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Venezuela

An Assessment of its National Infrastructure

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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

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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.

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Hugo Chavez: Madman or Savior?

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Changing Flag & Crest 1954-2006 flag As of March 12, 2006

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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) ?

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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.

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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.

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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.

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Legal protections and copyright laws Improvement in copyright and IP law

Andean Pact of 1994 Creation of National Copyright office in 1995

Piracy very rampant 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

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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

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Language

Official language is Spanish Also considered official “business” language Very little English spoken in countryside Upper class and businessmen speak English

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Hofstede Analysis

62

46

40

91

48

80

70

21

73

76

81

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0 20 40 60 80 100

Masculinity

UncertaintyAvoidance

Power Distance

Individualism

Venezuela

LatinAmerica

USA

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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

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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

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Venezuela “Night Sky” BrightnessLuminance map of Venezuela - 1997

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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

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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

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GDP

Per Capita: $6,500 (2005 est) Growth rate: 9.1% (2005 est)

Venezuela - GDP - real growth rate (%)

-7.2%

3.2% 2.7%

-8.9% -9.2%

16.8%9.1%

-20.0%-10.0%

0.0%

10.0%20.0%

1999 2000 2001 2002 2003 2004 2005

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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.

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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)

-1

0

1

2

3

4

Foreign Direct Investment (% of GDP)

FDI -0.17 1.29 0.08 0.11 0.93 1.27 3.88 2.95

1970 1975 1980 1985 1990 1995 2000 2003

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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.

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Conclusion

Future is uncertain Economy too tied to petroleum sector Chavez government shaky Uncertainty in continuing privatization

Overall Assessment of IT Capability of Venezuela 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.

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Questions?