Venezuela 1999–2014: Macro-Policy, Oil Governance and Economic Performance

During the administration of President Chavez, Venezuela registered some celebrated and encouraging socio-economic achievements, however; in the macroeconomic realm the country underperformed compared with other countries in Latin America of a similar size. The country, for instance, did not manage to avoid recurrent external crisis, suffered from unprecedented net transfers of financial resources abroad and, despite the oil windfall, has not accumulated a strong level of defensive international reserves. Moreover, inflation has been rampant and output growth has been very volatile and, on average, poor. This study provides a descriptive account and analysis of Venezuela’s macroeconomic performance and policy experience during the administration of President Chavez and his handpicked successor, Nicolas Maduro (1999–2014). It focuses on the major policy and institutional changes, and on the problems and imbalances of the economy to find out and explore the conundrum of Venezuela’s economic underachievement. We evaluate Venezuela’s exchange rate and monetary policy and the key commitments of the Central Bank to society. In general the study suggests that macroeconomic mismanagement and a failed institutional structure of governance are essential to understand some key imbalances. It seems to be the case that the root cause of this macroeconomic mismanagement and poor governance of Venezuela lies in prevailing political and economic incentives.