During the colonial era and until the development of petroleum resources, the export of coffee and cocoa and the raising of cattle and goats provided the main supports for the economy. However, agriculture now accounts for only about 5% of the GDP. For over 40 years the economy has been completely dominated by the petroleum industry; in the mid-1980s, oil exports accounted for 90% of all export value, and in 2002 petroleum accounted for over one-third of the GDP, three-fourths of export revenues and half of government revenues. The Venezuelan economy is therefore greatly influenced by petroleum market conditions and Venezuela through its membership in OPEC has exercised influence on the rest of the world. The Venezuelan oil minister is reputed to be one of the principle architects of the first oil shock in 1973, and in 1999, Venezuela's decision to cut production to halt the continuing slide in oil prices led the way to their recovery in 2000 and after. The second most important mineral product is iron, and Venezuela's mineral wealth is augmented by frequent discoveries of additional reserves. Industrial development is fostered by government policy.
The average annual GDP growth during 1970-80 was 5%, with a peak of 7.2% during 1974–77, the years following the first oil shock and OPEC's quadrupling of oil prices. In the late 1970s, the economy began to stagnate as inflation ate up the real value of the oil price increases. Venezuela's GDP growth rate declined from 3.2% in 1978 to zero in 1979, with a negative rate of 1.5% recorded in 1980. In 1980 oil prices reached all-time highs, but the speculation was that they would continue to rise. Instead, recession and reduced demand in the main industrial markets brought oil prices sharply down, eventually collapsing in 1986 to levels prevailing, in real terms, before the first oil shock. Venezuela and many other Third World countries were left holding large amounts of high-interest short-term obligations with no way to earn the money in the stagnating world economy to pay them off. Venezuela's state-owned enterprises had accumulated short-term loans in the petro-dollar market when high inflation had reduced real interests to near zero. The Reagan administration's tight money stance wrung inflation out of the system, and by 1982 soft markets for oil, iron ore, and aluminum were aggravating Venezuela's financial problems; GDP declined during 1983–85. During 1980–90, average annual GDP growth was only 1.1%.
After severe adjustments experienced during 1989 and 1990, the main economic indicators improved considerably in 1991 and 1992. Real GDP growth rose to 10.4% and 7.3%, respectively. Growth was led by expansion of the petroleum sector due mainly to the Persian Gulf War. Growth was also a result of the liberalization of the economy, including a privatization program initiated in 1990 and the restructuring of the public sector enterprises. However, growth slowed down and real GDP contracted by 1.0% in 1993. In April 1996, President Caldera announced a shift towards a more free market orientation coupled with fiscal austerity to revitalize the economy. The government devalued the currency, eliminated exchange controls, and raised domestic gasoline prices 369–862%. From 1988–98, real GDP growth averaged 2.5%. Inflation remained stubbornly high; between 1990 and 1996, consumer prices rose by an average of about 50% per year. The inflation rate was at 30% in 1998. A recession during 1998 due to low oil prices triggered a steep rise in the cost of living and halted economic growth. GDP contracted 6.1% in 1999 as inflation rose to 20%, triggering the government's decision to restrict oil production to bring prices up from near-record lows. With the recovery of oil prices in 2000, the economy grew 3.2% in 2000, and inflation fell to 13.2%. In the context of the global economic slowdown of 2001, however, real growth declined to 2.1% as inflation fell to a relatively low 12%.
In 2002, however, politics overtook the economy. Populist President Hugo Chavez had been elected in 1998, with a term to run to 2006, a prospect seemingly all but intolerable to the opposition which saw in his "Bolivarian democratic revolution" ruination for the economy. Though the present constitution provides for a referendum on the continuance of the president in office midway through his term, that is, in August 2003, this also appeared too long to wait, particularly since it was quite likely Chavez would win such a referendum. In January 2002 and in December 2002 strikes were called against the government with the intention of forcing Chavez's resignation. From 12–14 April 2002, in fact, Chavez was briefly ousted with apparent close cooperation from the Bush administration, but then returned to power on a wave of popular and military support. After his return, however, no more oil was delivered to Cuba, allegedly for lack of payment, under a 2000 agreement that allowed Cuba to buy 53,000 barrels a day with 15 years to pay at low interest rates. Chavez had been accused of giving the nation's oil wealth away. A new wave of strikes began in December 2002 demanding an early referendum. The strike by oil workers lasted longest, over two months, costing the economy an estimated $6 billion. By March 2003, oil production had returned to normal levels. The interruptions in production in 2002 contributed to an estimated 8.9% decline in GDP in 2002, with an increase in inflation to 15.5%. Further contraction is expected in 2003. Negotiations between the government and the opposition have been assisted by a "Group of Friends" that includes the OAS, the Carter Center, the US, Brazil, Mexico, Chile, Portugal and Spain.