Venezuela
Presented to: Aussie Shampoo
Presented by:
Location
• Mathematical Location:
latitude: between 8 and 0
degrees north
longitude: between 66 and 0
degrees west
• Situation:
Northern South America,
bordering the Caribbean Sea
and the North Atlantic Ocean,
between Colombia and
Guyana
• Formal Region: South America
• Functional Region: Caracas
Demographic Comparisons
Countr
Pop
growth
HDI
Life
expect
ancy
literacy Per
capita
GDP
Venez
uela
1.515
%
.696
74
93%
$13,00 93%
0
21/100 P:13%
0
S:23%
T:64%
Brazil
1.166
%
.699
72
88.6%
$10,10 86%
0
22/100 P:20%
0
S:14%
T:66%
Colum
bia
1.184
%
.689
74
90.4%
$9,300 74%
17/100 P:18%
0
S:19%
T: 63%
Guyan
a
0.547
%
.611
67
91.8%
$6,500 28%
38/100 P:na%
0
S:na%
T:na%
y
name
Urbani
zation
Infant
Labor
Mortali Force
ty Rate by
Occup
ation
Demographic Analysis
•
•
•
Venezuela’s life expectancy rate is high compared to Guyana and Brazil,
and is even with Columbia, and the infant mortality rates are low compared
to Guyana and Brazil, which shows that it has enough resources to take
care of its people. In addition, literacy is the highest of the four countries,
which shows the majority of people are educated and can work hard. Also,
since urbanization is the highest of the four countries, you can see that
Venezuela would have good infrastructure, so transportation and
communication would be easier and cheaper. Venezuela has the highest
rate of people in secondary industries out of the four countries, which
provides already experienced factory workers.
Unfortunately, Venezuela also has a high population growth, so workers
would have more children, and that requires better benefits to take care of
the families. Also, the per capita GDP is higher by, on average, about
$4,000 dollars than surrounding countries, so there will be higher required
wages.
Overall, though, the country is developed enough to have good conditions,
but not so developed that profits would be lower due to required higher
wages. Money would not be saved, though, by possible benefits required
for large families.
Demographic Transition Model
•
•
Venezuela is in Stage 3 of the demographic transition. This makes them perfect for industry
because people are starting to move to cities and work in factories instead of on farms. Less
money will have to be spent on hospital bills and health insurance for workers, because the
medical revolution has diffused here and people are healthier. There are a lot of people in
Venezuela from 20-54, so there will be plenty of people to work in the factory. Also, locating a
factory near the market, like in Venezuela, is more productive because shampoo is a bulk gaining
product, meaning it is composed of small things that are shipped in, but is bigger when it leaves,
so you save on shipping if it’s nearer where it needs to be shipped to.
Venezuela’s birth rate, though is high and the death rate is low, so NIR is high. Because of
urbanization, NIR starts to even out, but it is still high, so the large population would make it
harder for the government to give benefits to the people. That means the employer may have to
spend more money on employees so they will have enough to live.
Economic Development
•
•
•
In the Primary sector, people grow
corn, sorghum, sugarcane, rice,
bananas, vegetables, and coffee.
People also raise animals for beef,
pork, milk, and eggs. People fish, as
well. The Secondary sector includes,
construction materials, food
processing, textiles steel, aluminum
and motor vehicle assembly. In
addition, a third of the GDP is from
Petroleum.
Because Venezuela is a popular to
tourists, service jobs include
healthcare, education, retail trade, and
transportation.
The labor distribution is perfect for
factory work because the economy is
not too focused on agriculture and
other primary industries, but instead
on manufacturing, so experienced
workers will be available. And since a
lot of people work in services, there
will be sufficient transportation, and
good retail to sell Aussie Shampoo.
Site Factors: Labor
•
•
Putting a factory in
Venezuela would cut
labor costs because the
required minimum wage
is more than $12,000
less than the required
minimum wage in the
US.
In addition, all health
care in Venezuela is paid
for by the government,
through taxes, though the
tax rate for a worker with
minimum wage is still
only about 6%, while in
the US, employers can
pay up to $15,000 dollars
for a worker’s health
insurance, and taxes are
about $1675 more.
Site Factors: Land
• As Venezuela is a tourist
country, land in the more
popular and beautiful cities is
extremely expensive at
$4,000,000 dollars. In
contrast, land in rural areas is
only $3000-4000 dollars per
acre. Unfortunately, Aussie
Shampoo is a bulk gaining
product and would be more
suited to being in urban areas
to save on shipping.
Construction prices have
lowered since Chavez became
president in Venezuela, and
may go down further. Money
could definitely be saved in
construction in Venezuela.
Site Factors: Resources
•
Shampoo is made mainly of water,
various fragrances, and chemicals that
make up soap. Most chemicals in
consumer products are actually made
of corn—one of the main agricultural
products in Venezuela, so money
would be saved on shipping. In
addition, fragrances often come from
walnuts, herbs, etc., which are also
grown in Venezuela. The most
important ingredient, water, would not
have to be shipped if the factory was
located near water, so a lot of money
is saved that way. Both fragrances
and soap chemicals would have to be
shipped. Aussie Shampoo is a bulk
gaining product, so it should be
located near good transportation
networks, and since water is the
cheapest form of transportation,
another good reason for the factory to
be located near the coast and Lake
Maracaibo, which is also in one of
Venezuela’s largest cities, opening up
more forms of transportation, and a
potential market.
Situation Factors
• A major market near Venezuela would be the U.S. The
U.S. is in Rostow’s stage of mass consumption, where
consumer products are in demand, products like
shampoo. The distance from Caracas, Venezuela to
New York City, New York is 2125 miles or 1846 nautical
miles. It takes about 2700 gallons of gas to go about
1800 nautical miles, and the average cost of gasoline
around the world is three dollars per gallon. So the cost
for sending one ship out would be $8100. Sending the
product out over land would be more expensive because
one truck carries a lot less than one ship, and one truck
would cost about $700 to travel from Caracas to New
York City. Venezuela is located near the sea, so
shipping the shampoo over sea would save money and
would be possible. But the market for Aussie Shampoo
is also very wide in Venezuela itself, so at least half of
the shampoo produced could be sold in the larger cities
of Venezuela, saving even more on shipping.
Infrastructure: Transportation
Roadwa Railways Airports
ys
Venezue 96,155
806 km 409
la
km
Waterwa
ys
7,100
km
Brazil
4,072
50,000
km
0
96
330 km
3,802
km
990
18,000
km
Guyana
1,751,86 28,857
8 km
km
7,970
km
Columbi 164,257
a
km
Infrastructure: Communication
Infrastructure: Communication
cont.
Infrastructure Explanation
Venezuela could have better infrastructure. The
country doesn’t have many railways, so cheap
shipping on land would be hard to come by.
There also aren’t many airports, but air travel is
expensive and unnecessary anyway, as
shampoo doesn’t expire. As for communication,
there are a lot of phone lines and cell phones in
Venezuela, making communication more
convenient. On the other hand, the amount of
internet hosts and users is low, so phone bills
may get pretty high for long distance calls to
headquarters.
Taxes
Social Stability
• Rights: Right to private property, slavery is prohibited
and freedom is a right to all people, people 18+ can vote
for public office, right to religious freedom, no draft, right
to a jury, and nobility are treated the same as everyone
else.
• Corruption levels are high in Venezuela, and have been
for 150 years. A long history of dictator-presidents have
lied to get in office, then increased the national debt by
placing themselves above the law and stealing money
from the country. The current President, Hugo Chavez,
has tried to rewrite the constitution so he can be
“president for life,” and has already tripled the country’s
budget. (from $22,000,000,000 to $70,000,000,000) In
addition, Chavez has imposed sanctions on the one TV
news channel that opposes him, so there must not be a
lot of freedom of speech.
Social Stability (cont.)
• Political opposition in Venezuela is virtually nonexistent, because President Hugo Chavez has
been known to imprison people who don’t agree
with him. It is also expected that the
government has set up assassination attempts
to mayors of major states that oppose Chavez,
as two murder attempts on one mayor alone has
sent him into hiding.
• Despite all of this, Venezuela’s history of free
and open elections has earned it the reputation
of one of the more stable democracies in Latin
America.
Conclusion: Benefits
• Benefits: High literacy and urbanization means that experienced
and intelligent workers will be available, but for cheap, as the
country is not so developed. It’s a stage three country, so it is in the
perfect stage for industry. Minimum wage is cheap, and all health
care is provided by the government (paid by taxes) so costs will be
lower for the employer. Another cost lowering factor is the
construction price, which is lowering over time. Venezuela definitely
has the most important ingredients for Aussie Shampoo, water and
corn, so money could be saved by locating it near one of
Venezuela’s many water sources and purchasing corn from farmers
in Venezuela. Venezuela also has enough waterways to save
money by shipping the shampoo over seas, to a nearby major
market: the U.S. Venezuela would not need any investments in its
infrastructure, as it has the waterways and roadways. Corporate tax
rates are very low in Venezuela, so a lot of money could be saved
by locating the factory there. Property taxes are not the lowest, but
still not as high as the neighboring country, Brazil. Venezuela is
also usually considered a stable democracy, so civil unrest will most
likely not be a problem.
Conclusion: Drawbacks
• The high NIR in Venezuela may make benefits
cost more, as people have larger families to take
care of. In addition, land is very expensive in
urban areas, which are better places for the
factory to be located. Communication would
also be insufficient in Venezuela, as limitited
internet access would cause phone service to be
more expensive. Social stability is definitely not
very good, with the history of dictators,
corruption, and money laundering. Opposing
the government is a very bad idea.