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Updated: Aug 27th, 2008 - 21:03:14 |
Despite political turmoil, Venezuela’s economy has almost fully recovered from the 2002-2003 period, registering real GDP growth of 16.8 percent in 2004. High world oil prices have helped fuel Venezuela’s recovery, as the petroleum industry is the mainstay of the country’s economy. The oil sector accounts for more than three-quarters of total Venezuelan export revenues, about half of total government revenues, and about one-third of GDP. Continuing high world oil prices will likely continue to drive Venezuela’s economy, with Global Insight forecasting that the country’s GDP will grow by 6.0 percent in 2005 and 4.1 in 2006.
After a period of modest economic growth in 2000 and 2001, the Venezuelan economy entered into recession in 2002. Political conflict, particularly a nationwide strike beginning early in December 2002, further compounded the deteriorating economic situation. On December 2, 2002, opponents of President Chavez organized a nationwide strike to call for an early referendum on the President's rule. Employees from Venezuela’s state-owned oil company Petroleos de Venezuela S.A. (PdVSA) also joined the strike, shutting down a large portion of the country's oil industry and drastically reducing the production of Venezuelan oil and its delivery to internal and external markets. President Chavez declared the strikers' demands unconstitutional and dismissed nearly half of PdVSA's workforce. In 2003, the strike, along with the implementation of currency controls, severely impacted Venezuela’s economy, with real gross domestic product (GDP) contracting 29 percent in the first quarter, and 9.2 percent for the entire year, after already contracting 8.9 percent in 2002.
In early 2004, Venezuela's opposition movement pushed for a constitutional referendum on Chavez's presidency. On June 2, 2004, Venezuela's National Electoral Council (CNE) announced that the opposition had collected enough signatures to trigger a recall vote, scheduled for August 15, 2004. However, Chavez won the vote by a comfortable margin, and his political party went on to win local elections in October 2004.
