WORLD TRADE G/STR/N/1/VEN
13August 1996
ORGANIZATION(96-3198)
Original: Spanish Working Party onState Trading Enterprises
STATE TRADING
Notification Pursuant toArticle XVII:4(a) oftheGATT 1994 andParagraph 1
oftheUnderstanding ontheInterpretation ofArticle XVII
VENEZUELA
Thefollowingcommunication,dated22July1996,hasbeenreceivedfromthePermanentMission
ofVenezuela.
_______________
I. Enumeration ofstatetrading enterprises
Product: Petroleum products
Enterprise: Petróleos deVenezuela S.A.(PDVSA)
II. Reason andpurpose forintroducing andmaintaining statetrading enterprises
Theoilindustry isreserved fortheVenezuelan State, owing tothesector 'simportance to
Venezuela andforreasons ofnational security.
TheOrganizational Law Reserving thePetroleum Industry andTrade totheState (the
NationalizationAct)containsaprovisionwherebyanyenterprisescreatedtoengageinreservedactivities,
iftheytaketheformofjoint-stock companies, mayconsist ofonesingle partner (Article 6),thereby
forminganexceptiontotheCommercialCode,whichrequirestwoormorepartnersfortheestablishment
ofjoint-stock companies. Theparent company isthesoleshareholder oftheaffiliates andtheVenezuelan
Stateisthesoleshareholder oftheparent company. Hence itfollows thatoneofthemain objectives
ofpetroleum enterprises inourcountry istoachieve amaximum economic rateofreturn, inkeeping
withtherequirements ofnational development (Article 3).TheNationalization Actstipulates that
petroleum enterprises shallbegoverned bytheActandtheregulations thereto, bytheirownstatutes,
bytheprovisions issued bytheNational Executive andbyanyapplicable provisions ofordinary law
(Article 7);thisprovision isrepeated intheConstituent Instrument -Statutes ofPetróleos de
Venezuela, S.A.
TheNationalization Actcontains provisions embodying important principles, forexample,
administering thepetroleum industry isa"business" oftheVenezuelan State, andhence theimportance
oftheeconomic rateofreturn; securing andmaintaining astable, diversified andadequate foreign
market; promoting further exports ofVenezuelan products, guaranteeing thesupply, under appropriate
terms, ofinputs, equipment andother production factors, aswellasessential consumer goods needed
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bythecountry; thefinancial self-sufficiency ofthepetroleum industry; stability forworkers and
maintaining andimproving thegains achieved bythem.
III. Description ofthefunctioning ofthestatetrading enterprises
Through itsaffiliates, Petróleos deVenezuela S.A.isengaged inmeeting boththeneeds of
thedomestic market and,directly orindirectly, exports. Itisalsoresponsible forimports ofproducts
andinputs foritsactivities.
Theprivate sector isauthorized toplayaroleinpartofthemarketing process. Forexample,
service stations andsystems fordistributing gascylinders areoperated byprivate traders. Theprivate
sector alsoplays apartinproducing andmarketing lubricants.
Export quantities aredetermined onthebasisofinternational supply anddemand forpetroleum.
Itisthemarket andproduct competitiveness thatdetermine export quantities.
Inputs andproducts required bytheindustry areimported according toneedinorder tooptimize
manufacturing activities. Manufactured products, using bothdomestic resources andimported inputs,
arethenre-exported orsoldonthedomestic market.
Exports arepriced onthebasis ofproduct competitiveness ontheinternational oilmarket.
Inregard topricing:
(1) Domestic prices areestablished bytheGovernment, through theMinistry ofEnergy
andMines;
(2) exportpricesareestablishedbyPetróleosdeVenezuelaS.A.,onthebasisofcompetitive
prices forcrude andforoilproducts ontheinternational oilmarket; inother words,
market forces determine theprice levels.
Crude andoilproducts aresoldontheinternational market bycontracts ofvarious kinds based
onclearly commercial criteria andnegotiated bymutual agreement between theparties. Theonlysupply
ofquantitiesbasedonageo-politicalagreementisforSanJoséAgreementcountries.Theyare,however,
handled entirely onacommercial basis.