Venezuela
An Assessment of its National
Infrastructure
1
Map & Background



Capital: Caracas
Government: Federal
Republic
Chief of State: Hugo
Chavez Frias


Acts as both the chief of
state and head of
government
National Assembly
elected by people
2
Brief History






Discovered by Columbus in 1498
Controlled by Spain from 16th century to early 19th
century
Independence from Spain in 1821 – Bolivarian
Revolution
Discovery of oil in early 20th century
Oil boom in 1970s helped shape the economy
Poor oil market of 1980s led to economic and
political crisis.
3
Hugo Chavez: Madman or Savior?
4
Changing Flag & Crest

1954-2006 flag

As of March 12, 2006
5
Rise of Populism in Latin/South America

Moderate/Social
Democratic Left






Brazil – Luiz Inacio “Lula”
da Silva
Chile – Michelle Bachelet
Costa Rica – Oscar Arias
Uruguay – Tabare Vazquez
Stand for prudent
macroeconomic policies
and retention of 1990s
economic reforms
Also, better social policies

Latin American “traditional”
Populism




Venezuela – Hugo Chavez
Argentina – Nestor Kirchner
Bolivia – Evo Morales
Possible leaders



Peru – Ollanta Humala or
Alan Garcia
Mexico – Andres Manuel
Lopez Obrador
Nicaragua – Daniel Ortega
(Sandinistas) ?
6
Chavez rise to power continues an
uncertain political stability



2002 Coup to oust Chavez
2002-2003 general strike at PDVSA
Oil makes up




1/3 of GDP
80% of all Venezuelan exports
Over 50% of Government operating revenues
Stability is mostly based on how well the oil
market is doing.
7
Government promotion of IT

Government promotion of IT very high





Internet users increased 810% between 1998 and
2005
Opening of 2,000 public internet centers
Pledging universal internet access of all citizens
Projecting a 50%/year growth of internet
usage.
Currently, 4% of population access Internet a
month.
8
Trade barriers to IT diffusion and IT
ownership

Free trade zone in Merida – Venezuela’s
“Silicon Valley”


Tax breaks and incentives to all national and
international companies starting there.
Telecommunications open to unlimited
competition


Includes fixed-line, cellular/mobile, cable, satellite,
data and multimedia.
Investments in infrastructure continue to rise.
9
Legal protections and copyright laws

Improvement in copyright and IP law



Piracy very rampant




Andean Pact of 1994
Creation of National Copyright office in 1995
Protection of satellite signals nonexistent
Especially true of US satellite signals
Piracy rate up from 60% (1999) to 79% (2004)
Intellectual Property protection still not
adequate
10
Educational System


Literacy rate (over age 15): 93.4%
IT Literacy fairly low


Especially away from the coast
32% of public schools have computer equipment





Primarily used for administrative work
Mostly obsolete
No Internet access due to poor telephone service
Very little teacher training
Computer labs mostly found in universities
11
Language

Official language is Spanish



Also considered official “business” language
Very little English spoken in countryside
Upper class and businessmen speak English
12
Hofstede Analysis
12
Individualism
21
Power Distance
91
70
40
Uncertainty
Avoidance
20
40
Latin
America
USA
73
48
0
Venezuela
76
80
46
Masculinity
81
62
60
80
100
13
IT Diffusion




Phones per capita: 110 per 1000 people
Computers per capita: 46 per 1000 people
TVs per capita: 180-185 per 1000 people
Extent of IT usage






Mainly the oil and petrochemical industries
Banking and finance sector
Insurance
Telecommunications
Government and Customs
Manufacturing and Industrial Sector
14
Telecommunications/Infrastructure

Telecommunications Infrastructure is modern and expanding
 Still behind other South American counterparts
 However, digitalization of fixed lines growing

66.1% (1998) to 80.5% (2001)
Privatization of industry leading to more growth.
Only 5 out of every 100 people are internet users
 This number is probably higher, due to push for “public internet
centers”
No official standard for EDI
Digital Access Index: 0.47
 United States: 0.78
 Brazil: 0.50
 Colombia: 0.45
 Peru: 0.44




15
Venezuela “Night Sky” Brightness
Luminance map of Venezuela - 1997
16
Computer Industry

Native hardware industry – very low



Virtually no hardware manufacturing
Some well-known hardware resellers have subsidiaries or
operations in Venezuela
Native software industry


Growing, especially in the telecommunications, banking
and petroleum sector.
INTESA



Joint venture between PDVSA and SAIC
Largest information technology services company in Latin
America
PDVSA outsources IT services to INTESA, the largest in Latin
America
17
Economy

Physical Infrastructure best near cities



Large number of airports
Road quality decreases away from city centers.
Privatization trends reversing


Telecommunication and IT sector highly privatized
Oil industry now state run



PDVSA forced all foreign oil companies into joint
ventures, or face a takeover
16 of 32 foreign companies so far have complied
Total and Eni did not, fields were taken over by PDVSA
18
GDP


Per Capita: $6,500 (2005 est)
Growth rate: 9.1% (2005 est)
Venezuela - GDP - real growth rate (%)
20.0%
10.0%
0.0%
-10.0%
-20.0%
16.8%
3.2%
2.7%
-7.2%
1999
2000
9.1%
2001
-8.9%
-9.2%
2002
2003
2004
2005
19
Joint Ventures & Stock Market

Extent of Joint Ventures with International Firms



Growing in technology sector
All foreign oil companies are now forced into Joint Ventures
Caracas Stock Exchange



Emerging market
Market cap of 7.59 billion
94 companies listed (1998)


Only a few are telecommunications/IT companies
Hard to get funding for companies


Very expensive and inefficient
Have to look to the United States or other developed
countries.
20
Foreign Direct Investment

Foreign Direct Investment growth slowing down


However, still much better than pre-90s
Companies still investing, especially in telecommunications

Lucent launching 3G CDMA 2000 network end 2006 (2.4Mbps)
Foreign Direct Investment (% of GDP)
4
3
2
1
0
-1
1970
1975
1980
1985
1990 1995 2000 2003
FDI -0.17
1.29
0.08
0.11
0.93
1.27
3.88
2.95
21
World Economic Forum’s Economic
Creativity Index



Attempts to measure country’s creativity and involvement in
innovation
Index based on observed data and survey results
Measures the level of technology and the conditions favoring
business start-ups.
22
Conclusion

Future is uncertain




Overall Assessment of IT Capability of Venezuela



Economy too tied to petroleum sector
Chavez government shaky
Uncertainty in continuing privatization
Emerging IT based economy with emphasis for growth
Working hard with other regional countries to increase IT
capability.
Attractiveness of Venezuela from an IT perspective

Seems to be attractive, albeit high risk.
23
Questions?
24