459

How Do We Measure Economic Freedom? See page 477 for an explanation of the methodology

or visit the Index Web site at heritage.org/index.2011 data unless otherwise noted.Data compiled as of September 2012.

Quick Factspopulation: 29.8 milliongdp (ppp): $374.1 billion4.2% growth in 20115-year compound annual growth 2.6%$12,568 per capitaunemployment: 8.2%inflation (cpi): 26.1%fdi inflow: $5.3 billionpublic debt: 45.5% of GDP

Economic Freedom Score

Least Mostfree free

5025 75

0 100

0 20 40 60 80 100

Country Comparisons

Freedom Trend

Country

WorldAverage

RegionalAverage

FreeEconomies

2009 2010 2011 20132012

35

36

37

38

39

40

41

36.1

59.6

59.4

84.5

36.1

venezuela’s economic freedom score is 36.1, making its economy the 174th freest in the 2013 Index. Its score has

decreased by 2.0 points since last year, reflecting deteriora-tions in business freedom, labor freedom, and freedom from corruption and an explosive increase in government spending in the run-up to 2012 elections. Venezuela is ranked 28th out of 29 countries in the South and Central America/Caribbean region, and its overall score has recorded one of the 10 largest declines in the 2013 Index.

The foundations of economic freedom in Venezuela continue to deteriorate, severely hampered by structural and institu-tional problems. With the judicial system increasingly vulner-able to political interference, corruption is prevalent, and the rule of law is weak across the country.

The state’s presence in economic activity has increased through nationalization of industry. Heavily dependent on the oil sector, which accounts for 95 percent of exports, the economy suffers from a lack of dynamism. Inefficient and non-transparent regulatory and judicial frameworks obstruct prospects for long-term development. The lack of access to financing precludes entrepreneurial growth, and the invest-ment regime lacks transparency and remains under tight state control.

backgRound: In 1999, Hugo Chávez won the presidency, vanquished the traditional party system, and launched his Bolivarian Revolution aimed at “Socialism for the 21st Cen-tury.” Chávez styles himself the leader of Latin America’s anti–free market forces and has made alliances with China, Cuba, Russia, and rogue states like Iran. He has persecuted his political adversaries and critics, restricted media freedom, undermined the rule of law and property rights, militarized the government, and tried to destabilize neighboring Colom-bia. The national assembly, which he controls, passed a 2009 constitutional amendment allowing him to seek yet another presidential term, and he won re-election in October 2012. Venezuela has Latin America’s highest inflation rate (cur-rently nearly 30 percent); chronic electricity, food, and hous-ing shortages; and skyrocketing crime rates.

World Rank: 174 Regional Rank: 28

vENEzuELA

460 2013 Index of Economic Freedom

Property RightsFreedom from

Corruption

Fiscal FreedomGovernment

Spending

Business FreedomLabor FreedomMonetary Freedom

Trade FreedomInvestment FreedomFinancial Freedom

Score Changes

Business FreedomLabor Freedom

Monetary Freedom

REGULATORY EFFICIENCY

OPENMARKETS

Trade FreedomInvestment Freedom

Financial Freedom

LIMITED GOVERNMENT

Fiscal FreedomGovernment Spending

RULE OF LAW Property RightsFreedom from Corruption

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

0 20 40 60 80 100

Country World Average Rank

RULE OF LAW LIMITED GOVERNMENT

REGULATORY EFFICIENCY OPEN MARKETS

0–1.0

+0.8–16.7

–1.7–1.5

+0.9

000

175th169th

109th125th

151st166th174th

160th169th159th

5.019.0

75.650.6

45.634.547.3

58.85.0

20.0

THE TEN ECONOMIC FREEDOMS

The judiciary is dysfunctional and completely controlled by the executive. Politically inconve-nient contracts are abrogated, and the legal system discriminates against or in favor of investors from certain foreign countries. The government expropriates land and other private holdings across the economy arbitrarily and without compensation. Corruption, exacerbated by crony-ism and nepotism, is rampant at all level of government.

The top income and corporate tax rates are 34 percent. Other taxes include a value-added tax (VAT). The overall tax burden is estimated to equal 11.3 percent of total domestic income. Bud-get deficits have fluctuated depending on changes in the price of oil. Government spending has risen to 40.6 percent of GDP, spurred in part by oil profits, and public debt has risen to over 45 percent of total domestic output.

Regulatory encroachment on private businesses continues to increase, with heavy govern-ment control and intervention discouraging entrepreneurship. There is little transparency in decision-making, and most contracts are awarded without competition. There is no minimum capital requirement for establishing a business, but the process takes over 100 days. The labor market remains controlled by the state. Inflation continues to be extremely high.

The trade-weighted average tariff rate is relatively high at 10.6 percent, and extensive non-tariff barriers further distort the free flow of goods and services. Private investment remains hampered by state interference in the economy, and hostility to foreign investment, coupled with threats of expropriation, persists. The financial sector is tightly controlled by the state, and credit is often allocated on the basis of political expediency.

vENEzuELA (continued)