Venezuela is a small country lying in the northern coast of South America. Together with the bordering Colombia, Brazil and Guyana, Venezuela constitutes Latin America. It attained its independence in 1821 and became a republic in 1830. Its first democratically elected president was Romulo Gallegos, elected in 1947. Venezuela’s economy has for a long time largely depended on natural resources with oil topping the list. It has rich oil reserves and ranks the fifth among oil producing and exporting countries (Alvarez & Hanson, 2009). Other than oil, Venezuela has large deposits of gold and diamond and all these together, unarguably, make it a rich nation by any standards. Despite the magnitude of wealth possessed by this nation, a good number of the citizens do not benefit from this wealth. This attributes largely to massive corruption in the government, greed, blackmail, pressure and an embezzlement of funds from the public coffers. Mismanagement has been the order of the day, but all started to change with the election of President Hugo Chavez who has been on the frontline in pressing and advocating for efficiency and transparency in government (Wallis & Parraga, (2012). The oil reserves carry on their shoulders the economy of Venezuela and directly benefit other countries such as the United States of America, which is a valuable trading partner to Venezuela.
The importance of oil, oil products and related industries on the economy of Venezuela cannot be underestimated. Oil has propelled Venezuela to an upper-middle income country over the past half of the century. For a considerable time, the government has controlled the country's natural resources. Through the oil industry the government has been able to raise the number of employed citizens immensely (Wilpert, 2003). Out of the employed population, up to ninety percent works in the government and a substantial number of this percentage, in the oil industry. Over the years, Venezuelans have grown to be less dependent on agriculture but rather, have embraced industrialization and the oil industry. This has had both positive and negative impacts, the most notable negative impact being that food production took a tremendous spiral forcing the country to resort to importing food products to feed its citizens. The importance of oil to Venezuela, however, far outweighs its negative impact on the economy (Wilpert, 2003). For example, there was the stability of prices for a long time in the country with inflation remaining at an all time low at around three percent in the late seventies and early eighties. The gross domestic product of the country was also on an upward trend with oil being the main contributor.
The oil wealth in Venezuela has not been to the benefit of the mother country only. Other nation to have enjoyed benefits accruing from this endowment is the United States of America (United States. General Accounting Office, 1991). For some time now, diplomatic relations between the United States and Venezuela have been hanging on the balance. Some years back, these two countries shared a lot in terms of trade, investment and cooperation. However, with the election of President Hugo Chavez, a socialist, the relations changed until recently when the two governments agreed to work together once again. This has not been easy though, with trade of accusations and counter-accusations. In short, the relationship still has suspicion and mistrust. The pathetic aura that surrounds the diplomatic relations, however, has had little impact on the economy of both countries (Wallis & Parraga, 2012). For instance, for a long time, the United States has been the number one trading partner of Venezuela as regards imports and exports. It is only until recently that the Venezuelan government has tried to change the situation by exporting most of its oil to China thus, reducing the over dependence on the United States.
Bilateral trade between the two countries is picking up compared to the period when the two governments were at loggerheads. This has been beneficial to both the government of Venezuela and the government of the United States. With the onslaught of the terror war, the war in Iraq and the sour relation between the United States and the Middle East countries (countries that together form the largest oil producing and exporting body), Venezuelan oil has been crucial and essential for United States’ economy. It has been the single largest importer of Venezuelan oil even with plans underway to reduce this dependence (Wallis & Parraga, 2012). The high demand for oil in the United States dues to the need to keep the multitude of industries that form the foundation of the American economy running. The same industries create employment opportunities and contribute to the country’s gross domestic product (GDP). Many homes use oil and oil products too. Therefore, oil is the backbone of industrial progress in Venezuela. Industrialization is what has made the United States the world’s biggest economy (Carrillo & West, 2004).
In conclusion, Venezuelans know quite well the importance of oil to the industrial progress of a nation. Therefore, there is no surprise that on numerous occasions Venezuelans have dangled the carrot in the name of oil in a bid to have their demands met. For this reason, oil has been the subject of conflict between the two nations with the Venezuelan government asserting that they do not need the United States to remain on the oil business. On the other hand, the United States is boastfully riding on the fact that it is the only nation in possession of the sophisticated equipment required for refining oil from Venezuela, considered heavy crude oil. Nevertheless, the trade agreement between the two countries seems to be lucrative for both governments, and both know better than to stop trading because of diplomatic disagreements. The positive impact that oil has had on both the Venezuelan and the United States’ economy is massive, despite the wrangling that has frequently marred the relationship between the two nations.