World's largest oil reserves: Venezuela's economic situation between crisis paralysis and strategic realignment

When authoritarian stability becomes a business model: Why German partner searches for Venezuelan companies are a dead end in history

Venezuela is facing one of the most complex economic situations in Latin America. The country, which once possessed the world's largest proven oil reserves and in the 1950s achieved half the per capita GDP of the United States, has been experiencing an unprecedented economic collapse since 2014. The Venezuelan economic crisis has shrunk its gross domestic product (GDP) by almost 80 percent, catapulted the poverty rate to over 96 percent, and led to the emigration of more than seven million people.

For 2024, international institutions are forecasting differing growth rates: While the Venezuelan central bank reports growth of seven percent, the International Monetary Fund (IMF) projects only one percent. GDP is expected to reach approximately US$119.8 billion in 2024, with a per capita GDP of around US$4,511. According to the UN Economic Commission for Latin America and the Caribbean (ECLAC), the economy has recovered by 6.1 percent, ranking second in Latin America. Nevertheless, economic output remains only a fraction of what the country generated before the crisis.

The inflation rate, which peaked at over 63,000 percent in 2018, has declined significantly but remains volatile. It stood at 49 percent in 2024, while experts predict a renewed rise to as high as 270 percent in 2025. The de facto partial dollarization of the economy has temporarily slowed inflation, but the ongoing currency devaluation—the bolivar has officially lost 60 percent of its value since August 2024—is once again driving up prices.

Oil dependency as a structural disaster: The chronic monoculture of a reindeer economy

Venezuela despite huge reserves: Why the country imports gasoline

Venezuela's economy is overwhelmingly dependent on the oil sector. Over 90 percent of its export earnings come from oil. Oil production reached approximately 892,000 barrels per day in February 2025 – a slight increase from the historic lows of 350,000 bpd in 2020, but far from the 2.7 million bpd pre-crisis level.

The state-owned oil company PDVSA, once one of Latin America's largest, is suffering from decades of mismanagement, a lack of investment, and a loss of skilled personnel. Its infrastructure is dilapidated, refineries are no longer operational, and paradoxically, Venezuela has to import gasoline despite possessing the world's largest oil reserves. Exports amounted to approximately US$15.3 billion in 2024, while imports were significantly lower.

US sanctions, which have been systematically tightened since 2017, have severely restricted oil production and exports. Between January 2017 and December 2024, Venezuela lost oil revenues equivalent to 213 percent of its GDP—an estimated total of $226 billion, or about $77 million per day. These unilateral coercive measures have blocked access to international financial markets, credit, and technology, systematically hindering economic recovery.

Export markets have shifted: China bought about 70 percent of Venezuelan oil in 2023. The US, traditionally the most important buyer, further tightened its sanctions policy under the Trump administration in 2025. The threat of 25 percent tariffs on all imports from countries that buy Venezuelan oil led to a drastic drop in exports to China.

Venezuela as a cautionary tale: When oil dependency paralyzes entire economies

In economics and political science, the term "rentier economy" refers to an economic system in which the state or a small elite derives its income primarily from "rents" – that is, from the use and sale of natural resources (e.g., oil, gas, minerals) – instead of from a broadly diversified, productive economy.

• Oil dependency: The state derives the majority of its revenue from oil exports.
• Structural disaster: This structure becomes entrenched over time and makes economic diversification more difficult.
• Monoculture: There is effectively only one dominant economic sector (here: oil), which leaves other industries underdeveloped.
• The consequence: Societal and political structures are geared towards the continuous extraction of this resource. This often leads to low innovation, politically motivated rent distribution, weak institutions, and vulnerability to external price fluctuations.

Typical characteristics of a reindeer economy

1. Government revenue primarily comes from the export of a resource, not from taxes paid by the population.
2. Political power is often concentrated in the hands of a few who control the resource.
3. Economic risks due to price fluctuations or resource depletion.
4. “Resource Curse” – resource-rich countries often paradoxically develop lower long-term economic diversity.

Origin of the term

The French word "rentier" means someone who lives off a pension or annuities. Originally, these were wealthy individuals who lived off interest, lease or rental income without doing any productive work themselves.

In political economy, the term was later generalized: A “rentier” receives income from a resource that comes from outside or is not created through productive labor.

Venezuela overtakes Saudi Arabia: The world's largest oil reserves

Oil wealth vs. economic crisis: Venezuela's paradoxical reality

Venezuela has the largest proven oil reserves in the world, ahead of countries like Saudi Arabia, Canada, Iran and Iraq.

Details on oil reserves

• Venezuela's reserves are estimated at around 300 billion barrels and represent about 18 percent of total global oil reserves.
• Saudi Arabia follows with just under 260 to 298 billion barrels, Canada with about 168 billion barrels, Iran with about 158 ​​billion barrels and Iraq with around 145 billion barrels.
• The figures are based on international statistics from BP, OPEC and other energy organizations.
• However, a large part of Venezuela's reserves is heavy oil, which makes extraction more difficult.

Background and meaning

• The enormous amount of oil gives Venezuela an important geopolitical role, but does not necessarily affect the country's economic stability.
• Despite its vast reserves, the country has been suffering from a severe economic crisis for years, with production volumes having recently fallen sharply.
• The exploitability and quality of Venezuelan reserves are particularly challenging from a technical and economic perspective compared to other countries.

Economic structure beyond oil: Fragmented sectors with limited development potential

Outside of the dominant oil sector, Venezuela's economic structure is highly fragmented and underdeveloped. The agricultural sector accounts for approximately five percent of GDP, manufacturing 37.2 percent, and the service sector 51.7 percent – ​​although these figures date back to 2014 and only partially reflect current conditions.

Agriculture and premium products

Venezuela possesses remarkable agricultural resources, particularly in fine cacao and coffee. Venezuelan Criollo cacao, which now accounts for only 0.001 percent of the global market, is considered one of the finest cacao varieties worldwide and is highly prized for its low bitterness and aromatic diversity. With an annual production of approximately 20,000 tons, Venezuela is a relatively small but high-quality producer. The coffee sector, which made Venezuela the world's third-largest exporter in the 1830s, has shrunk drastically due to decades of neglect and government price controls, and today accounts for less than 0.5 percent of global production.

Mining and raw materials

The mining sector, particularly gold mining, has become an important, albeit controversial, branch of the economy. The Orinoco mining region has an estimated 4,000 to 7,000 tons of gold, 34 million carats of diamonds, and significant deposits of iron ore, bauxite, and copper. However, gold mining is plagued by illegal activities, environmental destruction, and social conflict. The government and military elites profit from this sector, while the local population suffers from the environmental and health consequences of mercury pollution.

Private sector and industrialization

Since 2018, the Maduro government has undergone a remarkable economic policy reversal. Little remains of the socialist rhetoric of the Chávez era – instead, Maduro is focusing on partnerships with the private sector and privatizations. Approximately 350 to 600 state-owned enterprises are slated for privatization or transfer to mixed ownership. This development marks a fundamental shift: Venezuela has become a “predatory state” where state officials and corrupt businesspeople enrich themselves at the expense of the majority.

German-Venezuelan economic relations: A history of systematic decline

Trade relations between Germany and Venezuela are at a historic low. While goods worth €738 million were exported to Venezuela in 2013, this figure had fallen to just a quarter of that in 2017. German imports from Venezuela also declined, falling by 19 percent to €256 million over the same period. In 2016, exports totaled €251 million and imports €143 million – a 73 percent drop in trade volume compared to 2011.

Germany exported mainly machinery, chemical products, and petroleum derivatives to Venezuela, while imports consisted primarily of petroleum, iron, and steel. Venezuela ranks far behind other Latin American trading partners such as Brazil or Argentina.

Approximately 28 German companies still operate in Venezuela, employing around 4,000 people. Among those remaining are Siemens Energy, Bayer, and Bosch. Many German firms are maintaining their presence despite the crisis, primarily for strategic reasons: they want to secure a strong starting position for a potential restart after a change of government. Establishing a new company, rebuilding sales structures, and obtaining new permits would be complex and expensive after a complete withdrawal.

German direct investment in Venezuela has been declining for years. The investment climate is considered one of the worst in the world: Venezuela ranks last out of 82 countries in the Economist Intelligence Unit's ranking and 174th out of 176 in the Index of Economic Freedom. Complicated regulations, a lack of legal certainty, a high tax burden (which in 2022 amounted to two-thirds of companies' net profits), a lack of access to bank loans, and the risk of nationalization deter foreign investors.

Venezuelan industries with theoretical export potential: A realistic assessment

Despite the structural problems, theoretically some industries can be identified that could be relevant for international expansion:

Fine cocoa and premium chocolate

Venezuelan Criollo cocoa enjoys an excellent reputation worldwide and is in demand by specialty chocolate manufacturers in Europe. Its quality and rarity could serve a premium market. However, the economic crisis has led to a decline in quality, as there has been an increase in the export of unfermented beans to quickly obtain foreign currency. German importers like Bohnkaf already trade in fine cocoa from over ten countries and could integrate Venezuelan varieties into their offerings.

Specialty coffee

Similar to cocoa, high-quality Venezuelan Arabica coffee from high altitudes could serve a niche market. However, production is marginal, and government regulation has largely destroyed the sector.

Tourism and Caribbean destinations

Venezuela boasts spectacular natural beauty, Caribbean beaches, and islands like Los Roques and Isla Margarita. Theoretically, the tourism sector could be developed, but political instability, security problems, and dilapidated infrastructure make the country unattractive to European tourists.

IT and software development

Before the crisis, Venezuela was a competitive IT hub in the region with a skilled workforce. Today, the sector struggles with a brain drain (over 1.3 million people fled in 2019-2020), high taxes, infrastructure problems, and political instability. A few IT companies offer software development, cybersecurity, and data analytics, but trust levels are low.

Germany as a bridgehead for Europe: The strategic illusion of Venezuelan entrepreneurs

The idea of ​​using Germany as a “starting point for conquering the German and European markets” fails due to multiple structural realities:

Market access barriers

German and European markets are highly developed, regulated, and competitive. Venezuelan companies would have to meet quality standards, certifications, food regulations, and product liability requirements that are difficult to achieve with current production quality. Venezuela's export infrastructure has collapsed—even transporting goods is problematic.

Financial limitations

Venezuelan companies lack access to international loans, their currency is volatile, and they have no foreign currency to invest in marketing, sales, or product adaptations. The lack of access to bank loans within the country itself—the total loan portfolio of Venezuelan banks amounted to only about US$730 million in mid-2023, compared to an estimated need of US$6 billion—makes expansion plans unrealistic.

Reputational risk

The association with Venezuela is problematic for German companies. The political situation, allegations of corruption, human rights violations, and the risk of sanctions (“overcompliance”) deter business partners and investors. German companies operating in Venezuela do so despite, not because of, the situation.

Lack of economies of scale

Venezuela's few exportable products – fine cocoa, specialty coffee, and gold – are already imported by established trading partners. Quantities are small, and supply chains are unreliable. "Conquering" the European market with limited production capacity is unrealistic.

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The role of German partners: Marketing, PR and business development as a miscalculation

The assumption that Venezuelan companies could successfully expand through “a strong and specialized German partner in the field of marketing, PR and business development” overlooks fundamental realities:

Marketing and PR cannot compensate for structural deficiencies.

Even excellent marketing cannot solve the fundamental problems – lack of product availability, inconsistent quality, missing certifications, logistical hurdles, and political risks. German marketing and PR agencies can develop brand positioning, but without a functioning product, a reliable supply chain, and appropriate pricing, market entry is doomed to failure.

Business development requires substance.

Effective business development is based on viable business models, competitive products, and reliable partners. Venezuelan companies currently meet hardly any of these criteria. The success stories of German SMEs in Latin America are concentrated in stable markets such as Colombia, Brazil, Chile, or Mexico – not in Venezuela.

Diaspora as an alternative

The only realistic link between Venezuela and Germany is through the diaspora. Around 5,610 Venezuelans lived in Germany in 2018, and this number has increased in recent years. Well-educated Venezuelan emigrants with professional experience in Germany could theoretically act as a bridge, but the economic reality in Venezuela makes investments there risky and unattractive.

Geopolitical realignment: Venezuela's dependence on China and Russia

Venezuela has radically shifted its economic orientation. China and Russia have become the most important strategic partners supporting the Maduro regime.

China as the main investor

In September 2023, Venezuela and China signed a “strategic all-weather partnership”—a designation Beijing reserves for only a few favored partner countries. Thirty-one agreements were signed to promote cooperation in oil, mining, technology, health, tourism, education, and space exploration. China is the largest buyer of Venezuelan oil and is investing in infrastructure, with a focus on restructuring Venezuelan debt.

Russia as a military and energy partner

In November 2024, Venezuela and Russia signed 17 agreements in the areas of defense and energy, including intelligence cooperation, drone operations, military equipment, and oil exploration technology. Russia is among the few countries that recognize Maduro's disputed election victory and supports the regime against US sanctions.

This geopolitical orientation makes Venezuela even less attractive to Western companies. Its close ties to authoritarian regimes, which are themselves subject to Western sanctions, increase compliance risks and complicate any commercial cooperation.

Case studies: Latin American expansion versus Venezuelan isolation

A comparison with other Latin American countries highlights Venezuela's special position:

Brazil as a success story

German companies rate their business situation in Brazil as exceptionally positive – 35 percent report good business, and two-thirds expect improvements. Bilateral trade volume amounts to €21 billion, and Brazil offers potential for mechanical engineering, hydrogen, and medical technology. The EU-Mercosur agreement would further facilitate trade.

Colombia as an emerging destination

Colombia has recorded the highest growth rates in Latin America in recent years and is considered an attractive location for German companies. While bureaucratic hurdles exist, they are surmountable, and profit margins are significantly higher than in Asia.

Venezuela as a negative example

In contrast, Venezuela is economically isolated, politically unstable, and toxic for foreign investors. While other Latin American countries benefit from the diversification of European supply chains, Venezuela remains excluded. Its sanctions policy, authoritarian regime, and economic dysfunction make it a pariah state in the region.

Critical risks: The multiple crises as an insurmountable obstacle

Any economic engagement with Venezuela involves serious risks:

Political instability and authoritarianism

The Maduro regime is internationally regarded as autocratic and illegitimate. The presidential election of July 2024 was deemed rigged by the opposition and international observers. Repression, human rights violations, and arbitrary arrests characterize the political climate. Regime change is unlikely, but not impossible, and would redefine all existing business relationships.

Legal uncertainty and corruption

Venezuela offers no legal certainty. Nationalizations, arbitrary regulations, corrupt authorities, and opaque business practices are commonplace. Foreign companies have repeatedly lost their property or been forced to cooperate with questionable partners.

Sanction risk

US sanctions not only directly affect Venezuela, but also its business partners. The threat of 25 percent tariffs on all exports to the US from countries that trade oil with Venezuela demonstrates the extraterritorial reach of American economic policy. German companies doing business with Venezuela risk losing access to the US market.

Humanitarian disaster

The economic crisis has led to a humanitarian emergency. Over 7.5 million Venezuelans have fled the country – one of the world's largest refugee crises. Malnutrition, the collapse of the healthcare system, water shortages, and a lack of medicine are commonplace. This situation is morally unacceptable and makes Venezuela an irresponsible business partner.

Environmental destruction

Illegal mining, particularly in the Amazon, causes massive environmental damage. Mercury pollution endangers indigenous communities and ecosystems. German companies that take sustainability and corporate social responsibility seriously cannot afford to be associated with these practices.

Future scenarios: Between stagnation, transformation and renewed collapse

Venezuela's economic future depends on multiple factors that are difficult to predict:

Scenario 1 – Authoritarian Stabilization

Maduro remains in power and continues his pragmatic economic policies. The rapprochement with the private sector deepens, further privatizations take place, and the economy stabilizes at a low level. China and Russia remain important partners, and oil production slowly recovers. US sanctions remain in place, but circumvention mechanisms become more efficient. This scenario offers no prospects for Venezuelan companies in Europe – the country remains isolated and economically weak.

Scenario 2 – Stricter sanctions and renewed collapse

The Trump administration drastically tightens sanctions, oil exports collapse, and public finances grind to a halt. Inflation soars once again to hyperinflationary levels, the currency becomes worthless, and the humanitarian crisis worsens. Millions more Venezuelans emigrate, and the country descends into chaos. This scenario makes any economic activity impossible.

Scenario 3 – Political change and economic restart

Regime change leads to democratic reforms, the lifting of sanctions, and massive foreign investment. Oil production is modernized, the economy diversified, and international organizations like the IMF support stabilization. Legal certainty is restored, and Venezuela becomes an attractive investment location. In this scenario, German companies could play an important role—but as investors in Venezuela, not as partners for Venezuelan expansion into Europe.

The most likely development is a mixture of scenarios 1 and 2: authoritarian stagnation with recurring crises. An economic recovery that would allow for substantial exports to Europe is not foreseeable in the coming years.

Strategic Implications: A Sober Assessment for German Decision-Makers

For German companies considering ventures with Venezuelan partners, the following applies:

Avoidance instead of engagement

Venezuela currently offers no attractive business opportunities for marketing, PR, or business development partnerships. The structural, political, and economic problems are too fundamental to be compensated for by services. German companies should critically examine inquiries from Venezuela and, in most cases, decline them.

Focus on stable markets

Latin America offers numerous attractive alternatives – Brazil, Colombia, Chile, Peru, Mexico – which are economically dynamic, politically more stable, and strategically more relevant. Resources should be concentrated on these markets, where realistic growth opportunities exist.

Diaspora as the only bridge

If business dealings with Venezuela are desired, they should be conducted exclusively through the well-educated Venezuelan diaspora living in Germany. These individuals are familiar with both cultures, possess relevant networks, and can provide realistic assessments. Direct business with companies based in Venezuela is too risky.

Long-term observation

The situation in Venezuela is volatile. A political shift could make the country an attractive market in the medium term – but as a destination for German investment, not as a source of Venezuelan expansion. German companies should monitor developments and wait for the right moment to engage.

Reputation management

Any association with the Maduro regime is damaging to reputation. German companies that value ethical business practices, sustainability, and human rights cannot enter into partnerships that directly or indirectly support an authoritarian system.

Is the Mercosur free trade agreement with Europe an opportunity for Venezuela?

Venezuela is officially a member of Mercosur, but its membership has been suspended since August 2017 and has not been reactivated to this day. This means that Venezuela is not currently actively participating in Mercosur negotiations or agreements.

Background to the suspension

• Venezuela joined Mercosur as a full member in 2012.
• Venezuela was initially suspended in 2016 and finally in 2017 due to violations of democratic principles and the so-called Ushuaia Protocol.
• The Mercosur rules do not provide for a complete exclusion, therefore Venezuela remains a "suspended member".

Current status of the Mercosur agreement

• The active members of Mercosur are Argentina, Brazil, Paraguay, Uruguay and, since 2024, Bolivia.
• Venezuela, as a suspended member, is currently not part of the Mercosur community in new agreements, e.g. the EU-Mercosur free trade agreement.
• Associate members include Chile, Peru, Colombia and Ecuador, which is not the status of Venezuela – Venezuela remains a formal full member, but without voting rights or participation.

Suitable for:

• EU-Mercosur Agreement: Latin America as the EU's mineral wealth? Lithium, copper, and other resources – Gold Rush 2.0?

The bitter truth behind the illusion

Venezuela is experiencing one of the most severe and complex economic crises in modern history. The idea that Venezuelan companies – regardless of their sector – could use Germany as a “starting point for conquering the German and European markets” is, given the realities, an illusion.

The structural deficits are too massive: collapsed production capacities, lack of export infrastructure, insufficient financing, political isolation, sanctions risks and the association with an authoritarian regime make Venezuelan companies unacceptable business partners for the European market.

German marketing, PR, and business development service providers lured by the prospect of lucrative projects should steer clear. The probability of failure is extremely high, the reputational risks considerable, and the moral dubiousness obvious.

The only realistic prospect for economic relations between Venezuela and Germany lies in the distant future after a political change – but then in the opposite direction: as German investments in the reconstruction of Venezuela, not as Venezuelan expansion into Europe.

Until then, Venezuela remains a country economically suffocated by sanctions, politically mired in authoritarian stagnation, and whose entrepreneurial potential has been systematically destroyed. Venezuela's history serves as a warning: even the world's largest natural resource reserves cannot save a country if corruption, mismanagement, and political authoritarianism destroy its economy.

For Venezuelan entrepreneurs seeking a way out, emigration is the only option – individual, not institutional. For German companies looking for opportunities, these lie everywhere in Latin America – just not in Venezuela.

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