Venezuela Market Fitness Report

Memo

To: Maria Lee

From:

Date:

Re: Venezuela Market Fitness Report

As requested, I have conducted research into the viability of Atticus Shoes conducting business in the country of Venezuela. This South American country currently has a democratically elected socialist government. The U.S. is a major importer of Venezuelan oil and goods, accounting for almost half of their total global trade. It is the fifth largest source of crude oil in the U.S. Exports from the U.S to Venezuela totaled over $9 billion in 2009.

Despite this seemingly healthy trade relationship, there are significant political tensions between the United States and Venezuela that need to be taken into careful consideration. In the latter half of this decade, Venezuelan president Hugo Chavez Frias, has strengthened political, social and economic ties with countries that the United States has deemed to be state sponsors of terrorism (most notably Iran and Syria), as well as those with communist governments (North Korea). President Chavez considers the U.S. a threat and has been outspoken against the U.S. on several occasions. Parliamentary elections are approaching, but there are no expectations of change.

Economically, the country has been somewhat successfully recovering from a recession earlier this decade, but there is evidence that recovery has slowed significantly, owing to a drop in global oil prices over the last couple of years. A great deal of domestic business has been nationalized under President Chavez; petroleum, electricity, telecommunications, banking, industrial, and agricultural interests have all been affected. As a result, private business and investing are at very low levels. With the oil sector accounting for a large percentage of their GDP, currently around 30%, Venezuela’s economy is very dependent on the global petroleum market, making it potentially volatile. Currently 37% of Venezuelans are living below the poverty