Introduction

Venezuela is located in the upper corner of South America and neighbors with Colombia, Brazil, and Guyana. It has been nearly 200 years since Venezuela first gained its independence from Spain (1811). From 1830 onwards, when Venezuela split from the Bolivarian Colombia (1819-1830), the country was governed mostly by military and despotic regimes. That military period lasted until 1958 when the current democratic spell started following the ousting of General Marcos Perez Jimenez’s dictatorship. [1] Despite that long period of military dictatorships, the Venezuelan economy is considered to be a mixed economy where there is a mixture of command and free market elements [2] . These will be discussed in greater depth in the following text.

Venezuela had until the 1980’s a series of successful periods of economic growth [3] . The country had from there on and until 1999 a succession of economic and political crises. The government previous to the election of Hugo Chavez headed by Rafael Caldera was in power from 1994 to 1999. During this time in office he had to deal with high inflation rates and a financial crisis. Due to these severe problems, Caldera was forced to impose an exchange control in mid-1994. This was shortly followed by more stabilization actions that were enforced by the International Monetary Fund agreement. Due to these severe actions taken by the Caldera’s government (Convergencia) he became severely unpopular among the electorate. This did not help him win his reelection and set the stage for Hugo Chavez [4] .