombia in 1819. In 1829, Gran Colombia fell apart and Venezuela became fully independent, with its capital established at Caracas.

Throughout much of the 19th century, Venezuela was plunged into a series of civil wars and this led various governments to borrow heavily from Great Britain, Germany, and Italy. This led to a later government reneging on payment of the loans, and the three countries sent ships to the Caribbean to blockade Venezuela's ports in 1902, forcing the new government to start repaying the loans. However, this did lead to the emergence of the dictatorship of General Juan Vicente Gómez, who took power in 1908 and ruled until his death in 1935. Although the nature of his rule was extremely unpopular, he did have access to vast wealth to sustain his long rule. This was because of the discovery of oil and its wide exploitation in Venezuela in the 1920s.

The Venezuelan oil industry owes much to Manuel Antonio Pulido, who recognized the hidden wealth in the country in the late 19th century. At that time, it was used for paraffin, but with the increasing popularity of the automobile, engineers from the United States, the United Kingdom, Germany, and the Netherlands started prospecting for oil, having to carve roads through the jungles to remote locations where oil drills were established. It was not long before drilling for oil started in Lake Maracaibo, later leading to the building of elaborate pumping stations.

Throughout the dictatorship of Juan Vicente Gómez, some 3,500 families continued to own about 80 percent of the richest farmland in the country, and they enjoyed much of the wealth from oil. The oil industry also tended to result in a neglect of agriculture, which led to the country having to import food, which, in turn, resulted in a rise in prices. The death of Gómez in 1935 paved the way for two more military governments. However, the people started protesting and in 1945, Rómulo Betancourt came to power leading the Acción Democrática Party, which planned to make the economy of the country more socialist. Reforms were introduced, but eight months later, this ended with a military coup. In 1958 Betancourt's supporters overthrew the military and he became president, becoming the first democratically elected president who stood down at the end of his term in office.

Oil continued to provide money for the Venezuelan government, and with the oil price increases in 197374, and again in 1979, the country started to become wealthy. However, in the 1980s, there was an economic downturn and unemployment rose, followed [Page 1677]by an increase in inflation to such an extent that it looked as though Venezuela would not be able to pay back its international debts. Austerity measures were introduced in February 1989, and in demonstrations and rioting in Caracazo, some 300 people were killed. This instability led to Hugo Chávez Frías attempting to stage a coup d'état. Chávez was jailed but was released and in November 1998, his supporters won a majority in the congress and Chávez himself became president. He assumed office at a time of major economic problems in the country, with some 70 percent of the population living at or below the poverty line and about 35 percent of the population believed to be making a living by black market trading.

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