Facing Stagnant Oil Market, Venezuela Diversifies Exports by up to 75%

Amid economic crisis fueled by stagnant oil prices, Venezuela is set to increase its non-oil exports by 75% in 2015. 

Santa Elena, October 8th, 2015. (venezuelanalysis.com) – In the past year, as global surplus drove the price of Venezuelan crude down by 52 percent, Venezuela has begun to diversify exports in an urgent attempt to counterbalance oil sales that make up 95 percent of its foreign earnings. 

According to data released by Venezuelan Trade Minister Isabel Delgado, revenue from non-oil exports from the first eight months of 2015 equaled the total sum from 2014, at USD $4 billion.

Delgado estimates that number could rise to $7 billion by the end of the year, conceivably amounting to a 75 percent hike since last December.

The minister indicated that the figure encompasses sales of over 300 non-oil products produced in the country, including steel, aluminum, granite, cacao, sesame, shrimp, coconut, rum and cocuy (a Venezuelan agave spirit). 

Craft items such as adobe bricks, furniture, leather footwear and pottery are also among the expanded list of trade. 

Representatives of the National Granite Workers’ Association and the Venezuelan Technical Marble-Maker have reported significant progress in placing their products in Cuba, Bolivia, Brazil, and Panama. Both groups cited support from the Venezuela Exports program, which provides an essential bridge for Venezuelan businesses through the Foreign Trade Bank (Bancoex). 

Other important platforms include the Member States of the Common Market of the South (Mercosur) and the Bolivarian Alliance for the Peoples of Our America (ALBA).

Despite recent growth, the alternative business sector has yet to regain its former capacity of 2009, when the country was earning over USD $9 billion in non-oil exports. 

Dire Predictions

The International Monetary Fund (IMF) this week predicted Venezuela’s economy will shrink more than any other in the world by the end of 2015.

In it’s World Economic Outlook report published on Tuesday, the IMF estimated a 10 percent contraction of gross domestic product and an average of 159 percent inflation by December.

The Washington-based organization also forecasted a 6 percent contraction for 2016, with inflation rates rising to 204.

Although the Venezuelan government has taken little action to stem rising inflation this year, analysts argue they are waiting for after the Dec 6th parliamentary elections to implement economic reforms. 

The socialist administration has long cited its dependency on oil revenue as a source of instability, citing Dutch disease and vulnerability to market flux. 

“We cannot continue extracting raw materials and importing products to satisfy our needs […] That is a model which does not create employment, it is basically monopolistic that has historically trampled small and medium industry,” the trade minister Delgado said in an interview in July. 

Both President Nicolas Maduro and his predecessor Hugo Chavez tried promoting expansion in national production, both agricultural and otherwise, with limited results. 

But faced with decreased spending power and the scarcity of basic grocery items, alternative markets and co-ops are springing up across the country as grassroots groups rally at the front lines of what Maduro has dubbed the “economic war.” 

Despite these small-scale projects being a direct result of the recession, Delgado believes they will also pave the way out of the crisis.

“Overcoming our historic dependency is the only strategy for defeating the economic war,” she said.