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Venezuela Manufacturing
Government-implemented industrialization policies begun
in
the late 1950s boosted the manufacturing sector. From the
early
1970s to late 1980s, the state's ownership role in
manufacturing
increased from 4 percent to 42 percent. In 1988 the sector
employed 18 percent of the labor force and accounted for
17.1
percent of GDP. Except for the export of processed
petroleum and
minerals, virtually all manufacturing was consumed
locally.
Manufacturing previously had been limited to oil refining,
food
processing, and small-scale enterprises. Domestic
manufacturing
blossomed somewhat during World War II as the country
substituted
local production for imports curtailed by the conflict.
The
expansion of manufacturing accelerated to its fastest pace
in the
1950s as the world economy boomed, and the government
embarked on
the economic diversification and industrial development
policies
it referred to as "sowing the oil." By the mid-1970s, the
nation's enormous oil wealth allowed the government to
provide
significant aid to industry, especially in the form of
subsidized
credit. Public-sector participation in industry expanded
considerably with the nationalization of iron and steel in
1975
and petroleum in 1976. But after the country had exhausted
its
reserves from the two oil booms of the 1970s, it was
forced to
reexamine its industrial policies. Although Venezuela's
level of
industrialization was impressive by Latin American
standards,
industry was generally inefficient and productivity low.
In 1990
Venezuelan industry faced the difficult task of moving
beyond
local markets and trying to compete in the international
market.
By the end of the 1980s, the structure of manufacturing
continued to be dominated by thousands of small firms in
the
private sector and a few hundred large, mainly
public-sector,
enterprises. In 1988 large firms employed 64 percent of
the
sector's workforce and supplied 78 percent of its output.
Most
smaller firms were family owned. Unlike many Latin
American
countries, capacity utilization among large, state firms
was
generally better than in the private sector. Caracas was
the home
of just under half of all industry, but it provided only
36
percent of its jobs and 26 percent of the country's
manufactured
goods. By contrast, the Guayana region, with only 3
percent of
the country's industrial firms, produced 10 percent of all
manufactured goods.
Four broad functional categories made up the
manufacturing
sector: traditional or basic industries, intermediate,
capital
goods and metals, and other. Basic industries included
most
traditional manufacturing, such as food processing,
beverages,
leather, footwear, and wood products. Traditional
manufacturing
constituted 54 percent of all firms; about three-quarters
of
these were considered small businesses. Intermediate
products,
such as paper, petrochemicals, rubber, plastics, and
industrial
minerals, represented 18 percent of the sector, but their
share
was growing. The share of the capital goods and basic
metals
subsector was 19 percent by 1988. These thriving heavier
industries included iron, steel, aluminum, transport
equipment,
and machinery. Other miscellaneous manufacturing accounted
for 9
percent of the sector's output.
The automobile industry was one of Venezuela's largest
manufacturing activities outside of petroleum refining and
mineral processing. The industry consisted of Venezuelan
subsidiaries of various foreign-owned companies. United
States
automobile companies assembled 85 percent of the country's
vehicles, and European and Japanese companies produced 10
percent
and 5 percent, respectively. The two largest United States
car
companies, General Motors and Ford, controlled 70 percent
of the
Venezuelan automobile market, followed by Fiat, Toyota,
Jeep, and
Renault.
At the outset, the Venezuelan automobile industry was
almost
completely an assembly operation, importing most parts.
Eventually, local factories supplied a greater percentage
of
parts to the assembly line, particularly tires, metal
products,
and motors. A government decree in 1985 required that all
car
engines be Venezuelan made by 1990.
Venezuela's automobile industry was first established
with
three vehicle assembly plants in the 1950s. By 1984
cumulative
output had reached 1.7 million vehicles. The industry,
protected
by import tariffs as high as 300 percent, soon became
virtually
the only source of the country's transportation fleet. In
the
late 1980s, fifteen producers manufactured scores of
models for
domestic consumption, ranking Venezuela with Brazil as the
largest per capita producers of cars in Latin America.
Venezuelans rushed to purchase vehicles in the 1970s,
when
generous government price controls on gasoline made
driving
economical. Production dropped during the less-affluent
1980s,
however. As in the manufacturing sector at large,
increased
competition in the late 1980s forced many lay-offs at
automobile
factories.
Venezuelan factories manufactured a wide range of new
products during the 1980s: specialized rubber goods, new
paper
products, ships, and aluminum, among others. A growing
trend
among producers of both new and traditional manufactured
goods
was overseas marketing. The country's traditional
manufacturers
began turning to export markets to enhance efficiency. The
popular brewery, Polar, for example, turned to the
international
market after absorbing 85 percent of Venezuela's beer
market.
Following the success of other foreign beers in the United
States, Polar began to export its brew successfully to
North
America in the late 1980s. Increased sales helped rank it
among
the world's fifteen largest breweries. The
government-owned
cement industry likewise expanded exports in the late
1980s,
boosting its overall production in the process. Increased
production allowed the industry to operate at more than 90
percent capacity, an unusually high rate of efficiency
among
Latin American industries. Although some manufacturers
were
expected to succeed in foreign markets, economists
predicted that
many others would close their doors during the 1990s as a
result
of reduced import protection.
Having reached a rather advanced stage of physical and
human
resource development by 1990, Venezuela hoped to turn
toward
high-technology areas for future manufacturing expansion.
One of
the country's largest import items, for example, was
computer
equipment. The Pérez administration promised to create
incentives
for investment in newer industries, such as information
technology, telecommunications, and electronics. One
obstacle to
this goal, however, was the limited extent of research and
development in the economy, particularly in the private
sector.
The country's expenditure on research and development in
1985
stood at only 0.41 percent of gross national product
(
GNP--see Glossary), compared with 2.7 percent in the United States.
During
the 1990s, the country aspired to reach the level of 1
percent of
GNP recommended by the United Nations Educational,
Scientific,
and Cultural Organization.
Data as of December 1990
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