For nearly two decades of my professional career I worked as an advisor to Carmelo Lauría, probably the Venezuelan legislator with the longest and most distinguished record in public finance. Working alongside him was an invaluable postgraduate education in the school of life. During that period I taught Financial Law, Constitutional Bases of Taxation, Tax Regime of Commercial Companies and Multilateral Financial Institutions in the graduate programs of the Universidad Católica Andrés Bello. I have also accumulated nearly four decades of practice in international tax law.
As a member of the National Assembly between 2000 and 2005, I devoted much of my effort to the budget, public spending and debt, and oversight of fiscal management. If I learned anything from those experiences, it is that governing means knowing how to budget. A state’s priorities, its true intentions and its real possibilities are revealed by reading its budgets.
In every functioning democracy, budget debate and oversight of its execution are a central part of political and legislative activity. In Venezuela, however, over the last two decades this process lost its substance. An essential democratic practice became a mere formality, followed by discretionary and almost entirely opaque budget execution.
The absence of this issue from the political conversation at such a critical moment is a shortcoming we must correct. First we need technical consensus on the facts and figures. Then we must debate proposals, avoiding clichés and, in particular, the notion that because there is a fiscal deficit, the only possible response is to cut public spending.
Venezuela’s reality is far more complex. The country has a high deficit and debt that exceeds its current capacity to pay, yet it needs to spend and invest considerably more to restore essential services, rebuild its infrastructure and begin paying down the immense accumulated social debt.
The fiscal paradox
Before turning to the figures, a necessary caveat: in the absence of complete, up-to-date official fiscal reporting, the data that follow are plausible estimates compiled from available sources —multilateral organizations, analysts and specialized press— not certified official figures, and should be understood as references subject to verification.
The annual deficit is estimated at between 6% and 9% of GDP: a gap of between $7 billion and $10 billion, depending on the estimate of the economy’s size. Added to this is external debt and a set of liabilities that some calculations place at between $150 billion and $170 billion, including sovereign and PDVSA bonds, overdue interest, bilateral loans, commercial obligations and arbitration awards.
I am convinced that this nominal figure —which some advisors and intermediaries have had incentives to present at its highest estimates, including figures that in recent months have gone as high as $240 billion— should not automatically be accepted as a definitive and incontrovertible obligation of the Republic. Venezuela will need to conduct an audit examining the origin, legality, terms and beneficiaries of each claim, distinguishing between legitimately owed principal, accrued interest, penalties, disputed obligations and claims subject to litigation.
On that basis, a restructuring should be negotiated that substantially reduces the value of the debt, extends maturities and establishes debt service compatible with economic recovery and social needs. Part of it could be converted into productive investment, and another part exchanged for assets or stakes in projects, through transparent, competitive processes subject to institutional oversight. This is not about liquidating national assets or rewarding speculative claims, but about transforming unpayable liabilities into capital, infrastructure and economic activity.
But the other side of the problem is that the Venezuelan state spends and invests very little on its essential functions. The 2026 national budget amounts to approximately 18% of estimated GDP, while general government spending in OECD countries averages more than 40% of GDP.
Venezuela allocates around 1.7% of GDP to public education, compared with approximately 5% in MERCOSUR and 4.8% in the OECD. In health, the line item combining health and social security barely reaches 1.2% of GDP, meaning spending on health alone must be lower still. The regional average for public health spending is close to 5%, and the OECD average is 7%.
Venezuelan investment in infrastructure and public works represents around 1.1% of GDP, compared with 3% in MERCOSUR and 3.5% in the OECD. In science and technology, the budget allocation amounts to just 0.16% of GDP.
Closing these gaps and moving initially toward the regional average would require mobilizing an additional $10 billion to $12 billion each year. Progressively approaching OECD benchmarks could require between $15 billion and $17 billion annually.
The scale of the social debt
Those figures still do not adequately reflect the accumulated needs in pensions, housing, public services and post-earthquake reconstruction.
The pension system is fragmented, unequal and opaque. The IVSS (Venezuelan Social Security Institute) reportedly covers around 3.2 million pensioners, while the 100% Amor Mayor program serves more than two million additional beneficiaries. Although there may be overlap, more than five million older adults depend on some form of pension or state transfer.
The formal pension remains frozen at 130 bolívares a month —less than one dollar— supplemented by administrative bonuses that are not legally part of the pension and are not adjusted under any stable rule. Pensioners covered solely by the IVSS and Amor Mayor beneficiaries receive around $70 a month, while some public-sector retirees receive higher amounts.
Guaranteeing $70 to five million people costs approximately $4.2 billion a year. Progressively establishing a universal floor of $150 would raise the gross cost to about $9 billion annually. Before reforming the system, it will be essential to conduct a census identifying beneficiaries, overlaps, contributory rights and assistance programs. The transition must replace discretionary bonuses with formally recognized, predictable and sustainable pensions.
In housing, the deficit is close to 2.75 million units. At an average cost of between $25,000 and $35,000 per housing solution, addressing it would represent a cumulative investment of between $69 billion and $96 billion. Not all of this should be financed or built by the state. A ten-year program will need to combine mortgage credit, private investment, rental housing, rehabilitation, social housing, land regularization and targeted subsidies.
Restoring public services will likewise require investment on a large scale. Available estimates place the initial needs for electricity, water, transportation and telecommunications at no less than $17.67 billion. A ten-year program would need to mobilize between $2 billion and $4 billion annually, combining public and private investment, concessions, sustainable tariffs and subsidies targeted at vulnerable households.
To this must be added the cost of normalizing public-sector wages, currently propped up artificially through non-salary bonuses that amount to barely $190 a month on average. Raising the income of the roughly 2.5 million civilian public employees —excluding the National Armed Forces (FAN), whose case warrants a separate study— to the level of the region’s average public-sector wage, an original estimate based on Inter-American Development Bank data that puts that figure at around $850 a month, would cost no less than $19 billion a year, assuming the current size of the state payroll remains unchanged. Added to this is a pending, still unquantified liability for severance and other statutory labor benefits (“prestaciones sociales”), which has built up because much of workers’ real income has for years been paid through bonuses that are not part of their legally defined base salary, and therefore have not generated the entitlements required under current labor law. Sizing that retroactive liability first requires a legal reform that does not yet exist and that will have to decide how —and whether— to recognize those rights retroactively.
To this pre-existing social debt must be added the earthquakes of June 24, 2026. The World Bank estimates $19.6 billion in direct physical damage. Reconstruction under modern safety standards, the restoration of services and economic recovery could raise the total effort to as much as $50 billion.
This figure is equivalent to close to half of Venezuela’s GDP and two and a half times the national budget. Reconstruction must be conceived as a multi-year program, financed through budgetary resources, multilateral credit, international cooperation, insurance and private investment. We must avoid double-counting, since part of this damage overlaps with needs already identified in housing, infrastructure and public services.
A state that collects little, yet punishes the formal taxpayer
The paradox is completed by an equally troubling reality: although the state collects little relative to GDP, formal businesses bear an extremely heavy tax burden.
It is estimated that only between 36% and 40% of Venezuelan businesses effectively pay taxes. The weight of the system therefore falls on those that remain in the formal sector. Beyond income tax and VAT, these businesses face municipal taxes on economic activity, urban sanitation fees, and payroll-based contributions earmarked for FAOV (housing), INCES (training), science and technology, sports, and anti-drug programs. Several of these are calculated on gross revenue or payroll, not on profits.
National analysts estimate that the effective rate stemming from national-level taxes can approach 40% of net income. Adding municipal and payroll-based charges, the cumulative burden could exceed 60%, in line with the World Bank’s last measurement before it discontinued its Doing Business report, which put Venezuela’s total tax and contribution rate at 65% of commercial profits.
We thus have a double distortion: a state with insufficient revenue and an overburdened formal sector. Raising rates on those who already comply can discourage investment, push activity into informality, and end up reducing collection. But cutting taxes without broadening the base or putting public finances in order would worsen the deficit.
An agreement for the next ten years
The response cannot be an isolated measure, nor a program left to economists alone. One of the great goals of the democratic transition must be to build a political and social agreement around a fiscal and development plan with a minimum ten-year horizon.
That agreement must define what kind of state we want and what it costs to finance it; which services should be universal; how oil revenue will be distributed; what contribution should be expected from citizens and businesses; and what commitments the government, workers, the private sector, universities and civil society must each undertake.
The plan will have to combine fiscal discipline with a progressive expansion of social spending and investment. This means eliminating monetary financing of the deficit, restoring the Central Bank’s autonomy, publishing consolidated fiscal accounts, auditing and restructuring the debt, simplifying the tax system, reviewing payroll-based charges, and broadening the taxpayer base. The goal cannot be to charge the same taxpayers more, but to ensure that a larger, more formal and more productive economy generates greater public revenue at reasonable rates.
Oil must contribute to that process, but it cannot go back to financing a clientelist state vulnerable to market swings. Windfall revenue must be converted into savings, infrastructure and human capital. It will also be essential to mobilize private investment, multilateral financing and public-private partnerships, under transparent rules and legal certainty.
The challenge is to simultaneously do things that appear contradictory: reduce the deficit while increasing essential spending; improve pensions without reigniting inflation; ease the tax burden while raising fiscal revenue; rebuild housing and services without turning all of that investment into public debt; and make use of oil while overcoming fiscal dependence on it.
Resolving this paradox will require time, sequencing, credibility and agreements that outlast any single government. The democratic transition will not be complete with free elections and new political institutions alone. It must also produce a new fiscal contract: an agreement under which the state is held accountable, citizens contribute under fair rules, and public spending is effectively translated into rights, services, opportunities and development.
That is one of the fundamental consensuses Venezuela needs to build.