The macroeconomic outlook for Venezuela in 2025 projects a significant contraction in the oil sector, along with a reduction in external revenues due to the reinstatement of sanctions, a situation that will negatively impact total GDP, inflation, and exchange rates.
We continue to present the global economic landscape, specifically for Venezuela, based on the “Venezuela Economic Report: April 2025,” prepared by the Institute of Economic and Social Research (IIES) at the Andrés Bello Catholic University (UCAB).
This report indicates that estimates for 2025 suggest that Venezuela will re-emerge as the leading inflationary economy in Latin America and the Caribbean. The macroeconomic outlook for Venezuela is marked by a significant shift in the recovery trend observed between 2021 and 2024. In this regard, an economic contraction is expected, primarily affected by the reinstatement of U.S. oil sanctions and other internal and external factors.
Chevron’s License
The suspension of General License 41 (LG41) by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is undoubtedly the most significant factor affecting the Venezuelan economy in this external context. This license allowed Chevron Corporation to carry out limited oil extraction and marketing operations in Venezuela.
The effects of this measure on the production, export, and import of crude and refined oil in Venezuela are crucial, and this impact will be amplified by the involvement of other foreign companies like Repsol and Maurel & Prom in this decision.
The most likely scenario is a gradual adjustment throughout 2025, combining complementary measures like the issuance of License 41A and the application of punitive tariffs on countries that trade Venezuelan oil.
Although final details of this set of measures from the U.S. government are unknown, it is perceived that they will have a negative effect on net external revenues generated by Venezuelan oil activity.
Other Influencing Factors on the Venezuelan Economy
Similarly, the immigration policies implemented in the United States are also estimated to negatively impact remittances from Venezuelans abroad.
The U.S. trade policy could adversely affect the flow of Venezuelan exports, while immigration policies would lead to a reduction in remittance flows.
Likewise, the high dependence of some countries in the region, such as Peru and Chile, on trade with China could represent another risk by exposing them to a potential slowdown in the activities of the Asian giant. It’s probable that a slowdown in China could have indirect implications for Venezuela if China serves as an alternative market for its oil exports after U.S. sanctions.
Oil Sector
It is expected a contraction in the oil sector in 2025
According to the report, the main expectation for the global oil sector is a reduction in oil prices in 2025 compared to 2024. Average prices for Brent and WTI markers are projected to decline. The average price of Merey16, the marker for Venezuelan oil, is estimated to reach USD 63.2 per barrel in 2025, a decrease of approximately 3% compared to 2024.
It is expected that the average oil production in Venezuela in 2025 will reach 770 mbd, representing an 11% decline compared to 2024 levels. This figure sharply contrasts with the first quarter of 2025, when monthly average production reached 903 mbd under the LG41.
Oil exports, predominantly focused on crude, are estimated between 670 and 680 mbd, depending on the availability of diluents and the capacity of Petróleos de Venezuela S.A. (PDVSA) to find substitute markets.
The suspension of the LG41 license will have negative effects compounded by the tariff penalties announced by the U.S., which will undoubtedly impact the realized prices of exported crude.
USD 3.4 Billion Losses
PDVSA’s alternative—given the loss of access to U.S. and potentially European markets—will be to place crude and refined products in other markets, particularly in Asia, which will require significant discounts and incur higher costs.
It is presumed that the average realized price of crude exported from Venezuela could reduce by 25% to 30% in the remaining three quarters of 2025 due to these discounts.
In other words, a significant decrease in external oil revenues is expected, resulting from both the decline in sector activity levels and effective realized prices. A 34% drop in the value of crude exports is likely due to the reduction in volume and the higher discount on the Merey price. Just from the estimated discount (30%), the country would lose an amount equivalent to over USD 3.4 billion.
Level of Economic Activity in Venezuela in 2025
This scenario leads to the estimate that the GDP of the oil sector could contract by approximately 12% this year, in contrast to the nearly 15% expansion recorded in 2024. This oil contraction would imply a fall in total GDP close to 1.5%, not accounting for indirect effects.
The non-oil GDP could contract between 1% and 1.5% in 2025, considering that non-oil activity represents around 80% of total GDP, which would lead to the real total GDP potentially experiencing a contraction greater than 2% in 2025.
Outlook for 2025 implies a significant shift in the recovery trend that has been observed between 2021 and 2024 (with an average annual expansion rate of 5.25%).
The sectors expected to perform relatively well are communications, trade, and manufacturing, with moderate growth rates ranging between 1% and 3%. Conversely, the sectors projected to perform worse are construction, electricity and water, financial sector, and governmental services.
The per capita GDP in Venezuela has shown a sustained decline since 2013, falling 73% by 2020. Although it improved between 2021 and 2024—due to population decreases from emigration—it is expected to stagnate in 2025, widening the gap with other significant countries in the region.
External Sector
The trend for 2025 is a contraction in Venezuela’s external trade flows, primarily due to the impact of Chevron’s operational interruption.
The total value of the country’s exports is estimated to decrease by 31% compared to the end of 2024, representing a resource loss estimated at nearly USD 6 billion. This is due to the high weight of crude exports at around 80%.
The value of non-oil exports would remain roughly at the same level as in 2024, around USD 3 billion. The impact of U.S. tariffs of 15% on these exports is limited—only about USD 200 million—and is concentrated on products with low elasticity to consumption.
The participation of the value of non-oil exports in the total is believed to increase, but this is a result of the reduction in oil exports, reflecting the low structural dynamism of non-oil exports.
Statistics indicate that only 24% of non-oil exports come from the private sector, concentrated in a few products.
It is estimated, conversely, that imports will decrease by 13% in 2025 due to lower foreign currency inflows and corresponding expected economic activity performance.
Remittances are estimated to range between USD 2.8 billion and 3 billion for 2025, based on the negative effect of recent U.S. immigration policies.
The current account of the balance of payments is expected to remain relatively balanced, with no significant changes in international reserves, revealing a limited margin of maneuver for monetary authorities due to sanctions and restrictions.
Regarding public external debt, interest and unpaid principal on sovereign bonds and PDVSA continue to accumulate, totaling approximately USD 70 billion, amounting to just over USD 170 billion at the end of 2024.
The renewal of the ban on transactions with the PDVSA 2020 bond aims to prevent the liquidation of its collateral represented by 50.1% of Citgo Holdings Inc. shares. A complex liquidation process of that collateral is anticipated starting July 3, 2025, with competing claims among bondholders and companies with expropriation lawsuits. The market value of Citgo Corp. is barely half of settled claims.
Exchange Rate and Currency Market
Since the last quarter of 2024, both official and parallel exchange rates have experienced greater upward pressure, accompanied by an increase in their differential.
The Central Bank of Venezuela (BCV) has sought to reduce this differential by increasing its intervention in the official currency market, especially before the presidential elections in July 2025. Despite the increased supply of foreign currency from the BCV, upward pressures on the exchange rate persist.
Monetary authorities aim to keep fluctuations in the exchange rate differential within a broad range of no more than 50%, at the expense of a persistent appreciation of the real exchange rate.
The accelerating pace of exchange rate depreciation confirms the tightness of external resources and the fragility of the BCV’s stabilization policy, focused on the exchange rate as a nominal anchor. The situation in the oil industry will cause a roughly 40% drop in the total supply of foreign currency in the formal exchange market.
For 2025, it is anticipated that the upward trend in the exchange rate will continue, with a greater impact on inflation and an accentuation of the real appreciation of the national currency, as well as an increasing dollarization of the economy.
If the exchange rate differential remains or widens and the government continues to use the official exchange rate as a reference for prices in the formal sector, there will be an intensified increase in prices set in dollars.
Fiscal Aggregates
Fiscal revenues increased significantly in 2024, but they are expected to reverse in 2025 due to the decline in oil fiscal contributions following the suspension of activities by Chevron Corp. and other sanctioned companies.
Limitations on reducing public spending will force the government to continue financing part of its spending through monetary emissions.
The accelerated depreciation of the exchange rate will impact the spending on “patria” bonds, which are subsidies indexed to the official exchange rate, significantly affecting total fiscal expenditure.
Measures to improve internal tax collection are not specific but are expected to impact monetary expansion on prices due to dollarization.
Venezuela’s country risk will remain the highest in Latin America without a restructuring of public external debt.
The internal tax collection from SENIAT reached an extraordinary level in 2024, standing at 22.1% of GDP.
The Income Tax (ISLR) was the biggest contributor to this increase. A payment from Chevron Corp. for ISLR would have been decisive, but overall collection has been high.
For 2025, SENIAT’s collection is estimated to remain slightly below that of 2024 (22% of GDP).
The oil fiscal contribution is estimated at 9% of GDP for 2024. For 2025, a negative impact on crude volume is expected, projected to amount to 7% of GDP.
Central government spending significantly increased in 2024, approaching 35% of GDP, driven by elections and the impact of the exchange rate on patria bonds.
Monetary Aggregates and Inflation
The stabilization of monetary aggregates and inflation in Venezuela, given the fiscal dominance, dollarization, and exchange rate anchoring, crucially depends on external resource flows.
In 2024, there was some easing of monetary policy and greater inflation stability in the early quarters, thanks to the inflow of foreign currency from Chevron Corp.’s oil exports. However, in the last quarter, increased public spending financed through monetary emissions and electoral instability led to significant exchange rate depreciation and inflation rise.
For 2025, the effect of the reinstatement of oil sanctions will result in a projected primary monetary expansion increase of 257%.
Therefore, it is likely that the government and the BCV will tighten monetary policy to minimize liquidity expansion.
In a dollarized economy with external resource restrictions, monetary policy has limitations in controlling monetary aggregates and curbing the high substitution of the bolívar with dollars in a context of high and persistent inflation.
A reversal of the downward inflation trend observed until 2024 is anticipated. It is estimated that, in the absence of other shocks or policy changes, the point inflation rate for 2025 will exceed 200%.