1. Venezuela
Economic Freedom Score
50
25 75
Least Most
free 0 100 free
World Rank: 174 Regional Rank: 28 36.1
V enezuela’sthe 174th freest in theyear, reflectingmakinghas
economy
economic freedom score is 36.1,
decreased by 2.0 points since last
2013 Index. Its score
its
deteriora-
Freedom Trend
41
tions in business freedom, labor freedom, and freedom from
40
corruption and an explosive increase in government spending
in the run-up to 2012 elections. Venezuela is ranked 28th out
39
of 29 countries in the South and Central America/Caribbean
region, and its overall score has recorded one of the 10 largest
38
declines in the 2013 Index.
The foundations of economic freedom in Venezuela continue 37
to deteriorate, severely hampered by structural and institu-
tional problems. With the judicial system increasingly vulner- 36
able to political interference, corruption is prevalent, and the
35
rule of law is weak across the country.
2009 2010 2011 2012 2013
The state’s presence in economic activity has increased
through nationalization of industry. Heavily dependent on
the oil sector, which accounts for 95 percent of exports, the Country Comparisons
economy suffers from a lack of dynamism. Inefficient and
non-transparent regulatory and judicial frameworks obstruct Country 36.1
prospects for long-term development. The lack of access to
financing precludes entrepreneurial growth, and the invest- World
Average 59.6
ment regime lacks transparency and remains under tight state
control. Regional
59.4
Average
Background: In 1999, Hugo Chávez won the presidency,
vanquished the traditional party system, and launched his Free
Economies 84.5
Bolivarian Revolution aimed at “Socialism for the 21st Cen-
0 20 40 60 80 100
tury.” Chávez styles himself the leader of Latin America’s
anti–free market forces and has made alliances with China,
Cuba, Russia, and rogue states like Iran. He has persecuted
his political adversaries and critics, restricted media freedom, Quick Facts
undermined the rule of law and property rights, militarized Population: 29.8 million
the government, and tried to destabilize neighboring Colom- GDP (PPP): $374.1 billion
bia. The national assembly, which he controls, passed a 2009 4.2% growth in 2011
constitutional amendment allowing him to seek yet another 5-year compound annual growth 2.6%
presidential term, and he won re-election in October 2012. $12,568 per capita
Venezuela has Latin America’s highest inflation rate (cur- Unemployment: 8.2%
rently nearly 30 percent); chronic electricity, food, and hous- Inflation (CPI): 26.1%
ing shortages; and skyrocketing crime rates. FDI Inflow: $5.3 billion
Public Debt: 45.5% of GDP
How Do We Measure Economic Freedom?
See page 477 for an explanation of the methodology 2011 data unless otherwise noted.
or visit the Index Web site at heritage.org/index. Data compiled as of September 2012.
459

2. VENEZUELA (continued)
THE TEN ECONOMIC FREEDOMS
Country World Average Rank
RULE OF LAW Property Rights 5.0 175th
Freedom from Corruption 19.0 169th
0 20 40 60 80 100
The judiciary is dysfunctional and completely controlled by the executive. Politically inconve-
nient contracts are abrogated, and the legal system discriminates against or in favor of investors
from certain foreign countries. The government expropriates land and other private holdings
across the economy arbitrarily and without compensation. Corruption, exacerbated by crony-
ism and nepotism, is rampant at all level of government.
LIMITED Fiscal Freedom 75.6 109th
GOVERNMENT Government Spending 50.6 125th
0 20 40 60 80 100
The top income and corporate tax rates are 34 percent. Other taxes include a value-added tax
(VAT). The overall tax burden is estimated to equal 11.3 percent of total domestic income. Bud-
get deficits have fluctuated depending on changes in the price of oil. Government spending has
risen to 40.6 percent of GDP, spurred in part by oil profits, and public debt has risen to over 45
percent of total domestic output.
REGULATORY Business Freedom 45.6 151st
EFFICIENCY Labor Freedom 34.5 166th
Monetary Freedom 47.3 174th
0 20 40 60 80 100
Regulatory encroachment on private businesses continues to increase, with heavy govern-
ment control and intervention discouraging entrepreneurship. There is little transparency in
decision-making, and most contracts are awarded without competition. There is no minimum
capital requirement for establishing a business, but the process takes over 100 days. The labor
market remains controlled by the state. Inflation continues to be extremely high.
OPEN Trade Freedom 58.8 160th
MARKETS Investment Freedom 5.0 169th
Financial Freedom 20.0 159th
0 20 40 60 80 100
The trade-weighted average tariff rate is relatively high at 10.6 percent, and extensive non-
tariff barriers further distort the free flow of goods and services. Private investment remains
hampered by state interference in the economy, and hostility to foreign investment, coupled
with threats of expropriation, persists. The financial sector is tightly controlled by the state,
and credit is often allocated on the basis of political expediency.
Score Changes
LIMITED REGULATORY
RULE OF LAW GOVERNMENT EFFICIENCY OPEN MARKETS
Property Rights 0 Fiscal Freedom +0.8 Business Freedom –1.7 Trade Freedom 0
Freedom from –1.0 Government –16.7 Labor Freedom –1.5 Investment Freedom 0
Corruption Spending Monetary Freedom +0.9 Financial Freedom 0
460 2013 Index of Economic Freedom