The economy of Venezuela is built upon the nation’s valuable petroleum and mineral resources. While resource extraction has assisted in developing an industrial economy, the nation is vulnerable to fluctuations in world markets. High petroleum prices in the early 1980s gave the nation the highest annual per capita income in South America, but in the early 1990s a weak global oil market, coupled with political instability and a crisis in the banking system, produced a series of economic shocks for the nation. The gross domestic product (GDP), after rising throughout the 1980s, began to fall in the 1990s as the inflation rate rose. The government responded by reducing spending, improving tax collections, and accelerating privatization of state-owned firms, all intended to reduce inflation and the national deficit. The national budget in 1998 included revenues of $16.4 billion and expenditures of $19.8 billion. The GDP in 1999 was $102.2 billion.

The Venezuelan economy is based primarily on the production and exploitation of petroleum. Until 1970 the nation was the world's largest petroleum exporter, but it was overtaken in that year. The modernization and diversification of its economy have been predicated upon the application of petroleum area earnings to other economic sectors; “sowing the oil” (“sembrando el petróleo”) has been the slogan since the 1940s. The potential for such diversification and economic growth has been expanded as a result of the find of valuable deposits of iron ore, nickel, coal, and bauxite, as well as the development of hydroelectric potential.

The petroleum area dominates the economy, accounting for roughly a third of GDP, around 80% of export earnings, and more than half of government operating revenues. Venezuelan officials estimate that GDP grew by 3.2% in 2000. A strong rebound in international oil prices fueled the recovery from the steep recession in 1999. Nevertheless, a weak nonoil area and capital flight undercut the recovery. The bolivar is widely believed to be overvalued by as much as 50%. The government is still rebuilding after massive flooding and landslides in December 1999 caused an around $15 billion to $20 billion in damage.