Nova Southeastern University
H. Wayne Huizenga School
of Business & Entrepreneurship
Assignment for Course:
INB 5827 – Import/Export Principles & Practices
Submitted to:
Belay Seyoum
Submitted by:
Andrea Cajete
N01558128
[email protected]
(718)3744420
Date of Submission: May 30th, 2014.
Title of Assignment: U.S. TRADE WITH VENEZUELA
CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.
Student's Signature: ______Andrea Cajete_________
Instructor's Grade on Assignment:
Instructor's Comments:
Table of Contents
Introduction. ………………………………………………………………….1
History…………………………….…………………………….…………….2
Present…………………………….…………………………….…………….3
Future…………………………….……………………………………………6
Conclusion…………………………….………………………………………8
Bibliography…………………………….…………………………………….9
I. Introduction
The United States of America and Venezuela have enjoyed good diplomatic relations and prosperous and abundant trade during several decades.
always enjoyed maintaining good relations with Venezuela, trade and investment relationships have been significant and abundant over past decades. However, tensions began to appear after former president Hugo Chavez took power in 1999, and increased after he accused the United States of conspiracy against his government by supporting a failed coup d'état. Since then, Venezuela and his current President have accused the U.S. government several other times of plotting an invasion, of espionage and sabotage. In the recent years Venezuela has ordered several America diplomats of leaving the country and has closed consulates in a few American cities.
Many American spokespersons have also "criticized Venezuelan officials for their involvement in the drug trade, skewering the country in annual drug reports and freezing the assets of at least seven current or former Venezuelan officials" (O'Neil, 2013),
Even though economic relations have been damaged by these tensions, the United States has remained Venezuela's most essential trading partner for oil as well as other exports.
II. History
The United Stated established diplomatic relations with Venezuela in 1835 (U.S. Department of State). In January of 1986 the U.S. was exporting $219.3 million dollars in goods to Venezuela and importing as much as $664.7 million from Venezuela. In January of 1993 it exported $407 million goods and imported $686.2, in January of 1999 it exported $436.3 million goods and imported $643.6 million. So far, economic relations were blooming and the U.S. maintained a trade deficit of $5,981.1 million of trade in goods with Venezuela (Census.gov).
After new socialist president Hugo Chavez was elected in 1999, economic relations continued to increase.
In January of 2003, just after Venezuela's president Hugo Chavez accused President George W. Bush of supporting what had been a failed coup d'état against his government, exports of goods to Venezuela dropped significantly that month compared to previous years to $120.8 million and imports to $399.5 million (Census.gov).
After that year, despite the edgy diplomatic relations and despite a currency exchange control (CADIVI) imposed in February of 2003, economic trade increased against all odds. In the year 2005, Venezuela's total imports of goods from the U.S. totaled $6,420, while the U.S. imported $33,978.1 million goods from Venezuela (Census.gov).
In 2011, the Secretary of State decided to impose sanctions on Venezuela's state oil company (PDVSA) for delivering three cargoes OF gasoline to Iran. "The sanctions prohibit PDVSA from competing for U.S. Government contracts, securing financing from the Export-Import Bank of the United States, and obtaining export licenses (U.S. department of State).
III. Present
Most of the exports the U.S. makes to Venezuela include machinery, organic chemicals, agricultural products, optical and medical instruments, autos and auto parts. Imports from Venezuela are dominated primarily by oil imports, as the country is one of the top five suppliers of oil to the United States. "U.S. foreign direct investment in Venezuela is concentrated largely in the petroleum, manufacturing, and finance sectors" (Department of State)
The USTR estimates that U.S. goods and services trade with Venezuela totaled $64 billion in 2012 (exports $24 billion and imports $40 billion). The U.S. has constantly maintained a trade deficit with Venezuela, in the year 2012 it totaled approximately $21 billion and last year it came up to almost $19 billion (Census.gov), which accounted for 2.7% of the overall U.S. trade deficit (USTR). The United States is Venezuela's largest importer representing 24.04% of its imports and largest exporting destination representing 27.13% of its exports (Observatory).
"Venezuela was the United States' 24th largest goods export market in 2013" (USTR). In this year, the U.S. mostly exported mineral fuel, machinery, organic chemicals, electrical machinery and cereals. In terms of agricultural products, total exports amounted to $1.5 billion including categories such as soybean meal, corn, and wheat. Exports of private commercial services were $6.6 billion in 2012, whish shows and increase of 18.3% or $1 billion from the previous year (USRT).
Also in the year 2013, Venezuela represented the USA's 13th largest supplier of goods totaling $32 billion of imports from this country. Imports from Venezuela accounted for %1.4 of overall U.S. imports in this year (USTR). The largest imports came from mineral fuel and oil (crude), organic chemicals, iron and steel, precious stones and inorganic chemicals. Agricultural imports came up to $9 million in 2013, and private commercial services totaled $891 million in 2012, showing an increase of 5.3% from the previous year and a 102% increase from the year 2002 (USTR). Travel services accounted for most of the service imports.
However, imports from Venezuela dropped 17.4% from $38,723.8 M in 2012 to $31,997.4 M in 2013, and exports to Venezuela 24.5% from $17,516.2 million to $13,220.1, respectively (Census.gov). Its oil exports to USA have lost ground, standing at $41.9 billion in 2011, $37.3 billion in 2012, and $30.8 billion in 2013 (El Universal, 2014).
This has happened in part due to the death of former president Hugo Chavez who stayed in power for 14 years, and his succession by his, also socialist, protégé Nicolas Maduro. Since president Maduro took power, Venezuela's economy has been on a steady downward path, causing trade to decrease with the U.S. and also with other nations.
U.S. foreign direct investment in Venezuela is mainly done on the manufacturing sector and he last available data for U.S FDI is from 2012, which amounted to $15 billion showing an increase of 26.6% from the previous year. Venezuela's FDI in the U.S. that same year was $4.6 billion.
It is important to mention that Venezuela has lost a great number of US companies over the years who have chosen to fled the country due to fear of being seized by the government, due to stricter state controls, price controls, higher taxes, difficult repatriation of profits and overall economic instability.
IV. Future
As the United States-Venezuela bilateral trade continues to deteriorate many speculate as to what can happen in the future. Hugo Chavez's death left the country among a lot of uncertainty, and important questions were raised by the U.S. regarding whether the Chavez's bilateral foreign policy approach would continue or not after his passing.
His successor Nicolas Maduro, who accused the U.S. of being the culprit of Chavez's death and causing his cancer, has already proven that just because Chavez is gone, it doesn't mean the tensions in bilateral relations will ease (O'Neil), and even though many thought that the anti-US rhetoric would start to fade after Chavez was gone, this has not been the case.
Maduro's administration has been faced with growing economical and fiscal problems. In the past year he has been in power, the Venezuelan Bolivar has suffered two devaluations: from BsF. 4,3/$1to BsF. 6,3/$1, and from BsF.6,3/$1 to BsF. 51,86/$1. This past devaluation represented a 88% depreciation in regards to the first devaluation. This represents a big impact on the still many US companies who currently do business in Venezuela providing not just goods but important links with the United States. Two consecutive devaluations of the national currency diminish their profits significantly.
In February of this year riots against the government have been happening all over Venezuela. During this time, the government has violently repressed and violated the human rights of many Venezuelans and foreigners working as press. Because of pressure from Venezuelans in the United States and from all over the world, the US has just passed a legislation to impose sanctions on Venezuelan officials "responsible for repression, including a ban on traveling to the United States and a freeze on assets" in the US (Washington Post, 2014).
The response of Maduro has been the threat of shutting down diplomatic missions in the United States, which include all embassies and consulates. However, in response to President's Obama opposition to the bill, he has named a new diplomat in Washington and has stated "that is an extreme point to avoid […] and that he wants the best relations with the government of the United States, based on respect and permanent communications" (Rueda, 2014).
Venezuela and the US represent very important partners to each other, but the future of economic and diplomatic relations between the two countries remains uncertain for all, especially in this time of turmoil in Venezuela.
V. Conclusion
Although Venezuela and the US have enjoyed many years of amicable diplomatic and economic relations, the government of Venezuela's past year's inclination toward authoritarianism has led to a series of events that have jeopardized these relations.
Expropriations, currency exchange controls, and political and economical instability have pushed away a lot of Venezuela's opportunities with the US. In spite of this, the United States has remained Venezuela's most important trading partner all these years, and Venezuela has managed to remain an important one for the US as well.
Trading between the nations continues to happen, mainly in the categories of mineral fuel (oil and crude), organic chemicals and agricultural products.
Recently, diplomatic relations have taken a sour turn as the US passed a bill to impose sanctions on Venezuelan officials. The current political events in Venezuela will determine the future of all relations, economical and diplomatic, between the countries.
Bibliography
Associated Press (2014). South America rejects US sanctions on Venezuela. Washington Post. Retrieved from http://www.washingtonpost.com/world/the_americas/south-america-rejects-us-sanctions-on-venezuela/2014/05/24/ba6eadba-e364-11e3-9442-54189bf1a809_story.html
Cabrera, J. (2014). Venezuela-US bilateral trade down 10.9% in 2014. El Universal. Retrieved from http://www.eluniversal.com/economia/140207/venezuela-us-bilateral-trade-down-109-in-2013 Venezuela-US bilateral trade down 10.9% in 2013
O'Neil S. (2013). Viewpoint: New era for US-Venezuela relations? BBC News. Retrieved from http://www.bbc.com/news/world-us-canada-21680885
Observatory of Economic Complexity. Venezuela. Retrieved from http://atlas.media.mit.edu/profile/country/ven/
Office of the United States Trade Representative website: Venezuela. Retrieved from http://www.ustr.gov/countries-regions/americas/venezuela
Rueda, J. (2014). Venezuelan Leader Praises US Rejection of Sanctions. ABC News. Retrieved from http://abcnews.go.com/International/wireStory/venezuela-leader-praises-us-rejection-sanctions-23929485
United States Census Bureau website: Trade in Goods with Venezuela (2014). Retrieved from: http://www.census.gov/foreign-trade/balance/c3070.html#1985
U.S. Department of State website: U.S. Relations With Venezuela. Fact Sheet (2003). Retrieved from: http://www.state.gov/r/pa/ei/bgn/35766.htm
