Why must global investors keep Venezuela on their radar?
Place in the world ranking of proven oil reserves.
million kW of installed power generating capacity.
of the population is urban
Place in Latinamerican ranking of gas reserves
average annual GDP growth 1950-1979
INFRASTUCTURE IN PLACE
Unlike other frontier markets that have a GDP per capita in the range where the Venezuelan one is today after years of consecutive economic contraction, Venezuela already has an in-built infrastructure, an industrial and technological know-how and multi-billion dollar private savings (abroad) which no other country in zthe frontier market category has.
This means that Venezuela has the potential to grow its economy at much faster rates than that of most countries in the world and to generate extraordinary returns for investors.
WORLD’S LARGEST PETROLEUM RESERVES
Venezuela has the world's largest oil reserves, surpassing countries such as Saudi Arabia, and having more than 100 times the amount of proven oil reserves of regional producers such as Colombia. Global oil companies are familiar with Venezuelan geology. The location of the oil reserves is clearly defined; most are onshore and close to coastal ports or pipeline networks. Therefore, geological risk in Venezuela is minimum and oil production and export should be among the lowest in the hemisphere.
LOCATION, LOCATION, LOCATION
Venezuela is located in the Western hemisphere, a geography free of international conflicts. Its location at the northern tip of South America allows for shorter shipping times to North America’s East Coast and Europe than from other South American countries. A container ship takes approximately 4 days from Venezuela’s main port (Puerto Cabello) to Miami. It would only take 7 days to Houston or New York, and only 15 days to Antwerp, Belgium. Venezuela is also a few day’s sail from the Panama Canal.
During the past eighty years, Venezuela built a transport infrastructure, which despite the complex economic circumstances of the recent past affecting its maintenance, it still remains comparable to that of other regional peers who have invested heavily in the last decade. For instance, according to the latest available figures from the CIA World Factbook (2017), Venezuela has 127 airports with paved runways, including 6 airports with runways longer than 3,047 meters.
Peru, a comparable country in terms of population size, only has 59 airports with paved runways, and 5 airports with runways longer than 3,047 meters. Neighboring Colombia, a country with a population more than one and a half times larger than that of Venezuela’s, has 121 airports with paved runaways, and only 2 airports with runways longer than 3,047 meters.
HIGHEST SKILLED DIASPORA
Substantial oil revenues over the decades allowed for several tens of thousands of Venezuelans to attend higher education programs around the world.
Starting with the Fundayacucho scholarship program in the 1970s, and continuing with the CADIVI funds for study programs during the last decade, Venezuela funded the education of one of Latin America’s most globalized and highly qualified workforces.
The spectrum of areas of specialization of these individuals ranges from petroleum and high-tech engineers, to medical doctors and scholars. Just to provide two examples of the diaspora’s technical quality, MIT’s current president and Harvard’s Center for International Development’s director are Venezuelans who completed graduate studies funded by Fundayacucho and currently live abroad.
Although a significant percentage of these globally trained professionals now lives abroad, another part remains in Venezuela, and the prospect of an economic turnaround could trigger the partial return of one of the most skilled diasporas ever seen.
INSTALLED POWER GENERATION CAPACITY
Throughout the 20th century and the first decade of the 21st decade, Venezuela invested in a much larger power generation infrastructure than its comparable regional peers. It all began in 1897 when Venezuelan entrepreneurs built Latin America’s first hydroelectric plant near Caracas.
The accumulated power generation, transmission and distribution infrastructure continued throughout the country funded with oil revenues.
Nowadays, Venezuela has a much higher installed power capacity than that of its regional peers. According to the latest available figures from the CIA World Factbook, Venezuela has an installed power capacity of 31.0 million kW.
This compares clearly and favorably with that of most regional peers, such as that of Colombia -much more populated -who has an installed capacity of 16.9 million kW, and Peru’s 14.7 million kW.
Whilst Venezuela shall have to recover certain power assets which have deteriorated over the last decade and which have affected current generation, the infrastructure is already in place. This means that the amount of capital required for this important installed power generation to fully function is limited to some CapEx maintenance and repair.
CULTURAL MELTING POT
Venezuela has a cosmopolitan culture which has historically been open to foreign cultures since colonial times.
Given its proximity to the Netherlands Antilles, illegal trading during the 18th century allowed colonial inhabitants of today’s Venezuela to be exposed to liberal ideas in a way not feasible for inhabitants of other parts of today’s Latin America.
Venezuela's oil prosperity in the early 20th century encouraged one of the largest inward migrations in the history of Latin America, in terms of the size of the host population.
Such flow of immigrants increased after World War II and made Venezuela a cultural melting pot which mixed Italians, Portuguese, Spaniards, Germans, Lebanese, Syrians, as well as people from other European countries, the Middle East and Latin America.
The rise of Venezuela's economic fortunes throughout the 20th century accentuated Venezuela's interrelationship with the world, as Venezuelans were able to study abroad by the thousands and travel the world.
1ST LARGEST GAS RESERVES
In addition to having the largest oil reserves in the world, Venezuela also ranks high in terms of other fossil fuels. According to the OPEC, Venezuela has 5,705 billion cubic meters of natural gas reserves, representing the largest reserves in Latin America and the 8th largest in the world. Given the availability of natural gas liquefaction units in neighboring Trinidad and Tobago, companies extracting gas from Venezuela's eastern region could save the investments needed to export LNG.
Significant Venezuelan Private Savings
Venezuela grew during the 20th century to become Latin America’s richest country. During several decades Venezuela had export revenues that were far greater than those of several peers in the region. Most of those funds were invested in infrastructure, in education (both in Venezuelan universities and abroad through the region’s largest foreign post-graduate scholarship program), and spent in the local economy.
apital account deficits, particularly since the 1980s, were driven mainly by locals who preferred to save in hard currency abroad. The amount of Venezuelan private savings abroad has been estimated by various sources to be in the range of US$425 to US$500 billion, which is several times larger than the foreign savings of locals in regional peers such as Peru and Colombia.
These savings represents a key potential source of capital that could complement and leverage the effect of future foreign investments, as some of these foreign savings could eventually return as conditions improve in Venezuela. The magnitude of this fund is a potential advantage for Venezuela, which no other comparable country has.
HIGH URBANIZATION RATES
Venezuela has one of the highest levels of urban development in Latin America (above 85%). Venezuela's urban population is concentrated in cities with at least 500 thousand inhabitants, with 10 cities of such size. By comparison, Peru has only 4 cities of that size (Lima, Arequipa, Trujillo and Chiclayo), Argentina has 5, and Chile has 3. Peers such as Peru and Colombia have an urban population below 75%. This level of urban development and concentration in larger cities has advantages for companies interested in penetrating as much of the population as possible, while minimizing efforts and investments.