The Consumer Price Index increased 18.7% in 2007, following increases of 13.7% in 2006, 16.0% in 2005, and 21.7% in 2004. Early monthly statistics suggest that annual inflation could be as high as 30% in 2008.

All foreign exchange requests must be approved by the National Exchange Control Administration (CADIVI), and the Central Bank (BCV) completes all legal purchase and sale of foreign currency. In January 2008, the Venezuelan Government adopted the "bolívar fuerte" as its new currency, effectively redenominating the previous currency, the "bolívar," by removing three zeroes (1 bolivar fuerte=1,000 bolívars). The current exchange control regime rate for U.S. dollar exchange is Bs.F. 2.145=U.S. $1.00. Unofficial exchange rates are far higher.

Central Bank-held international reserves increased to over U.S. $36 billion at the end of 2006. The reserves would have been higher, but the BCV transferred $6 billion to the National Development Fund (FONDEN) during the last quarter 2005, as directed by the Central Bank Law (July 2005) and an additional $4.3 billion in 2006.

The Venezuelan Government dominates the economy. The state oil company, PDVSA, controls the petroleum sector. Government companies control the electricity sector and important parts of the telecommunications and media sectors. In the spring of 2008, the government announced the nationalization of cement and steel producers, as well as select companies in the milk and meat distribution sectors. These and previous nationalizations, as well as other threats to property rights and an uncertain macroeconomic environment characterized by high inflation and foreign exchange controls, have led to reduced space for the private sector and low levels of private investment.

There is considerable income inequality. The Gini coefficient was 0.42 during 2007. According to government statistics, the percentages of poor and extremely poor among Venezuelan population were 27.5% and 7.6%, respectively, for the first half of 2007.

Although economic growth has been impressive, as a result of the oil windfall, many in the Venezuelan business community remain very concerned about President Chavez' vision for "21st Century Socialism" and what it portends for the private sector.

In the 1990s, the Government of Venezuela opened up much of the hydrocarbon sector to foreign investment, promoting multi-billion dollar investment in heavy oil production, reactivation of old fields, and investment in several petrochemical joint ventures. By the late 1990s almost 60 foreign companies representing 14 different countries participated in one or more aspects of Venezuela's oil sector. On November 13, 2001, under an enabling law authorized by the National Assembly, President Chavez enacted a new Hydrocarbons Law, which came into effect in January 2002. This law replaced the Hydrocarbons Law of 1943 and the Nationalization Law of 1975. Among other things, the new law provided that all oil production and distribution activities would be the domain of the Venezuelan state, with the exception of the joint ventures targeting extra-heavy crude oil production. Under the new law, private investors cannot own 50% or more of the capital stock in joint ventures involved in upstream activities. The new law also provided that private investors could own up to 100% of the capital stock in downstream ventures. A Gaseous Hydrocarbons law promulgated earlier by the Chávez government also allowed substantial participation by private investors with respect to gas production ventures.

During the December 2002-February 2003 general strike, petroleum production and refining by PDVSA, the state-owned oil company, almost ceased. Despite the strike, these activities eventually were substantially restarted. Out of a total workforce of 45,000, over 20,000 PDVSA management and workers were subsequently dismissed because the government asserted they had abandoned their jobs during the strike. Current levels of production remain a subject of debate, with considerable difference between the levels cited by the Venezuelan Government and those cited by private sector and international observers.

In early 2005, the government informed companies with operating service contracts for mature fields that they must migrate the contracts to joint ventures that conform to the 2001 Hydrocarbons Law. The government threatened to seize fields operating under the services contracts on December 31, 2005 if oil companies did not sign transition agreements to migrate their contracts. All but three companies ultimately signed joint venture agreements with the government. One company was bought out by its partner while the fields operated by two other companies were ultimately taken over by the government. One of these disputes was handled by negotiation while another company decided to take its case to international arbitration. In early 2007, President Chávez announced that the Venezuelan Government would take a majority government share in the remaining foreign investments in the oil sector, including the four heavy-oil "strategic associations." Several international oil companies agreed to migrate their interests to joint ventures with majority government ownership. Two U.S. companies decided to pull out of Venezuela--one is still in negotiations over compensation while the other has announced that it will seek international arbitration.