Since the economy was largely dependent on oil (in 2003 it accounted for approximately 80% of exports and nearly 50% of fiscal revenues), Venezuela neglected other domestic industries for decades in favor of importing goods to satisfy Venezuelan consumer needs. The government has recently encouraged industrial diversification and development through protective tariffs and tax exemptions for reinvestment. Industrial output grew by 1.6% on average during the 1980s and by 3.8% annually during the 1990s. Manufacturing industries grew by an average of 4.3% annually during the 1980s and 1.7% per year between 1988 and 1998. In 1998, manufacturing accounted for an estimated 15% of GDP. Industry as a whole accounted for 40% of GDP in 2001.
Although much of Venezuela's petroleum is exported in crude form, petroleum refining is a major industry. Venezuela's five refineries had a total capacity of 1,282,000 barrels per day in 2002, and reserves are estimated at 74 billion barrels. The country is the world's fifth-largest producer of oil. A two-month general strike in 2002–03 severely affected oil production, but it began to recover in March 2003. The steel industry operates at about 48% of capacity. The Venezuelan metal engineering industry produces auto body parts, valves, boilers, piping, wire mesh, and many other cast products. By 1983, Venezuela had the largest aluminum-smelting capacity in Latin America, with a total of 400,000 tons a year. Bauxite is processed in plants owned by the three state companies—Bauxalum, Venalum, and Alcasa. Other industries include shipbuilding, automobile assembly, and fertilizer manufacture. Venezuela produced 13,170 automobiles in 2001, down 38% from the 21,190 units produced in 2000.
The government is involved in a massive decentralization project to relocate industries in the peripheral cities and the interior. Valencia, the capital of Carabobo State, is a major new industrial center. A second major industrial development scheme has made Ciudad Guayana the hub of a vast industrial area with a 160-km (100-mi) radius. Puerto Ordaz was founded on the basis of the Cerro Bolívar iron ore deposits. West of Puerto Ordaz are the Matanzas steel mill, with a yearly capacity of 750,000 tons, and the Bauxalum bauxite-processing installation.
Venezuela has large and underexploited reserves of natural gas. In 2003, oil and natural gas production, water, whiskey, and the chemicals sector showed potential for growth. Further political unrest could undermine those sectors and the rest of the Venezuelan economy, however.