The Age Structure of the Population in Venezuela

The statistics indicates the age structure in Venezuela from 2007 to 2017. As we can see from the graph, average of 27% people is from the age of 0-14 and an average of 65% are from the age of 15-65 and approximately 5.50% are of 65 onwards ('Venezuela - Age structure 2017 | Statistic', 2019). There is a situation of hyperinflation and unemployment in the Venezuela due to economic crisis. According to international monetary fund Venezuela is in its fifth year of recession and the unemployment rate fluctuate from 2007 to 2017 which was approximately 7% in between those years ('Venezuela - Unemployment rate 2017 | Statistic', 2019). Because of the high Inflation rate between these years purchasing power parity is also reduced by year.

As we can see from the graph the purchasing power of country people is reduced from 2012. Purchasing power was at 0.54% in 2012 but with the time it starts decreasing. Till 2015 it was approx. 0.50% which was good as compared to present but from 2017 to 2019 purchasing power was almost half of it. It is expected that it will be at static rate from 2020 to 2022 but it will have reduced to 0.19% by 2022. ('Venezuela - share in global gross domestic product (GDP) adjusted for Purchasing Power Parity (PPP) 2022 | Statistic', 2019). We can conclude from these observations that purchasing power is very low due to the economic crisis in the country. In addition of this, unemployment, inflation also impact the purchasing power parity of the consumers.

To start trade with any country one should research about the country’s economic and political situation, how they will pay and in which currency payment terms and how they will resolve the dispute if they face any issue in the future. In Venezuela, there is a lack of transparency, exchange controls, bureaucracy, intellectual property rights are also act as a trade barrier when it comes to the rights of employees. In addition to these there are shortages in the water and electricity supply. High crime rates, inflation, currency devaluation, port inefficiency, corruption make a risky move to enter in the Venezuelan market. To overcome these risk, one country should have an in depth knowledge of the market and how to tackle these risks. Most effective market entry approach can be through distributor or joint venture. The reason behind this is that distributor has the market knowledge and agent can help any country in entering the Venezuelan market and how to get profit in the trading. ('Venezuela - Market Challenges | export.gov', 2019)

On the other side, joint venture can be the prominent choice because one country or company can look for another country’s company which is already in the profit and then the can do joint venture with them. This will protect them from losing all of their money as profits and losses are divided into both companies. With the help of joint venture company can access the market and get experience on how to do business in the Venezuelan market. After this, they can even take over the whole business or they can start the new business. ('Venezuela - Market Challenges | export.gov', 2019) Apart from this, it all depends on the market. In Venezuela most of the big firms did foreign direct investment or greenfield investment but after economic crisis most of these multinational companies went back to their countries.

In Venezuela there are so many natural resources and oil is the strongest part of the export. Although Venezuela has the high market size and they are rich in their natural resources but the number of investments in recent years were very less due to economic instability. Apart from this, port inefficiencies, unstable business environment preventing investment in Venezuela. As you can see in the table the foreign direct investment figures were reduced in the year 2017. ('Foreign investment in Venezuela - Santandertrade.com', 2019)

Venezuela is on its worst economic situation but there are still some sectors that can help the Venezuelan economy. There are oil reserves which is the largest around the globe and it is the biggest part of their export. Apart from this Venezuela privatize the ports and the airports which can attract the foreign investors. Also, they can give opportunity to foreign investors in agriculture industry including coffee, rice, cocoa, fruits, alcohol, and tobacco industries. In addition to these, there are offering investment in automobile sector and in the production of audiovisuals. ('Foreign investment in Venezuela - Santandertrade.com', 2019)

Big international firms including general motors, coca cola, chevron, phillips66, ford, Procter and gamble started business in Venezuela. Spain did the foreign direct investment for the companies including Repsol, Mapfre, BBVA. Spain’s investment of 5 billion euros are at risk as they have invested at a large scale. Main sectors included in the investment are oil and gas, food, hotel, telecom and in insurance companies ('When Should Multinationals Move Back into Venezuela?', 2019). Oil is the biggest part of Venezuela export. Chevron is the leading private company that did partnership with PDVSA for the processes of the production (Chevron Policy, 2019). As we can see that most of the companies are backing out from Venezuela because of the economic crisis but we can see that when they entered Venezuela by FDI or by partnership.

Venezuela is in its bad times and it is very hard for country people to spend money on basic things. They need 5,000,000 bolivars just to buy a kilogram of tomatoes, 14,600,000 bolivars for the chicken which is very expensive ('These pictures show just how much cash Venezuelans needed to buy even basic goods', 2019). We can conclude from this, if they have to pay this much for basic needs then the consumer spending on clothes, electronic gadgets, cars, housing will be even more less. As given above the consumer spending is reduced to 0.19% which is very less.