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Official Name: Bolivarian Republic of Venezuela

Internet Domain: .ve
International Dialing Code: +58

Table of Contents

Location and Size Credit and Collections
Government Risk Assessment
Legal Systems Business Climate
Interesting Facts Business Protocol
Economy Articles of Interest on Venezuela
Comparative Economic Indicators Other Sources of Information

Location and Size

Venezuela is located in Northern South America, bordering the Caribbean Sea and the North Atlantic Ocean, between Colombia and Guyana. Its total area is 912,050 sq km., which is slightly more than twice the size of California.

Government

Venezuela’s government is a Federal Republic. 

Branches:

  • Executive: President Hugo Chavez Frias, chief of state and head of government; Council of Ministers selected by president
  • Legislative: Unicameral National Assembly (165 seats elected by popular vote)
  • Judicial: Supreme Tribunal of Justice (32 magistrates elected by the National Assembly)

Legal System

Venezuela has an open, adversarial court system. Venezuela has not accepted compulsory International Court of Justice (ICJ) jurisdiction. (What does this mean?)

Interesting Facts About Venezuela

  • The word “Venezuela” literally means “Little Venice”
  • In the early 20th century, Venezuela was the largest oil exporter in the world
  • Venezuela is one of the oldest democracies in South America
  • Venezuela is counted as one of the 17 most bio-diverse countries in the world
  • Venezuela has more Miss Universe and Miss World titles than any other country


Economy

Venezuela's economy was strongly affected by the global economic crisis of the last few years. Growth of its GDP was contracted to -3.3% in 2009 and is estimated at -2.8% in 2010. The priority of the Chavez government is to extricate Venezuela from this current crisis.

Facing a recession and an increase in inflation, the government set up a double exchange rate and devalued the national currency by almost 50%. As a result, a parallel market has emerged in which the USD is exchanged at very high rates. The government has also restricted access to foreign currency and has moved to stop all non-essential expenses. A new devaluation of the Bolivar is expected in 2011.

In addition to its financial problems, the country is experiencing an energy crisis. This has led the government to order power cuts and to call for a reduction in energy consumption.

Venezuela remains highly dependent on oil revenues, which account for roughly 95% of export earnings, about 55% of the federal budget revenues, and around 30% of GDP.

The country's wealth is unequally distributed among the population. The unemployment rate reached 8.6% in 2010 and 37.9% of the population lives below the poverty line.

Leading Markets (2009): US 35.18%, Netherlands Antilles 8.56%
note: this excludes oil exports

Leading Exports-commodities: petroleum, bauxite and aluminum, minerals, chemicals, agricultural products, basic manufactures

Leading Suppliers (2009): US 23.66%, Colombia 14.43%, Brazil 9.13%, China 8.44%, Mexico 5.47%

Leading Imports-commodities: agricultural products, raw materials, machinery and equipment, transport equipment, construction materials

Top Industries: petroleum, construction materials, food processing, textiles; iron ore mining, steel, aluminum; motor vehicle assembly

Top Agricultural Products: corn, sorghum, sugarcane, rice, bananas, vegetables, coffee; beef, pork, milk, eggs; fish

Comparative Economic Indicators - 2010

Venezuela Colombia Guyana Brazil Mexico USA
Population* (millions) 27.2 44.2 0.7 201.1 112.5 310.2
Population growth rate* (%) 1.5 1.2 -0.5 1.2 1.1 1.0
Literacy (%) 93.0 90.4 91.8 88.6 86.1 99.0
Unemployment rate (%) 12.1 11.2 11.0 7.0 5.6 9.7
Inflation (%) 29.8 2.6 6.8 4.9 4.1 1.4
Population below poverty line (%) 37.9 46.8 unknown 26.0 18.2 12.0
GDP** (USD billions) 344.2 431.9 5.1 2.2 1,560.0 14,720.0
GDP real growth rate (%) -2.8 4.4 2.5 7.5 5.0 2.8
GDP per capita** (USD) 12,600.0 9,800.0 6,800.0 10,900.0 13,800.0 47,400.0
Public debt (% of GDP) 25.5 44.8 57.0 60.8 41.5 58.9
Exports (USD billions) 64.9 40.2 0.8 199.7 303.0 1,270.0
 Imports (USD billions) 31.4 36.3 1.4 187.7 306.0 1,903.0
Reserves of foreign exchange and gold (USD billions) 29.5 26.9 0.5 290.9 116.4 n/a
Currency Bolivar
(obsolete)
Peso
COP
Dollar
GYD
Real
BRL
Peso
MXN
Dollar
USD
Exchange rate per USD) 01/24/2011 4.3 1,843.5 203.2 1.7 12.0 n/a
Exchange rate (per EUR) 01/24/2011 ?? 2,509.1 276.6 2.3 16.4 1.4

Data from CIA World Factbook

* 2008
**PPP - Purchasing Power Parity

Credit and Collections

ABC-Amega's Experience Collecting in Venezuela

Provided by Vanessa Bersani, Assistant Vice President, International:

Venezuela is one of the most difficult Western Hemisphere countries to collect in.

Venezuela has very strict rules regarding foreign currency and it is often difficult or companies to obtain funds, even when they are willing to pay. Some debtors, however, do use this situation as a stalling technique.

If a law suit is required, all documents must be translated by a certified translator in Venezuela, which is very costly. In addition, the Venezuelan Courts are extremely slow. Even if you win a suit, the debtor would have to pay the official equivalent exchange rate of the debt in Bolivares. The official rate is approximately one-third the market rate.

Dispute Resolution

According to the Arbitration Review of the Americas 2011, Venezuela is a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (aka the 1958 New York Convention), as well as most of the other relevant conventions on international arbitration including the Panama Convention and the Washington Convention.

The Venezuelan Commercial Arbitration Act is based on the UNCITRAL model law. Read more about Venezuelan commercial arbitration.

Risk Assessment

Coface says: “In light of current conditions, particularly President Chavez's nationalization of many sectors of the Venezuelan economy, anti-market orientation, and virulent anti-U.S. rhetoric, U.S. exporters to and investors in Venezuela are well-advised to perform their risk-return calculations carefully, mindful of the uncertainties, but aware of the opportunities in the Venezuelan market.”

Coface Country Rating: C -- A very uncertain political and economic outlook together with a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.

Coface Business Climate Rating: C -- (same as above)

Ducroire Delcredere Political Risk Rating: 5 -- relatively high risk (Low=1; Highest=7)
Ducroire Delcredere Commercial Risk Rating: C -- high risk (A=low; C=Highest)

Business Climate

Venezuela has huge potential for investment and economic growth. This, along with natural resource wealth, has made it attractive to foreign investors. However, political instability, heavy bureaucracy and corruption currently inhibit the business climate.

Companies doing business in Venezuela, or considering such, cite lack of transport and port security and high customs charges as serious problems effecting their business activities in the country.

Market Access: The Venezuelan Government dominates the economy. The state oil company, PDVSA, controls the petroleum sector. Government companies control the electricity sector and important parts of the telecommunications and media sectors.

In 2008, the government nationalized cement and steel producers, as well as select companies in the milk and meat distribution sectors. In 2009, it nationalized assets in the oil (including assets owned by U.S. oil services companies), chemical, tourism, agribusiness (including a processed rice plant owned by a U.S. company), retail, and banking industries. These and previous nationalizations, as well as other threats to property rights and an uncertain macroeconomic environment characterized by high inflation and foreign exchange controls, have led to reduced space for the private sector and low levels of private investment.

Transparency of Regulatory System: Political and regulatory uncertainty has seriously discouraged foreign investment in Venezuela. The laws and regulations governing trade, industry and commerce can change dramatically with little or no notice.

Conversion and Transfer Policies: All requests for foreign exchange at the official exchange rate must be approved by the National Exchange Control Administration (CADIVI). The Central Bank (BCV) completes all legal purchase and sale of foreign currency.

Economic Freedom: Venezuela’s economic freedom score is 37.6, making its economy the 175th freest (out of 179) in the 2011 Index of Economic Freedom. Venezuela is ranked 28th out of 29 countries in the South and Central America/Caribbean region, and its overall score is much lower than the world average.

Corruption: Corruption is a significant problem in Venezuela where a culture of corruption exists within most levels of society, according to the Business Anti-Corruption Portal. President Hugo Chávez has openly declared a zero tolerance policy towards corruption, which has been demonstrated by several public initiatives. However, petty corruption is quite common.

Business Protocol in Venezuela

As with many Latin cultures, Venezuelans are risk averse, which makes it important that they know and trust the people with whom they do business. Venezuelans prefer face-to-face meetings to doing business by telephone or in writing, as these are seen as too impersonal. Senior positions in business are predominately held by the upper class, so it is important that you pay attention to the hierarchy and show appropriate deference and respect to those in positions of authority.

More information on Business Protocol:  Kwintessential

Articles of Interest on Venezuela

Venezuela prices up after new devaluation, UPI.com (January 3, 2011)

Venezuela devalues currency, Reuters-Financial Times (December 30, 2010)

Three Insights Into Doing Business in Venezuela, Fast Company Expert Blog (July 1, 2010)

Sources for further information on doing business in Venezuela

Embassy of the Bolivarian Republic of Venezuela, Washington, DC USA

U.S. Embassy, Caracas, Venezuela

Venezuelan-American Chamber of Commerce of the United States

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Venezuela. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating and Ducroire/Delcredere.

Exchange Rates: OANDA.com The Currency Site.

Other information is provided by sites including FITA.