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Country Strategy Paper: Venezuela

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Country Strategy Paper: Venezuela COMMISSION OF THE EUROPEAN COMMUNITIES 9(1(=8(/$ &RXQWU\6WUDWHJ\3DSHU &28175<675$7(*<3$3(5±9(1(=8(/$ 7$%/(2)&217(176 SUMMARY……………………………………………………………………………………1 1. EU CO-OPERATION OBJECTIVES.............................................................................. 2 1.1 EU Development Policy Objectives……………………………………………. 2 1.2 The Rio Summit and EC Regional Objectives………………………………… 2 2. THE POLICY AGENDA OF THE VENEZUELAN GOVERNMENT.......................... 4 3. ANALYSIS OF THE POLITICAL, ECONOMIC AND SOCIAL SITUATION ........... 6 3.1. Political situation.................................................................................................... 6 3.2. Economic and social situation................................................................................ 9 3.2.1. Economic situation, structure and performance ...................................... 9 3.2.2. Social developments .............................................................................. 11 3.2.3. Consequences of the 1999 floods and land slides……………………..12 3.2.4. Assessment of the reform process ................................................ 13 3.2.5. Structure of the public sector finances................................................... 13 3.2.6. External environment, including regional co-operation agreements ............................................................................................. 14 3.3. Sustainability of current policies.......................................................................... 14 3.4. Medium-term challenges...................................................................................... 16 4. OVERVIEW OF PAST AND ONGOING EC CO-OPERATION ................................ 16 4.1. Past and ongoing EC co-operation: results analysis, lessons and experience............................................................................................................. 16 4.1.1. Past EC co-operation (before 1998)....................................................... 17 4.1.2. Ongoing co-operation (1998-2001) ....................................................... 17 4.1.3. Lessons learnt from the past .................................................................. 17 4.2. Information on EU Member States co-operation programmes ............................ 18 4.3. Information on co-operation programmes of other donors .................................. 18 5. EC RESPONSE STRATEGY ........................................................................................ 19 5.1. Principles and objectives for co-operation ........................................................... 19 5.2. Priorities and specific objectives for co-operation............................................... 19 5.2.1. Reconstruction and prevention .............................................................. 19 5.2.2. Economic co-operation.......................................................................... 19 5.2.3. Regional dimension……………………………………………………21 5.3. Coherence............................................................................................................. 21 5.4. Complementary within EU................................................................................... 23 5.5. Complementary with other donors………………………………………………23 6. WORK PROGRAMME ................................................................................................. 24 7. ANNEXES 1. Comparative Indicators 2. A) Macroeconomic Indicators B) Trade C) Fish indicators D) Floods damage 3. A) Social Indicators B) Poverty Indicators C) Life conditions 4. Venezuela Energy Sector 5. Co-operation Venezuela A) Bilateral Co-operation EU-Venezuela (1992-2000) B) Current EU Co-operation Matrix C) Co-operation Matrix for Multilateral Organisations 6. Map of Venezuela 6800$5< Venezuela is the seventh largest Latin American country and covers an area of 2 912,050 km . Its population in 2000 reached 24.2 million. It has a Caribbean coastline 2,718-km long and an Atlantic coastline of 1,008 km. It is considered to be one of the world’s most ecologically diverse countries with four different geographical regions. The country has the largest economy in the Andean Community (CAN) and although it is very unevenly distributed, Venezuela enjoys one of the highest GNPs per capita in Latin America. Venezuela is going through a period of important changes that affect the political, social and economic spheres. The government started with reforms in the political arena: a new Constitution, a single-chamber National Assembly and extension of the presidential mandate with the possibility of re-election. A number of significant economic reforms, with important social implications, have also been tackled, resulting in strong protests from some social and productive sectors. Venezuela underwent major political turmoil in April 2002, which has highlighted the country’s social polarisation. The Venezuelan economy is characterised by a striking duality. Its energy sector is highly developed and efficient compared to other sectors. The energy sector represents almost 30% of GDP and 80% of exports, making the Venezuelan economy highly vulnerable to oil price fluctuations. Diversifying the economy has become a key objective and an urgent prerequisite for its development. Venezuela's growth potential is very high, provided that the government applies an efficient long-term economic programme, capable of restoring investor confidence. Severe floods in 1999 ravaged some of the coastal regions of northern and north-eastern Venezuela with an estimated 15,000 to 20,000 deaths, more than 8,000 homes affected, with total damage amounting to between ¼DQG¼ELOOLRQ7KHIORRGVFRQWULEXWHGWRD fall of 6.1% in GDP for that year. The international community reacted rapidly to the catastrophe; the European Commission provided ¼PLOOLRQLQHPHUJHQF\DLG There are two main dimensions to European Community co-operation with Venezuela: regional and bilateral. On a regional level, the dialogue between the EU and the Rio Group aims to strengthen relations with Latin America, covering political, economic, social and humanitarian domains1. On a bilateral level, the Commission will focus on two of Venezuela's main needs in accordance with the priorities of the government. First, on the prevention plans to mitigate the effects of natural disasters. Second, on helping to diversify the economy, by carrying out actions in the fish sector, which is included in the Government's plans, and which affects some of the areas with high poverty levels and at risk of flooding. 1 A number of horizontal programs have been developed by the Commission from which Venezuela will benefit, as it will from the EC´s support to CAN regional integration. 1 (8&223(5$7,212%-(&7,9(6 (8'HYHORSPHQW3ROLF\2EMHFWLYHV The European Union’s policy with regard to co-operation in Latin America is based on Title XX of the Treaty establishing the European Community. Article 177 establishes that Community policy in the field of development co-operation is to encourage sustainable economic and social development in developing countries, in particular the most disadvantaged; the harmonious and progressive insertion of the developing countries into the world economy and the fight against poverty. Furthermore, the general aim of EU policy is to develop and consolidate democracy and the rule of law, as well as the respect of human rights and fundamental freedoms. The European Union’s development policy was defined in a November 2000 Statement by the Council and the Commission, setting out the principle that co-operation is an expression of solidarity and is consequently an essential feature of the Union’s international activity. The European Union’s development policy is conceived in terms of sustainable, equitable and participatory human and social development. It also asserts that the promotion of human rights, democracy, the rule of law and good governance are an integral part of this policy. Given the current panorama of poverty in many regions of the world, a principal aim of EU development policy is to reduce poverty with a view to its eventual eradication. In this respect, it is believed that sustained growth is a necessary, but not sufficient condition, in the reduction of poverty. More focused, pro-poor actions are necessary to advance in this direction. At the same time, it is recognised that the integration of the developing countries into the world economy is a precondition for their growth and sustainable economic and social development, and is therefore also a precondition for the eradication of poverty. In the November 2000 Statement, the Council and the Commission explained that the EU intends to concentrate its development co-operation efforts on six areas: the link between trade and development; regional integration and co-operation; support for macroeconomic policies and the promotion of equitable access to social services; transport infrastructure; food security and sustainable rural development; and institutional capacity building. 7KH5LR6XPPLWDQG(&5HJLRQDO2EMHFWLYHV Relations between the European Union and Latin America are carried out using a number of political dialogue frameworks (up to ministerial level) and regional agreements. They are inscribed in the spirit of the Rio Summit of 28-29 June 1999, and the accords reached at the same, which have since been developed further in various ministerial working groups and will very likely be further strengthened at the Madrid Summit in May 2002. Enhanced and closer relations
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