Academic journal article Current Politics and Economics of South and Central America

2014 Investment Climate Statement: Venezuela *

Academic journal article Current Politics and Economics of South and Central America

2014 Investment Climate Statement: Venezuela *

Article excerpt

Bureau of Economic and Business Affairs

1.Openness to and Restrictions Upon Foreign Investment

Venezuela's legal and regulatory regime reflects the GBRV's ambiguous posture toward foreign direct investment (FDI). The legal framework generally provides for equal treatment of foreign and local investment. However, the GBRV's history of expropriations and interventions in the economy signal its ambivalence toward foreign investors.

The Venezuelan constitution of 1999 treats investment as a means of promoting development of the national economy. Article 301 of the constitution adopted international standards for the treatment of private capital, with equal treatment of local and foreign capital. Article 302 reserves for the state certain strategic sectors, including petroleum and natural resources.

Decree 2095 of 1992 (Gazette No. 34.930, 1992) provides the legal framework for foreign investment in Venezuela. Decree 2095 implemented Andean Community Decisions 291 and 292 and lifted most restrictions on foreign participation in the economy. Article 13 of the decree guarantees foreign investors the same rights and imposed the same obligations applied to national investors "except as provided for in special laws and limitations contained in this Decree." Decree 2095 also provides foreign investors the right to repatriate 100 percent of profits and capital, including proceeds from the sale of shares or liquidation of a company, and allows for unrestricted reinvestment of profits. Most investors, however, have been unable to repatriate dividends since 2008 due to Venezuela's exchange controls (see section 2 regarding Conversion and Transfer Policies). Between April 2006, when Venezuela first withdrew from the Andean Community, and April 22, 2011, when its withdrawal was finalized, the GBRV continued to apply some Andean Community norms in the absence of other regulations. Venezuela's formal withdrawal from the Andean Community, however, has added to the uncertainty regarding Venezuelan laws based on Andean Community decisions.

Under Decree 2095, foreign investors need to register with the Superintendent of Foreign Investment (SIEX) within 60 days of the date of their investment. Investors need not seek SIEX approval prior to investing. Registration requirements include: an application for registration and classification of the company as national, mixed, or foreign; a copy of the company's articles of incorporation or by-laws translated into Spanish by an official translator and authenticated by a Venezuelan consulate in the country of origin; and a power of attorney for a local representative of the foreign investor(s). Foreign companies may also open offices in Venezuela without prior authorization from SIEX as long as they do not engage in certain sales or business activities that would require registration. No prior authorization is required for technical assistance, transfer of technology, or trademark-use agreements provided they are not contrary to existing legal provisions. More information on registering foreign investments with SIEX is available (in Spanish) at http://www.siex.gob.ve/.

Decree 2095 reserved three areas of economic activity to "national companies": (1) broadcast media, (2) Spanish-language newspapers, and (3) professional services regulated by national laws. These professional services include law, architecture, engineering, medicine, veterinary medicine, dentistry, economics, public accounting, psychology, pharmacy, and management. A "national company" (as defined in Article 1 of Andean Community Decision 291) is a company in which Venezuelan nationals hold more than 80 percent of the equity. Foreign capital is therefore restricted to a maximum of 19.9 percent in the areas noted above. The Investment Promotion and Protection Law of October 1999 (Gazette No. 5.390, 1999), whose regulations were published in July 2002, maintained the same reserved sectors. Foreign professionals are generally free to work in Venezuela-provided that they possess a government-issued identity card or government-approved work permit-but they must first revalidate their certification at a Venezuelan public university. …

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