THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Venezuela

Ranked 121st of 149

At a glance

Ranks

121 st on the Legatum
Prosperity Index™

127th
145th
146th
98th
68th
129th
95th
130th
50th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Venezuela performs best on Natural Environment and Health and scores lowest on the Governance sub-index.

Visit our Rankings table to see how Venezuela compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

It will come as no surprise to many that Venezuela, like many oil rich countries, carries one of the worst prosperity deficits in the world. This deficit is the largest outside of the Middle East and Africa, and has almost doubled over the past decade.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

As the Prosperity Index exemplifies, whilst many South American countries are infamous for a tumultuous 20th century, none have continued to suffer the troubles of their past into the 21st century as bad as Venezuela. Ever since the beginning of Chavez’s self-proclaimed “Bolivarian Revolution” in 1998, Venezuela has been in turmoil: a coup d’état in 2002, a national strike in 2003 which caused Venezuela’s GDP to drop sharply, and recently violent protests in 2014. Venezuela has frequently made headlines due to corruption or hyperinflation. It unsurprising that the country is now ranked just 121st for prosperity, down from 85th in 2007, and is the world’s 4th worst governed country.

Governance and the fate of Venezuela’s economy are closely intertwined. State owned oil company PDVSA has been responsible for producing, selling and exporting at the mercy of the government, to the extent that oil and oil products makes up almost half of GDP and almost all of the country’s exports. It is no surprise that among Venezuela’s biggest real term losses in the Prosperity Index come in Economic Quality and Governance. The variables of these sub-indices reveal the full picture though, and starting with Economic Quality, the weight of the recession can be seen. The unemployment rate is up to almost 9%, export quality has fallen and poverty at the absolute line (less than $1.90 a day) has sky-rocketed to over double its 2007 figure. Additionally, people satisfied with their standard of living has dropped from 82% in 2007 to now just 36% in 2016, a marked drop that illustrates one of the many facets of rising dissatisfaction among Venezuela’s working class. Business Environment too, is poor – ranked now 145th after being 131st in 2007, only four countries now rank lower than Venezuela in this sub-index. The ease of starting as business has fallen, as has intellectual property protection and labour market flexibility.

These figures lead directly into the poor Governance figures, where, as already mentioned, Venezuela scores the 4th lowest in the world at 146th in the rankings, down thirteen places from 133rd in 2007. From the efficiency of the legal system in challenging regulation to judicial independence to rule of law, every variable that makes up the sub-index of Governance is failing, leading to a staggering fall in the proportion of the population of people who have confidence in the national government, which in 2007 was 63% and is now in 2016 just 20%, as well as a similar decline in confidence in the honesty of elections, which dropped from 64% to just 21% in the same time frame.

 Venezuela’s Prosperity Index score as a percentage of Central and Latin America’s average Prosperity Index score.
Venezuela’s Prosperity is has contracted sharply, even compared to its regional peers.

With the faltering of these three sub-indices comes the failure of the rest with the exception of Health, that has actually risen by two ranks to 68th, although this has its own problems, such as the satisfaction with the quality of healthcare in cities falling from 72% to 39% and the rise of diabetes and obesity. Perhaps the most worrying for Venezuela’s future prosperity is the collapse of Social Capital and Personal Freedom. Personal Freedom has seen the second largest real-terms loss in Venezuela after Economic Quality, as tolerance and satisfaction with freedom of choice plummets. Social Capital has seen a 57 rank fall over the past decade, as altruistic behaviour falls. Unless these foundations of prosperity can be improved, no amount of economic growth will ever lead to stable, upward prosperity. Venezuela’s fate will be forever tied to the oil price.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

There is little light in Venezuelan prosperity in 2016. It has witnessed the biggest prosperity decline in the world, and not simply in its economic indicators, but across sub-indices. Most concerning is the near complete fragmentation of the key foundations of prosperity: governance, freedom, and society. Unless something can be done to shore these up, Venezuela’s only hope for rising prosperity is a rising oil price, and there is little hope for any kind of stable, sustained, prosperity growth after that.

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Areas of Success
Areas of Success

The only real success in Venezuela is that it has managed to sustain its performance in the Health sub-index, despite the near collapse across the eight others. This is likely less a reflection of any deliberate policy approach, and more a reflection of the slow rate at which health tends to change in the absence of any major catastrophic disaster or disease outbreak. Outside of this, there is little to nothing positive about Venezuela’s current political, economic, or social situation.

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Areas of Little Change
Areas of Little Change

There has been relatively little change in Venezuela’s already highly limited Business Environment over the past decade. While it has dropped 14 ranks to 145th globally, it is one of only two sub-indices (alongside Health) to see a real-terms improvement. Small improvements have been seen in access to credit and telecommunications infrastructure, but not at a rate fast enough to improve the country’s poor relative position.

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Areas of Improvement
Areas of Improvement

Economically, politically and socially, Venezuela has a lot of areas in which improvement is vital. Venezuela’s economic problems far surpass any quick fix, however, making Venezuela an attractive place for investment is a start, as FDI flows can boost not only the potential for a growing economy but also assures investors that Venezuela is a country worth both loaning to and investing in. Politically, Venezuela has yet to depart from the political precedence Chavez set out where oil became both its bargaining chip and main source of income. Dispelling Chavez’s legacy and building a newer, more diverse one, is necessarily if prosperity is to rise long-term. Positive social change can come from many places, but ultimately improving the other two facets of Venezuelan society certainly benefits it innumerably; when people feel economically stable and secure in their government, a facet of life most populations in countries in the top half of the Prosperity Index take for granted, then social change follows suit.