The Venezuelan growth puzzle

Michael Penfold and Francisco Rodríguez

Chapter 30 in The Elgar Companion to the Economies of Latin America and the Caribbean, 2025, pp 602-618 from Edward Elgar Publishing

Abstract: Venezuela's persistent economic underperformance poses a puzzling question: Why has a country with vast oil wealth failed to achieve sustained growth across different political regimes? This study examines the historical roots and institutional failures that underpin Venezuela's development challenges. We argue that the Venezuelan state, from its inception during the Andean hegemony (1899–1958) to the democratic era (1958–1998) and subsequent autocratization (1999–2023), has lacked the capacity to mediate conflicts between economic and political elites. Oil revenues enabled state centralization without fostering the provision of public goods or solving elite coordination problems. When oil prices boomed, Venezuela's state oscillated between hyper-centralization and fragmented veto-player governance, leading to fiscal mismanagement, macroeconomic instability, and political conflict. These structural weaknesses culminated in economically destructive strategies during crises, such as the 2012–2020 collapse, exacerbated by external sanctions. The findings highlight the paradox of a resource-rich yet institutionally weak state unable to achieve stable growth, illustrating how the inability to manage elite interests and provide public goods lies at the core of Venezuela's economic decline.

Keywords: Venezuelan economy; Inter-elite conflict; Autocratization; Economically destructive political conflict; Institutional weakness; Economic collapse (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035317196
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