WT/TPR/S/108 Trade Policy Review
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II. TRADE AND INVESTMENT REGIME
(1) INTRODUCTION
1. Since Venezuela’s last Trade Policy Review, in 1996, its institutional and legal framework
has changed considerably.  Many new laws and regulations have been adopted both at the national
level and within the Andean Community.  These changes include the approval of a new Constitution,
which sets forth detailed provisions regarding some aspects of trade and investment policy and
establishes the general framework for other policies.  Many of the legal changes made since 1999
have been introduced by means of decrees having the status and force of law.  These decrees havebeen issued under the provisions of enabling laws which confer legislative power upon the President.
2. The swiftness and scope of the changes made in recent years have had some degree of
influence on most economic activities in Venezuela.  Some of these changes are aimed at
strengthening and modernizing the institutional struct ure, but the current process of change has also
generated considerable tensions which ultimately led to a temporary alteration of the country’sconstitutional order in April 2002.  In an effort to remedy this situation, the Government has pledged
to take part in a national dialogue and resolve the political crisis; this reconciliation process has the
support of the international community.
1  This process is likely to be a decisive factor in determining
how Venezuela’s legal and institutional framework will evolve in the future.
3. The changes made in Venezuelan law during the past six years reflect what are in some cases
divergent approaches to trade and investment policy.  Generally speaking, the policies that have been
introduced may help to consolidate the process of opening up the country’s trade and investment
sectors.  In some cases, however, they may result in increased State interference in the workings of
the domestic market.  Even though an effort has been made to ensure the transparency of these
legislative changes, their number and scope are such  that they could diminish the predictability of
Venezuelan trade policy.
4. The Ministry of Foreign Affairs continues to have jurisdiction over foreign policy and
multilateral trade negotiations.  Trade policy is implemented by the Ministry of Production and Trade,
which has jurisdiction in many areas relevant to WTO Agreements.  The Ministry of Production and
Trade was created in 1999.  It is composed of vice ministries responsible for trade, industry and
tourism, together with auxiliary and related bodies.  In the event of a conflict with national legislation
the provisions of WTO agreements and other international accords take precedence.
5. Venezuela took part in the multilateral negotiations on financial services and basic
telecommunications, and has submitted a series of proposals and reports to various committees,
particularly those concerned with services.  It has been involved only once as a complainant and once
as a respondent in disputes brought before the WTO and has reserved its third-party rights on four
occasions.
6. Venezuela is a member of the Andean Community and, together with Colombia and Mexico,
is a party to the free trade agreement signed by the Group of Three.  As a member of the Latin
American Integration Association (LAIA), Venezuela is party to a growing network of preferential
trade arrangements, most of which are partial in scope, with countries in the region.  The broadest
agreements of this type are those that have been concluded with Chile, Brazil and Argentina.
                                                     
1 See, for example, the “Declaration on democracy in Venezuela” adopted by the General Assembly of
the Organization of American States on 4 June 2002 at the following link:http://www.oas.org/
juridico/english/ga02/gen_as02.htm .Venezuela WT/TPR/S/108
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7. In the past few years, Venezuela has sought to attract more foreign investment by following
the general guidelines set forth in Decision 291 of the Commission of the Andean Community.  Thisapproach is also reflected in the new Constitution, which grants national treatment to foreign investors
in all sectors except certain reserved areas, such as hydrocarbons, fisheries and shipping; steps are
being taken, however, to increase the participation of foreign investors in some of these latter areas
(see Chapter IV).
8. The liberalization programme implemented since 1996 and the introduction of new measures
to stimulate foreign investment (such as the “legal stability contracts”) have not resulted in any
sizeable increase in investment flows.  This suggest s that the main factor that is preventing foreign
investment in Venezuela from growing more rapidly is investors’ perception of institutional and
regulatory uncertainty in the country in recent years.  Venezuela’s future success in attracting foreign
investment will therefore depend, to a great degree, on its ability to demonstrate the existence of thelong-term institutional and legal stability needed to bolster investor confidence.
(2) 
CONSTITUTIONAL AND GENERAL LEGAL FRAMEWORK
9. The Bolivarian Republic of Venezuela is a decentralized Federal State which is divided into
23 states, one district capital and 72 federal dependencies.  The Constitution is the supreme law of the
land and the foundation of its legal system.  A new Constitution was approved by popular referendumand entered into force on 15 December 1999.  Under the Constitution, the government is divided into
the national government, state governments and municipal governments.
10. The national government is in turn divided into executive, legislative, judicial, citizens and
electoral branches.  Executive power is exercised by the President of the Republic, the Executive Vice
President and the Council of Ministers.  The President is elected by direct suffrage for a six-year term
and is eligible for re-election to a single consecutive term.
2  The members of the Council of Ministers
are appointed by the President.
11. Legislative power is exercised by the National Assembly, which is composed of deputies
elected by each federal unit through proportional universal suffrage based on a ratio of 1.1 per cent of
the country’s total population.  Each federal unit also elects three deputies.  Indigenous groups elect
three deputies in accordance with the provisions of the Electoral Act.  This unicameral system
replaced the bicameral system that was in effect until 1999.  The National Assembly is empowered toappoint up to 15 regular and special standing committees to deal with specific issues.  The deputies in
the National Assembly serve five-year terms and may be re-elected to a maximum of two additional
terms.
12. The judicial branch is made up of the Supreme Court, the lower courts, the Public Ministry,
the People's Court of Defense, criminal investigative agencies, auxiliary bodies and the civil servantsemployed in the justice system, the prison system, alternative mechanisms for the administration of
justice, citizens legally empowered to take part in the administration of justice and attorneys-at-law.
Supreme Court Justices are elected for single 12-year terms.  Candidates may apply to the Judicial
Candidacy Committee on their own initiative or may be  nominated by organizations working in areas
related to the judicial system.  The Committee draws up a short list which it submits to the NationalAssembly.  The National Assembly then makes the final selection.
                                                     
2  Until 1999, the presidential term of office was five years.WT/TPR/S/108 Trade Policy Review
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13. The citizens branch is administered by the Republican Moral Council, which is composed of
the Public Defender, the Attorney General and the Comptroller General of the Republic, each of
whom serves a seven-year term.  The agencies of the citizens branch are responsible for preventing,investigating and penalizing acts that contravene public ethics and governmental morality and for
ensuring the proper management of public assets.
14. At the state level, the executive branch is headed by the Governor, who is elected to a four-
year term and may be re-elected for a single consecutive term.  The states’ degree of autonomy is
determined by the national Constitution and the relevant laws.  The national executive branch and itsdesignated agencies have exclusive jurisdiction over measures affecting national or international
trade.  Legislative powers in each state are exercised by a legislative council made up of no more than
15 and no fewer than 7 members.  At the municipal level, executive power is exercised by the mayor,
while legislative functions are performed by a legislative council.
15. The Council of State is the Government’s senior advisory body and is responsible for
formulating policy recommendations in the national interest regarding issues on which the President
requires its opinion.  The Council of State is com posed of the Executive Vice President, who chairs it,
and of the members appointed by the President of the Republic (five), the National Assembly (one),
the Supreme Court (one) and the state governors as a group  (one).
16. Bills may be submitted by the executive branch, the delegated commission and standing
committees, no fewer than three members of the National Assembly, the Supreme Court in cases
dealing with the judicial system’s organization and judicial procedures, the citizens branch in cases
dealing with laws concerning its constituent bod ies, the electoral branch in cases dealing with
electoral laws, groups of the electorate representing at least 0.1 percent of the persons listed on the
permanent voter registration list and the relevant state legislative council in cases dealing with state
laws.  Under the Constitution, any bill must be debated by the National Assembly on at least two
different days before it may be passed.  If no difference of opinion arises during the second debate,the bill is approved.  It is then sent to the President for promulgation within a period of 10 days;
during that time, the President may request amendments.  If amendments are requested, the National
Assembly takes them under consideration, reaches decisions regarding the questions posed by the
President and then submits the bill for promulgation within five days of its receipt; no further
observations are admitted.  The bill becomes law upon its publication in the Official Gazette of the
Republic .
17. The legislative process may diverge from the foregoing procedure if it is conducted under the
provisions of enabling laws.  Enabling laws are statutes which are passed by three-fifths of the
members of the National Assembly for the purpose of establishing guidelines, objectives and the
scope of matters that can be acted upon by the President and given the status and force of law.   Theperiod of time in which basic laws are to remain in effect is supposed to be stipulated.  Most of the
laws that have been passed and implemented by Venezuela since 1999 have been processed under the
provisions of enabling laws and are, consequently, decrees that have been endowed with the status
and force of law.  The laws that have been passed include significant  pieces of legislation which have
altered the legal system as it relates to such matters as investment, gaseous and other hydrocarbons,and various aspects of trade policy.  They also include laws that introduce changes in the system of
land ownership, such as the Agrarian Development and Land Law, and the Fisheries and Aquaculture
Law.  Interested parties have submitted observations or recommendations for amendment regarding
28 of the 49 laws approved by the executive branch under the second Enabling Law.
18. Matters of particular national importance may be submitted to a consultative or abrogative
referendum at the initiative of the President, the National Assembly or a specified percentage ofVenezuela WT/TPR/S/108
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voters (10 per cent of registered voters for either consultative or abrogative referendums).  Laws
granting approval for international treaties may not be the object of abrogative referendums.
(3) TRADE POLICY FORMULATION AND IMPLEMENTATION
(i) Trade policy objectives and formulation
19. Under Venezuela’s Constitution, it is the State’s prerogative to employ trade policy to defend
the economic activities of Venezuelan national enterprises, whether publicly or privately owned.3
Other aspects of trade policy covered by the Constitution include matters related to the protection ofintellectual property, competition policy, investment policy and environmental protection.  Under theConstitution, the petroleum industry and other sectors, operations and goods and services which are in
the public interest and of a strategic nature are reserved for the State.  It provides that the State shall
retain all shares of Petróleos de Venezuela, S.A. or of any other body created to manage the petroleum
industry, with the exception of subsidiaries and strategic joint ventures.  It further provides that the
State shall promote the domestic manufacture of raw materials deriving from the exploitation of non-renewable natural resources with a view to assimilating, creating and inventing technologies, creating
jobs and driving economic growth.  In addition, it provides that any revenues generated by tapping
subsoil resources and minerals shall be used to finance real productive investment, education and
health.
20. Within the general framework established by th e Constitution, the main lines of trade policy
to be pursued in the medium term are set forth in the National Economic Development Plan for 2001-
2007.  One of the main points addressed therein is the promotion and deepening of Latin American
and Caribbean regional integration.  The policy to be used to reach that objective is aimed at
promoting Venezuela’s entry into MERCOS UR as an Associate Member, forming a
MERCOSUR/Andean Community partnership and maki ng the negotiations regarding the Free Trade
Area of the Americas (FTAA) contingent upon the prior conclusion of those agreements.
4  Other
policy objectives are to promote economic integration among the Andean countries and within theframework of the Group of Three and to heighten Venezuela’s presence in the Caribbean.
21. One of the goals of trade policy is to strengthen Venezuela’s position in the international
economy.  This objective is to be achieved by identifying and developing new markets for non-
traditional Venezuelan products, building up strategic partnerships in the petroleum sector with a view
to increasing the value added to the country’s exports, and supporting the Organization of PetroleumExporting Countries (OPEC).
(ii) Main trade laws and regulations
22. International treaties do not have to be incorporated into Venezuelan law but instead enter
into effect automatically.  In practice, however, international treaties cannot be implemented unless
the corresponding domestic regulations or statutes are in place.  Once they are ratified and thenpublished in the Official Gazette , international agreements become part of the national legal structure.
The country’s Constitution states that treaties entered into by the Republic must be approved by the
National Assembly prior to their ratification by the President, with the exception of those which seek
to perform or execute pre-existing obligations of the Republic, apply principles expressly recognized
by the Republic, perform regular acts within the sphere of international relations or exercise powersexpressly vested in the national executive branch by law. In the event of a conflict with a national law,
                                                     
3 A definition of the term “national enterprise” is provided in section (5) infra .
4 República Bolivariana de Venezuela, “Líneas generales del Plan Nacional de Desarrollo Económico y
Social de la Nación 2001-2007,” Caracas, September 2001, p. 156.WT/TPR/S/108 Trade Policy Review
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the provisions of the international agreement prevail.  In the view of the authorities, it is therefore
unnecessary to modify national legislation in order to implement WTO trade agreements or to invoke
them in Venezuelan courts.  In fact, in areas such as antidumping or intellectual property, Venezuelanlaws now in effect pre-date the Uruguay Round.  The Uruguay Round agreements form part of the
nation’s body of law, however, and take precedence in cases where they come into conflict with
national laws.  In some areas, (tariffs, technical standards, sanitary and phytosanitary measures),
Venezuela’s existing laws mirror the Andean Community’s regulations.  Since the last Review, in
1996, no international agreement has been invoked in a Venezuelan court.
23. In 1999, Venezuela passed a new Organic Customs Law.  Other new trade-related statutes
introduced since the 1996 Trade Policy Review include the Safeguard Measures Law, the Tender
Procedures Law, the Private Investment Promoti on Law issued under the 1999 Concessions Regime,
and a number of decisions and resolutions of the Commission of the Andean Community.
24. Under the Organic Law authorizing the President of the Republic to enact exceptional
economic and financial measures in the public interest, which was published in the Official Gazette of
the Republic of Venezuela No. 36,687 on 26 April 1999, the President is empowered to issue, within
six months following that law’s publication, measures by decree for the purposes of, inter alia ,
amending the Organic Customs Law; establishing a value-added tax; amending the Income Tax Law;
and establishing standards for the application of safeguard measures, the promotion of investment,
and the regulation of the mining, gas, electricity and other sectors.  Under a law authorizing the
President of the Republic to enact decrees having the force of law concerning delegated matters,
which was published in the Official Gazette of the Republic of Venezuela No. 37,076 on
13 November 2000, the President is empowered to issue measures concerning, inter alia , agricultural
financing; the promotion of small and medium-sized industry; the regulation of the financial system;
land tenure and use; fisheries; the legal and tax system applying to hydrocarbons; and air, maritime
and land  transport.  As of mid-2002, the package of 49 laws issued under the second Enabling Lawwas under discussion in the National Assembly, with a view to their revision, as provided for by the
Constitution.
(iii) Trade policy executing agencies
25. The Organic Law on the Central Administration establishes the structure and governs the
operation of the central government, its agencies and system.  It also specifies the number anddesignation of ministers, their jurisdictions and organizational bases.  The President bears the ultimate
responsibility for determining the priorities, objec tives and goals of international policy, including
trade policy.  The President is not authorized, however, to ratify or implement international
agreements without direct approval from the National Assembly.  The Assembly may either approve
or disapprove agreements, but may not seek their modification.
26. The Ministry of Production and Trade plays an active policy-making role in the area of trade,
as do the following ministries when policies relate to their individual jurisdictions: Ministry of
Finance (tariffs and customs procedures), Ministry of Agriculture and Land (development of
production and commerce in the agricultural, plant, livestock, aquacultural, fisheries and forestry
sectors), Ministry of Infrastructure, Ministry of Science and Technology, Ministry of Planning and
Ministry of Energy and Mines.
27. The Ministry of Production and Trade is responsible for formulating and monitoring the
activities of the national executive branch that concern domestic and foreign trade and those relating
to all aspects of international trade negotiations or trade relations, in coordination with the Ministry of
Foreign Affairs.  The Ministry of Production and Trade is also in charge of formulating andVenezuela WT/TPR/S/108
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monitoring the executive branch’s activities in the following areas:   domestic and foreign investment,
intellectual property, consumer protection, weights and measures, technical standards, quality control
and certification, tourism, the promotion and encouragement of competitiveness and free competition,the safeguarding of national production against unfair international trading practices, and participation
in the formulation of customs and tariff policies in coordination with the Ministry of Finance.
28. The formulation, monitoring and supervision of policies are the responsibility of the Vice
Ministries (Trade, Industry and Tourism) of the Ministry of Production and Trade, while their
implementation and follow-up is performed by agencies attached to the Vice Ministries.  The agenciesattached to the Vice Ministry of Trade are:  the Superintendency for the Promotion and Protection of
Free Competition (also referred to as Pro-competen cia), the Consumer Protection Institute (INDECU),
the Antidumping and Subsidies Co mmission (CASS) and the National Cooperatives Superintendency
(SUNACOOP).  The bodies attached to the Vice Ministry of Industry are: the Superintendency for
Foreign Investments (SIEX), the Autonomous Intellectual Property Service (SAPI), the VenezuelanIndustrial and Technological Retooling Fund (FONDOIN), the National Council for the Development
of the Capital Goods and Services Industry (C ONDIBIECA), the Autonomous Quality and Metrology
Standardization and Certification Service (SEN CAMER), the Automotive Industrial Development
Research Centre (CIDIA) and the Small and Medium-Sized Industries Development Corporation
(CORPOINDUSTRIA).  Those attached to the Vice Ministry of Tourism are:  the VenezuelanTourism Corporation (CORPORTUR ISMO) and its regional and state counterpart organizations.
29. The President, in consultation with the Council of Ministers, is responsible for promulgating
the Customs Tariff, the formulation and modification of which is the responsibility of the Ministry of
Finance.  The Tariff Division of the National Customs Intendency (a part of the Integrated National
Tax Administration Service (SENIAT), which is attached to the Ministry of Finance) is in charge of
their administration.  The Ministry of Production and Trade is involved in the administration of tariff
policy insofar as it relates to trade policy.
30. Overall responsibility for the formulation and implementation of foreign policy by the
executive branch, which encompasses international actions on the part of the Republic, the
representation of the Republic in international organizations and participation in trade negotiations
(including the management of Venezuela’s trade policy within the framework of WTO), has been
delegated to the Ministry of Foreign Affairs.  The Ministry of Foreign Affairs is in charge ofnegotiating, signing, ratifying and executing intern ational agreements, treaties and other instruments,
except in cases where the law expressly assigns responsibility for their negotiation to another
ministry.  In such cases, the Ministry of Foreign Affairs ensures that the negotiations are coordinated
and consistent with Venezuela’s foreign policy and may choose to be represented at the negotiations if
it deems it necessary.
(iv) World Trade Organization
31. Venezuela is a founding Member of the WTO.  It took part in the WTO negotiations on basic
telecommunications and on financial services and submitted a Schedule of Specific Commitments in
each case.
5  The WTO notifications made since 1996, together with some of the areas in which the
proper notifications had yet to be received as of mid-2002, are listed in table AII.1.
                                                     
5 WTO documents GATS/SC/92/Supl.2 of 11 April 1997 and GATS/SC/92/Supl.3 of
26 February 1998, respectively.WT/TPR/S/108 Trade Policy Review
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32. Within the WTO system, Venezuela has reserved the right to participate as a third party on
four occasions.6  It has participated directly in one dispute as a complainant and in one as a
respondent.  It was a complainant in the dispute wi th the United States regarding reformulated and
conventional gasoline.7  Venezuela was a respondent to a complaint brought by Mexico on
5 December 1995 regarding an anti-dumping investigation in respect of imports of certain oil country
tubular goods.8  In a letter dated 6 May 1997, Mexico informed the WTO Secretariat that Venezuela
had terminated the anti-dumping investigation in this case.9
33. Since 1996, Venezuela has submitted communications and made contributions to the work of
the WTO in a variety of areas.  In services, thes e communications and inputs (some jointly with other
countries) include: a draft annex on tourism, an assessment of trade in services, the definition of
criteria to be used for the classification of services, and a communication on autonomous
liberalization and developing countries.10  It also submitted a proposal for negotiations on energy
services in 2001.11  Other inputs provided by Venezuela have included proposals concerning the
following matters:  electronic commerce, special and differential treatment and WTO policy, certain
aspects of intellectual property rights, the modification of certain provisions contained in the
Understanding on Rules and Procedures Governing the Settlement of Disputes, negotiations on a
multilateral agreement on transparency in government procurement and the protection of local and
indigenous communities’ intellectual property rights over traditional knowledge.12
34. Venezuela has also provided inputs for the WTO in the form of unofficial documents.  For
example, within the framework of the Working Group on GATS Rules, Venezuela has presented non-
papers for discussion with the other Members on emergency safeguard measures in relation to trade
services.  In addition, as part of the negotiations on agricultural trade, Venezuela has submitted non-
papers on special and differentiated treatment, food security and export subsidies.
(4) PREFERENTIAL AGREEMENTS
35. Since its last Trade Policy Review, in 1996, Venezuela made further headway in its regional
integration process.  Initiatives taken during this period include: the consolidation of a customs union
among the countries of the Andean Community; progress in the implementation of the treaty signed
by the Group of Three (Colombia, Mexico and Venezuela); implementation of the agreement signed
by Chile and Venezuela, which has resulted in the liberalization of approximately 97 per cent of the
tariff universe for trade between the two countries (the negotiation of the list of exceptions containedin that agreement is still pending); the execution of various initiatives for strengthening trade relations
                                                     
6 These cases were:  United States – Definitive Safeguard Measures on Imports of Certain Steel
Products, complaint of the European Communities (WT/DS248/11); European Communities – Trade
Description of Sardines (WT/DS231), complaint of Peru; Chile – Price Band System and Safeguard Measuresrelating to Certain Agricultural Products, complaint of Argentina (WT/DS207/1); and United States – ImportProhibition of Certain Shrimp and Shrimp Products (WT/DS58), complaint of India, Malaysia, Pakistan andThailand.
7 WTO documents WT/DS2/1 of 2 February 1995 (Request for Consultations), WT/DS2/R of
29 January 1996 (Report of the Dispute Panel) and WT/DS2/AB/R of 29 April 1996 (Report of the Appellate
Body).
8 WTO document WT/DS23/1 of 4 January 1996.
9 WTO document WT/DS23/3 of 26 May 1997.
10 WTO documents S/CSS/W/107 of 26 September 2001,  S/CSS/W/114 of 9 October 2001,
S/CSS/W/89 of 14 May 2001 and S/CSS/W/130 of 30 November 2001.
11 WTO documents S/CSS/W/69 of 29 March 2001 and S/CSS/W/69/Add.1 of 15 October 2001.
12 WTO documents WT/GC/W/376 of 19 October 1999, WT/GC/W/279 of 29 July 1999,
WT/GC/W/282 of 6 August 1999, WT/GC/W/410 of 29 September 2000, WT/GC/W/305 OF 13 August 1999and WT/GC/W/329 of 22 September 1999.Venezuela WT/TPR/S/108
Page 25
with the MERCOSUR countries (through the conclu sion of new trade agreements providing for
broader product coverage and preferences among the member countries of the Andean Community,
Argentina and Brazil); and the start-up of negotiations among regional blocs with a view to theconclusion of a Free Trade Area Agreement.  Venezuela’s economic integration with members of the
Andean Community, with Mexico (through the Gr oup of Three) and with Chile (through the
Economic Complementarity Agreement) is quite broad in scope (see table AII.2).
13
(i) Andean Community
36. Venezuela is a signatory of the Cartagena Agreement, under which the Andean Group was
created in 1969.  The Andean Group later evolved into the Andean Community, formed by Bolivia,
Colombia, Ecuador, Peru and Venezuela.  The Andean Community is composed of these countries
along with the bodies and institutions of the Andean Integration System:  the Andean Presidential
Council, the Commission of the Andean Community , the Andean Council of Ministers for Foreign
Affairs, the Andean Parliament, the General Secretariat, the Simón Bolívar Andean University, theAndean Development Corporation (CAF), the La tin American Reserve Fund (FLAR), the Andean
Labour Advisory Council, the Andean Business Adviso ry Council, and the Court of Justice of the
Andean Community.  The General Secretariat, which is headquartered in Lima, Peru, is the Andean
Community’s executive body.
37. The ultimate objective of the Andean Community is to form a Latin American common
market.  To that end, it has been pursuing a gradual integration process. The intermediate phases in
that process, involving the formation of a free trade zone and a customs union, are directed towards
the eventual establishment of such a common market.  The first two stages were completed by means
of a programme for the elimination of tariff and non-tariff restrictions among the member countries
and the adoption of a common external tariff (excluding Peru:  see WTO document WT/TPR/S/69 of
28 April 2000).  The member countries of the Andean Community are to apply a common external
tariff by 31 December 2003 at the latest.  As part of the consolidation of the Andean integrationprocess the Automotive Complementarity Agreement signed by Colombia, Ecuador and Venezuela
entered into force in January 2000 (see Chapter IV (6) (iii) (b)).
38. At the Thirteenth Andean Presidential Council, held in Valencia, Venezuela, in June 2001, the
presidents in attendance expressed their determination to put the Andean Common Market into
operation no later than 31 December 2005.  To that end, they are seeking to achieve the effectiveadoption of the Common External Tariff (CET) by all members, harmonize the provisions governing
trade in services, and adopt a common agricultural policy and a government procurement system.
Other goals set forth with a view to economic convergence include bringing annual inflation rates
down to single-digit figures by December 2002, capping annual fiscal deficits at no more than 3 per
cent of GDP and, by the year 2015, having a domestic and foreign public debt stock amounting to50 per cent of GDP at the most.
39. The Declaration of Santa Cruz de la Sierra, issued at the Special Meeting of the Andean
Presidential Council held in January 2002, sets out specific goals for the completion of the various
stages of the integration process and reaffirms the commitment to establish a common market by
31 December 2005 at the latest.
40. Within the Andean Community’s dispute settlement system, between 1996 and 2001
Venezuela has been the object of a series of non-compliance actions brought before the Court of
Justice of the Andean Community by the Community’s General Secretariat or by other member
                                                     
13 LAIA/SEC/Study 128/Rev.1 of 14 May 2001.WT/TPR/S/108 Trade Policy Review
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countries.  On a few occasions, Venezuela has brought such non-compliance actions against other
member countries.  Rulings in such cases may provide full or partial confirmation of non-compliance
by a respondent.  In the event of full confirmation, the respondent is generally required to pay thelitigation costs.  In the event of non-compliance with the terms of a ruling, the Court may authorize
the other member countries to withdraw concessions or impose levies on the respondent.  Such action
has been taken in respect of Venezuela once in the last five years, in a case regarding imports of garlic
from Peru.
(ii) LAIA
41. Under the aegis of the LAIA, Venezuela has signed regional and partial-scope agreements,
including a Regional Tariff Preference (PAR) accord.  Partial-scope agreements still in effect today
include the conventions signed with Paraguay and Uruguay in the 1980s.  In 1999-2000, the bilateral
economic complementarity agreements signed with Argentina and Brazil were replaced with
complementarity agreements entered into jointly by  the members of the Andean Community (with the
exception of Bolivia) which are broader in scope and cover a larger number of products.  The
economic complementarity agreement signed with Chile, which provides for the establishment of a
free trade area, is in force and will result in the lib eralization of the entire tariff universe once the list
of exceptions has been renegotiated.
42. Under the PAR, Venezuela grants and receives tariff preferences for all of its trade with
LAIA member countries in accordance with criteria based on the countries’  level of economic
development (with the exception of 960 NANDINA sub-items).  The PAR does not apply to trade
with Andean Community countries, Chile (for which it applies only to the products on the
Agreement’s list of exceptions) or Mexico (for  which it applies only until the G-3 free trade
agreement’s implementation timetable is met) because they are signatories to free trade area
agreements.  Thus, in practice, the PAR applies only to trade with Argentina, Brazil, Paraguay,
Uruguay and Cuba (in the process of implementation) involving products that do not enjoy a lowertariff under another preferential mechanism, such as an economic complementarity agreement.  The
preferences consist of a specified percentage reduction in the most favourable tariffs applying to third
countries; in the case of Venezuela, these reductions amount to 34 per cent for imports from
Paraguay, 20 per cent for imports from Chile, Cuba and Uruguay, and 12 per cent for imports from
Argentina, Brazil and Mexico.  Venezuela has applied these levels since 1 January 1995.  As acountry at an intermediate level of development, Venezuela receives preferences equivalent to 28 per
cent from Argentina, Brazil and Mexico, 20 per cent from Chile and Uruguay, and 12 per cent from
Paraguay.  Most of the products that are exempt from the PAR are agricultural, chemical, plastic,
wood, textile and clothing, and automotive products.
(iii) Group of Three
43. The Group of Three (G-3) Free Trade Treaty is designed to lead to the creation of a free trade
area among Colombia, Mexico and Venezuela.  In the case of merchandise trade, the Treaty provides
for an automatic, linear rollback for the entire tariff universe (with some exceptions) and is based on
the practices used in two bilateral tariff rollbacks (between Colombia and Mexico and between
Venezuela and Mexico), since trade between Colombia and Venezuela is already free due to theirmembership in the Andean Community.  The beginning of the tariff elimination process is based on
the PAR in the LAIA and is scheduled for completi on by 1 July 2004.  Goods on the list of exceptions
include some products of the agricultural and agribusiness, chemical, textile and clothing, and
automotive sectors.  Special treatment has been established for these products, characterized by
application of the PAR and, in the case of the automotive industry, a fixed tariff.  The Treatyestablishes the methodology to be used for incorporating these sectors into the tariff reductionVenezuela WT/TPR/S/108
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programme.  It should be noted, however, that the negotiations on their incorporation have not yet
been concluded.  One case in point is the automotive sector, for which a progressive reduction in
tariffs is scheduled to be completed by 1 January 2007.  In the area of textiles, Venezuela also has toreach a bilateral agreement with Mexico on tariff rollbacks.
44. The Free Trade Treaty signed by the Group of Three sets out specific regulations for
merchandise trade (rules of origin, safeguards, technical standards, dispute settlement procedures,
etc.) and provisions concerning the so-called "new issues" on the international trade agenda
(e.g., government procurement, investment, intellectual property).  National origin status is grantedfor goods produced entirely in member countries, goods for which the component materials fulfil a
tariff-heading change have been reduced as required, and goods whose regional content amounts to at
least 55 per cent of the total value (except for chemicals, metals, mechanics, machinery and
equipment, and electronics, whose regional content requirement is 50 per cent).  In the case of
government procurement, national treatment is conferred upon firms of other member countries, witha 10-year reservation for acquisitions above specified limits.  The Treaty also has clauses on
investment that include legal guarantees for national treatment, MFN treatment and the unrestricted
movement of transfers.  In addition, it establishes disciplines and procedures for ensuring free trade in
services within the region based on these principles.
(iv) Other partial-scope regional agreements
45. Venezuela has also signed partial-scope agreements with countries in Central America (Costa
Rica, El Salvador, Guatemala, Honduras and Nicaragua) and the Caribbean (CARICOM, Cuba,
Guyana, and Trinidad and Tobago).  Except in the case of Trinidad and Tobago, Venezuela grants
unilateral trade preferences under these agreements.  The tariff preferences provided for Central
American countries range from 50 to 100 per cent (with some exceptions, most of which concern
agricultural products).  In the agreement with CARICOM, the tariff preferences cover almost 90 per
cent of imports.  The agreements with Guyana and with Trinidad and Tobago are narrower in scopeand provide for tariff reductions on a limited number of tariff sub-items, with the reductions
amounting to between 20 and 100 per cent in the fi rst case and to 25 per cent in the second (see
Table AII.2).  Some of these reductions apply to products not covered by the agreement reached with
CARICOM.
(v) Association of Caribbean States
46. Venezuela has been a member of the Association of Caribbean States (ACS) since
June 1994.
14  The ACS is a forum for cooperation, consultation and concerted action devoted to the
identification and implementation of policies to promote regional development.  At the Third Summit
of Heads of State and/or Government (Isla de Margarita, Venezuela, 11-12 December 2001), it was
decided that the Greater Caribbean region should be designated a “cooperation zone”.  The initialsteps to be taken in this regard consist of joint measures in the areas of trade, sustainable tourism,
transport and natural disasters.
(vi) Free Trade Area of the Americas
47. Venezuela is a participant in the Free Trade Area of the Americas (FTAA) process, which
was launched at the First Summit of the Americas, held in Miami in December 1994.  At that summit,34 countries of the western hemisphere agreed to phase out barriers to trade and investment by 2005.
                                                     
14 The ACS was founded in 1993.  In addition to th e island States of the Caribbean, its members
include Belize, Colombia, Costa Rica, El Salvador, Fr ance, Guatemala, Honduras, Mexico, Nicaragua, Panama
and Suriname.WT/TPR/S/108 Trade Policy Review
Page 28
FTAA negotiations were formally opened in April 1998 during the Second Summit of the Americas,
held in Santiago, Chile.  At that time negotiating groups were set up to deal with issues in the areas of
market access; investment; agriculture; government procurement; intellectual property rights;subsidies, antidumping and countervailing duties; services; competition policy; and dispute
settlement.
15  Venezuela serves as the Vice Chair of the Negotiating Group on Services.  It has been
agreed that the negotiations will be consistent with WTO rules and disciplines and that their outcome
will take the form of a comprehensive, single undertaking.  At the Sixth Ministerial of Buenos Aires
in April 2001, it was decided that the negotiations should be concluded no later than January 2005 andthat the entry into force of their outcome should take place no later than December 2005.  In addition,
a deadline of 15 May 2002 was set for launching the negotiations on market access.  In July 2001, the
first draft of an FTAA agreement was made public.
(vii) Other international agreements
48. Venezuela participates in the Global System of Trade Preferences (GSTP), but the volume of
trade it conducts under this mechanism is actually very small.  Under the General System of
Preferences (GSP) system, it benefits from con cessions from Canada, the European Union, Japan,
Norway, Switzerland and the United States.  It is not a beneficiary of the United States’ Caribbean
Basin Initiative or of the Andean Tariff Preferences Act (ATPA).  One of the Andean Community’s
objectives in its bid to revitalize the ATPA was to include Venezuela in its system of preferences, butthat effort proved unsuccessful.
49. Venezuela is a member of the Organization of  Petroleum Exporting Countries (OPEC).  It
plays a very active role in this organization and has put forward various proposals for stabilizing the
oil market.  It is also a member of the Associ ation of Coffee Producing Countries (ACPC), although
its share of the coffee market is quite small.
(5) 
PETROLEUM SUPPLY AGREEMENTS
50. The Programme for Energy Cooperation with the Countries of Central America and the
Caribbean (also known as the San José Pact) was signed by Mexico and Venezuela on 3 August 1980
in San José, Costa Rica, and has been renewed each year since then.  Under this programme, 160,000
barrels of crude oil and petroleum products (80,000 per country) are supplied to Barbados, Belize,
Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua
and Panama.  It also includes a financial cooperation mechanism.  The relevant authorities haveemphasized that these sales are conducted at market prices and lending terms.  The financial
mechanism consists of the opening of lines of credit for social and economic development projects
whose funding amounts to between 20 and 25 per cent of the oil bill generated by the allotted quota,
so that the percentage of financing rises in proportion to the increase in the average billing price.
51. The Caracas Energy Cooperation Agreement was first signed on 19 October 2000 by Belize,
Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua
and Panama.  The purpose of this agreement was to finance a portion of the oil sales made to the
signatory countries in order to help defray the increase in their oil bills caused by rising prices.
Venezuela supplies 80,000 barrels per day of crude oi l, petroleum products and LPG, and finances a
percentage of those sales; the exact percentage varies according to prices changes (a minimum of5 per cent and a maximum of 25 per cent of the oil bill, providing that the price of the oil is above
US$15 per barrel).  Financing terms and conditions provide for a repayment period of 15 years, a
grace period of between 12 and 18 months, and an interest rate of 2 per cent.  The agreement expired
                                                     
15 There are also special consultative groups that deal with institutional matters, civil society participation,
smaller economies and electronic commerce.Venezuela WT/TPR/S/108
Page 29
in October 2001, but a new agreement was signed in December 2001.  The signatory countries were
Barbados, Dominica, Grenada, Guyana, Haiti, Honduras, Jamaica, and Saint Vincent and the
Grenadines.  The authorities have noted that Jamaica is the only country to have availed itself of theoriginal agreement, as well as of its renewal.
52. The Comprehensive Cooperation Agreement which Venezuela signed with Cuba in Caracas
on 30 October 2000 is a broad accord that provides for the supply of services, technologies and
products by Cuba, which are to be paid for out of the budgets of institutions, agencies and business
enterprises in Venezuela, as well as for the supply of goods and services produced by public andprivate Venezuelan organizations.  The agreement also provides for a supply of 53,000 barrels of
crude oil and petroleum products per day on terms and conditions similar to those stipulated in the
Caracas Energy Cooperation Agreement.
(6) 
INVESTMENT REGIME
(i) Legal and institutional framework
53. The Ministry of Production and Trade is responsible for coordinating all activities related to
the promotion and development of investments.  It is  also in charge of policy-making with respect to
private investment in Venezuela, as well as any other policies that develop, broaden or complement
Andean policies on the treatment of foreign capital.  In addition, the Ministry represents Venezuela in
the negotiation of international agreements or conventions on investment.  The Superintendency forForeign Investments (SIEX), which is attached to the Ministry of Production and Commerce, is
responsible for all matters related to the registration of foreign direct investment and contracts for the
importation of technology.
54. The legal framework for the investment regime is established in the Constitution,
Decisions 291 and 292 of the Commission of the Andean Community, Decree No. 2,095 ( Official
Gazette  No. 34,930 of 25 March 1999) and the Inve stment Promotion and Protection Law ( Official
Gazette  No. 5,390 of 22 October 1999).  At the subregional level, the rules and regulations governing
the treatment of investment are set forth in Decisions 291 and 292 of the Commission of the Andean
Community and are implemented by Decree No. 2,095.  The application of the decisions of the
Commission of the Andean Community and investment treaties takes precedence over national laws;
the former do, however, permit exceptions to be made at the national level by member countries.  The
Constitution guarantees national treatment for foreign investors except in areas of activity subject tospecial laws; such laws apply only to reserved sectors.  Under the new Constitution, restrictions on
foreign investment have been reduced, and 100 per cent of most sectors of the economy are now open
to foreign investors.  The Constitution also rescinded the President’s authority to reserve sectors
classified as “basic industries” for local investors.
55. Foreign firms may establish subsidiaries or employ other investment modalities, such as joint
ventures, franchises, technology transfer contracts, etc.  Foreign investors do not need to have prior
authorization for an investment unless it is located in specified border areas or near military facilities
or basic industries, in which case authorization from the Ministry of Defence is required.
16  In all
other cases, the only requirement is that investors mu st register with SIEX within 60 days after having
made a new investment.  This registration must be arranged for by the interested party.  Theregistration application is approved once all the formalities have been completed.  Between 1996 and
                                                     
16 This restriction is provided for in the Organic Security and Defence Act ( Official Gazette  No. 1,899
of 26 August 1976).WT/TPR/S/108 Trade Policy Review
Page 30
June 2002, 6,633 applications had been submitted, of which only 73 (1.1 per cent) were denied.17
Registration with SIEX is also required for contracts entered into by foreign, mixed and national firms
for technology transfers or for the use of patents and trademarks.  Prior authorization is not required inany of these cases.
56. Under Venezuelan law, foreign investors are guaranteed the right to repatriate 100 per cent of
their capital and profits, including the proceeds from the sale of equities, ownership stakes or rights,
capital reductions or the partial or total liquidation of an enterprise in the first instance.  No
restrictions apply to the reinvestment of profits or to the payment of royalties.  Remittances of profits
or royalties must be registered with SIEX.  Venezuelan law prohibits the expropriation of private
(including foreign) investments, unless it is for the public good or in the interest of society.  In such
cases, the payment of compensation is required.
57. The Investment Promoti on and Protection Law ( Official Gazette  No. 5,390 of
22 October 1999) regulates the development and protection of both national and foreign investmentsin all sectors of the country’s economy. It provides that investment policies are to be directed toward
promoting and safeguarding private enterprise.  In July 2002, the enabling regulation for the Decree
with the Status and Force of Law for the Promotion and Protection of Investment ( Official Gazette
No. 37,489 of 22 July 2002) entered into force.
58. The Investment Promotion and Protection Law opens  up the possibility of concluding what
are referred to as “legal stability contracts.”   These contracts can be used to ensure the stability of
certain economic conditions for a given investment during the life of the contract.  Legal stability
contracts can guarantee: the maintenance of the tax provisions in effect at the time the contract is
executed; the maintenance of the terms and conditions of the export promotion regime; and the
maintenance of one or more specific benefits or incentives granted to the investor or the investment
vehicle.  Legal stability contracts covering the tax system must be approved by the Integrated
National Tax Administration Service (SENIAT) and must be authorized by the National Assemblybefore they can enter into force.  The contracts must be concluded before the corresponding
investment is made and are limited to a term of not more than 10 years.  Until mid-2002, the absence
of an enabling regulation for the Investment Pr omotion and Protection Law made it impossible to
draw up a contract of this sort.  The enabling regulation for the Decree with the Status and Force of
Law for the Promotion and Protection of Investment sets out the terms and conditions for suchcontracts in detail.
59. The law places certain limitations on investment  in some economic activities.  Under Decree
No. 2,095, investment in television and radio broadcas ting, professional services that are regulated
under Venezuelan law and the Spanish-language press is reserved for national companies.  In
accordance with Decisions 291 and 292 of the Andean Community, a national company is defined asa company established in the investment’s host country in which at least 80 per cent of the stock is
owned by national investors (proprietors of nati onal investments).  Decree No. 2,095 defines national
investment as investments made by: (a) the State,  national natural or legal persons; (b) foreign natural
persons holding Venezuelan resident visas for an uninterrupted period of at least one year who,
whether or not they have imported capital, declare to SIEX that they are willing to waive their right tore-export imported capital and to remit profits outside the country and who obtain a National Investor
                                                     
17 According to the information on file with the Investment Registration Bureau of the Superintendency
for Foreign Investment, the reasons for these applications’ denial were: failure to submit documentation
verifying the entry of the foreign exchange or assets provided as capital stock or the provision of an intangible
asset (46 cases); the shareholders were Venezuelan (8  cases); the application concerned an activity that is
reserved for national enterprises (4 cases); and the capital contribution was paid for with public debt bonds(15 cases).Venezuela WT/TPR/S/108
Page 31
Credential from SIEX; and (c) investors who are nationals of any other member country of the
Andean Community.
60. While restrictions do still exist, they have been reduced in recent years.  For example,
restrictions still apply to the hydrocarbons sector (see Chapter IV(5)).  On the other hand, the new law
permits any person domiciled in Venezuela, whether a national or foreigner, to obtain mining rights
(see Chapter IV(4)).  The reserved status of the telecommunications sector has been abolished, and
that market (including fixed-line telephone service) was opened to competition in 2000 (see
Chapter IV(8)(iv)).  In the financial sector, the banking industry has been liberalized.  Since 1994,foreign companies have been able to own up to 100 per cent of the stock in banking institutions and
are permitted to acquire existing banks, open subsidiaries and create new banks.  In the insurance
industry, foreign investors must set up corporations in  the country, as they are not allowed to establish
subsidiaries or branches of foreign firms in Venezuela (see Chapter IV(8)(iii)).
(ii) Privatization
61. In principle, foreign investors are allowed to ta ke part in privatizations.  The only limitations
are those set forth in the laws applying to the specific sectors mentioned earlier and the requirements
established in the Privatizations Law ( Official  Gazette , Special Edition No. 5,199 of
30 December 1997).  The Law stipulates that up to 20 per cent of the stock in any firm which is to be
privatized, either totally or partially, and in which the public sector has a stake of over 10 per cent andless than 50 per cent, must first be offered to workers, retirees or pensioners of the entity or service
slated for privatization.
62. The privatization process is administered by the Economic and Social Development Bank
(BANDES), which has taken over the tasks that used to be performed by the Venezuelan Investment
Fund (FIV). Under the country’s privatization programme, foreign investors have purchased stakes in
the steel, commercial aviation, banking, cement, electricity, sugar refining, telecommunications and
tourism industries. The largest-scale privatizations have included the sale of the telecommunicationsenterprise CANTV, which was completed in 1996; the sale of a 70 per cent stake in the SIDOR steel
company in 1997; the sale of a 70 per cent share of the electricity company Sistema Eléctrico de
Nueva Esparta; and the sale of an 80 per cent interest in Ferrosilicona de Venezuela (FESILVEN).
63. The Government is planning a partial privatization of the ENELVEN and ENELCO
electricity utilities (see Chapter IV(7)).  Since 2001 it has been pursuing a policy of strategicpartnerships with a view to bringing in private capital to a number of the firms grouped together in the
Corporación Venezolana de Guayana (ALCASA, CVG, BAUXILUM and CARBONORCA) (see
Chapter IV(7)).  Generally speaking, the privatization process is moving ahead quite slowly.  If the
privatization of the above-mentioned firms actually takes place, this opening of entry to private capital
would send a positive signal that could give a boost to the Caracas Stock Exchange.  Although thereare no plans to mount a more intensive privatization effort in the near future, the Government is
seeking to use concessions to increase private-sector involvement.  In this regard, the authorities have
noted that a draft concessions bill is now in the process of being framed.
(iii) The investment tax regime
64. The income tax rate, both for individuals and for business enterprises, is capped at 34 per
cent.  The tax on the revaluation of corporate assets is 1 per cent, and dividends are subject to a 34 per
cent tax.  Municipal taxes range from 0.1 to 10 per cent of total taxable income and may be deducted
from income tax.  A 1 per cent tax is also levied on bank debits.  Oil production is subject to a 50 perWT/TPR/S/108 Trade Policy Review
Page 32
cent income tax rate (67.7 per cent until 2001), and royalties to a 30 per cent rate (16 2/3 per cent up
to 2001).
65. Venezuela provides a series of investment incentives, primarily in the form of tax reductions
or credits.  New investments made within five years of the entry into force of the 1999 Income Tax
Law are eligible for a 10 per cent reduction in the top income tax rate in the farm, agribusiness,
manufacturing, fisheries, fish-farming, livestock, tourism, construction, electrical power,
telecommunications, and science and technology (other than hydrocarbons-related) industries (or of
80 per cent under certain conditions in the farm, livestock, fisheries and aquacultural sectors).  Taxreductions are also granted for greenfield investments in the hydrocarbons industry (8 per cent), hotel
construction (75 per cent) and in sectors that are considered to be of particular importance for the
country’s economic development or that create jobs (see Chapter III(4)(ii)(a)).  Investors undertaking
industrial projects that are in their pre-operation stages may be exempted from the value-added tax for
a period of five years or until the pre-operation stages have been completed.
66. Investors may avail themselves of debt-equ ity swap mechanisms under the provisions of
Presidential Decree No. 1,217 of 14 February 1996.  Under these provisions, investors may buy
Venezuelan foreign debt on secondary markets at a below par, convert it into bolivares at a price
equal to or higher than its face value and use the proceeds to fund their capital contributions.
(iv) Bilateral investment and tax arrangements
67. Venezuela has bilateral investment arrangements with Argentina, Barbados,
Belgium/Luxembourg, Brazil,  Canada, Chile, Co sta Rica, the Czech Republic, Denmark, Ecuador,
Germany, Lithuania, the Netherlands, Paraguay, Peru, Portugal, Spain, Sweden,  Switzerland and the
United Kingdom.  Bilateral agreements with Cuba, France, Italy and Uruguay have been concluded
and ratified.  Negotiations on possible agreements of this type are underway with Austria, Australia,
Finland, Kuwait, Indonesia, Norway, Poland, Rumania,  Russia, Saudi Arabia, Trinidad and Tobago,
and Turkey.  Negotiations on such an agreement with the United States were suspended in 1998.
68. Venezuela has signed double taxation agreements covering income taxes with Belgium,
France, Italy, the Netherlands and Sweden.  It has also signed double taxation agreements covering
transport services with Argentina, Belgium, Brazil,  Canada, Chile, Colombia, France, Germany, Italy,
the Netherlands, Portugal, Spain, Switzerland, Trinidad and Tobago, the United Kingdom and the
United States.