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 The University of Chicago Graduate School of Business The Politics Economics of Development BUS 487-01 Final Project Kavilash Chawla Hilarie Deverell Anita Kuba Veda Pai-Panandiker Mijo Vodopic April 24, 2000 COUNTRY REPORT VENEZUELA Acknowledgements We would like to extend our heartfelt gratitude to the following corporate sponsors; Deutsche Bank, Diamond Technology Partners, CNA, and Pfizer, for their generous gifts and support in helping to bring these projects to fruition. Table of Contents I. Executive Summary 3 II. Venezuela: Historical Overview 3 III. Oil 4 IV. Constitution 6 V. Hugo Chavez 9 VI. Culture 12 VII. Venezuela’ Best and Worst Case Scenarios 13 VIII. Conclusion 14 IX. Contacts and Addresses 15 X. References 19  Executive Summary Investment prospects in Venezuela are bleak for the next 12 to 36 months. Political and economic uncertainty grips the country due to several factors. First, President Hugo Chavez has demonstrated a propensity towards authoritarian rule while espousing a populist message. Second, the government-run oil giant, PDVSA, suffers from mismanagement and increased oversight from the present Chavez administration. Third, the newly adopted, expansive constitution requires considerable interpretation and concentrates significant power in the executive branch. Finally, the cultural mindset of Venezuelan’s is slow to change. Oil’s mystique of providing substantial rental income for everyone’s needs is beginning to fade, however not rapidly enough. Our current recommendation to not invest in Venezuela, however, may alter if the upcoming May elections result in an Arias led government or if a sizable, credible opposition emerges to curb Chavez and his “peaceful revolution.” Historical Overview From 1821, when it achieved independence from Spain, to 1958, when General Marcos Perez Jimenez was overthrown, Venezuela was characterized by politi