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David Caploe PhD

David Caploe PhD

David is a writer for the popular economic news site Economywatch.

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A Look At Oil Rich Venezuela’s Shrinking Economy

In booming South America, oil-rich Venezuela is the exception: the continent's only shrinking economy in 2010.

Officials are rationing hard currency. Government takeovers of private businesses are increasing. One prominent financial analyst recently had just two words of advice for investors here: “Run away.”

Many middle-class and wealthy Venezuelans have done exactly that, creating a slow-burning exodus of scientists, doctors, entrepreneurs and engineers.

But wander into the bazaar in the shadow of Santa Teresa Basilica in this city’s old center, and the opposite seems to be happening as well. Merchants murmur in Arabic, Urdu and Hindi. Haitians pushing ice cream carts chatter in Creole. Street vendors selling DVDs call out in Colombian-accented Spanish.

Sip coffee in Naji Hammoud’s clothing shop, where photos of Lebanon’s Bekaa Valley grace the walls - and the outlook is downright bullish.

“There’s money in the street, whether the price of oil is $8 a barrel or $80,” said Mr. Hammoud, 36, who came here from Lebanon a decade ago and has no plans to leave.

“I could have moved to Europe, Germany, someplace, and done fine, but I would have been someone’s employee. Here, I’m my own boss.” Venezuela is in the throes of an immigration puzzle.

While large numbers of the middle class head for the exits, hundreds of thousands of foreign merchants and laborers have put down stakes here in recent years, complicating the portrait of how a brain drain unfolds.

The opposing tides reflect the increasingly polarized nature of the country.

The government of President Hugo Chávez, who recently declared an “economic war” against the “bourgeoisie,” has expropriated 207 private businesses this year — including banks, cattle ranches and housing developments, according to Conindustria, a Venezuelan industrial association - prompting many to seek safer havens elsewhere.

“I feel like I can finally breathe again,” said Ivor Heyer, 48, the owner of a boat manufacturing company, who recently moved his entire operation to Colombia, creating more than 100 jobs there.

“I’ve gone from a country where fear is constant over crime and state takeovers to a place that actually welcomes companies involved in something other than oil.”

At the other end of the economic spectrum, many new immigrants continue to arrive on tourist visas and overstay their visits, drawn by incomes that are still higher than those in some of Venezuela’s neighbors and by a broad array of social welfare programs for the poor championed by Mr. Chávez’s government.

“One can live with a little bit of dignity here, at least enough to send money home now and again,” said Etienne Dieu-Seul, 35, a Haitian street vendor, who moved here a month before the earthquake that devastated Haiti in January.

After the disaster, officials here said they would grant residence visas to the 15,000 Haitians believed to have been here illegally.

As many as four million immigrants have come here from Colombia, according to Juan Carlos Tanus, director of the Association of Colombians in Venezuela. And some continue to arrive, despite the protracted recession here and the recent strides Colombia has made in growing its economy and ending the civil war that has plagued it for so long.

“There’s work in Venezuela for those who want it,” said Arturo Vargas, 39, a Colombian laborer who moved to Caracas last year, finding jobs as a watchman and at a chicken-processing plant.

“This place isn’t perfect, but it’s better than what I left behind.”

The influx is driven in part by Venezuela’s long tradition of lenient immigration policies -
dating at least from the years after World War II, when the country was a magnet for immigrants from war-ravaged Europe - and by the importance of the asset that has helped define this nation for a century:


Even during times of fluctuating oil prices and institutional disarray, revenues from petroleum exports give Venezuela a cushion against the wrenching crises that have jolted its neighbors in the past.

Oil money also allows for a broad assortment of imports, from Scotch whisky to Russian Lada cars, creating a large consumer society and opportunities for people to sell things in it.

More than 50,000 Chinese have settled in cities and towns across the country, working largely as shopkeepers. Thousands of merchants and their families from Lebanon, Syria and Jordan have also arrived in recent years, extending a tradition that dates back more than a century, when Arab immigration began in different parts of South America.

The Middle Eastern community here is big enough to support the Mezquita Ibrahim bin Abdul-Aziz Ibrahim, one of South America’s largest mosques, across the street from the sprawling Mission of Saint Charbel for Lebanese Maronite Christians.

While economic reasons are paramount, ideology plays a small role in attracting some immigrants here.

Some from the Middle East find affinities with Venezuela’s contentious policies toward Israel. Those same policies, combined with fears over violence and economic shifts, have weighed on the decisions by thousands of Jews here to emigrate.

So many Venezuelans have left that newspapers here call them “balseros del aire” - or rafters of the air - a riff on the Cuban term “balsero,” which refers to those who fled on makeshift rafts.

But as the name makes clear, the Venezuelans have the means to leave by airplane.

As with Venezuela’s immigrants, precise figures of emigrants are unavailable, but Iván de la Vega, a sociologist here who studies the issue, puts their number in the hundreds of thousands, enough to form enclaves in South Florida and Houston, in the United States, and in Alberta, the oil-rich Canadian province.


In a twist, many of the emigrants are the children or grandchildren of immigrants who came to Venezuela during its long postwar boom. Spain and Portugal, which offer citizenship to descendants of immigrants, have absorbed many Venezuelans.

Neighbors like Panama and Colombia, seeking to lure Venezuelan business owners, are welcoming others. “It was not an easy decision, but it was necessary,” said Esther Bermúdez, who recently moved to Montreal.

She owns Mequieroir.com, a Web site that offers services for Venezuelans planning to emigrate (its name means “I want to leave”), and she said visits to the site climbed nearly 50 percent this year, to an average of 80,000 a day.

Immigration scholars say Venezuela’s experience - of losing educated residents while attracting new workers - is similar to what happened in Argentina a decade ago during its economic crisis.

As some skilled professionals left the country, Argentina remained a magnet for laborers from Bolivia and Paraguay. The new arrivals are not immune to Venezuela’s problems, confronting issues like restrictions on sending money abroad and rampant crime.

Assailants near Caracas killed one Chinese laborer in September by dousing him with gasoline and burning him alive, according to local news reports. In separate cases in October, kidnappers abducted two Chinese women - one 19, the other 38 - on the same day.

Still, that has not deterred those who follow their star to Venezuela’s chaotic streets.

“This is a crazy place, not for families but fine for a single man like me,” said Subash Chand, 25, who moved here a year ago from the northern state of Haryana, in India, to manage a shop in downtown Caracas.

“There’s danger and excitement here every day,” Mr. Chand said. “Within that mixture, there’s money,” he told the New York Times.

David Caploe PhD
Chief Political Economist
Economy Watch

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Leave a comment
  • Anonymous on February 07 2011 said:
    "Danger and excitement every day," a gentleman said in this very informative article. Sounds right to me. When I got off the plane at the IAEE International Conference in Caracas, before I left the exit hall, and maybe before clearing customs, a gentleman accosted myself and a dozen other energy travelers with a suggestion that he would be honored to introduce us to some ladies.
  • Anonymous on February 07 2011 said:
    A very fascinating look at the new Venezuela! The complex immigration picture is particularly intriguing. Immigrants pouring into Venezuela, some for opportunity and some for welfare benefits -- at the same time that a mass of middle-class emigrants are leaving due to high crime and cruel government caprice.Chavez will not be able to keep the lid on forever. Venezuela's oil can only support so many freeloaders, and the opportunity-seeking newcomers will become less tolerant of Chavez' idiocy as they grow more successful and influential.Chavez and Obama have similar plans to "stack the polling places" with a permanent Idiocracy. Not likely to work.

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