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Venezuela ranks among the top countries in Latin America in terms of investment potential, but capitalising on the wealth of opportunities can be a mammoth task without local help on hand.
Natural resources and an idyllic geographic location have made Venezuela a magnet for foreign investment. It is home to 55% of crude oil reserves in the Western Hemisphere and 18% of global reserves, and also has the eighth largest gas reserves in the world, holding approximately 195.2 billion cubic feet. Thanks to a privileged location on the Northern Coast of South America, there is good access to the East Coast of the US and quick connections to the Panama Canal, Central America and the Caribbean.
The Constitution of the Bolivarian Republic of Venezuela is aligned with international principles that regulate investment, and the country welcomes overseas capital by being non-discriminatory between national and foreign firms and the recognition and protection of intellectual property rights. Legal and judicial transparency and guarantee of legal security has also encouraged more foreign direct investment (FDI) to flow into the country, although there are still many problems to be overcome.
Day-to-day business and lifestyle tasks can seem like a constant uphill struggle in Venezuela. Identification is required just to buy a carton of milk and taking money out at a bank requires two signatures, fingerprints and in some cases a photograph. State suspicion permeates everyday business life, and even though Hugo Chavez has now passed, political interference in the economy can make doing business a mammoth task. The World Bank and International Finance Corporation (IFC) rank Venezuela in the top 100 for only two of the ten indices it tracks, highlighting the mundane and challenging nature of the business environment.
Starting a Business
Compared to the OECD average of five procedures and the Latin and Caribbean average of nine, there are 17 procedures to be completed when starting a business in Venezuela, taking an average of 144 days to complete. Companies are required to register with various local government agencies as well as state authorities such as the Ministry of Labour and the National Bank for Housing and Habitat.
Dealing with Construction Permits
Construction is a timely and heavily bureaucratic procedure. Permits for construction alone take over a year to obtain, with several governmental departments required to be contacted during the process. What’s more, there are several payments to be made along the way, such as bank fees and charges for inspections and certificates from road, fire and telecoms agencies.
Getting Electricity
Electrical connections are carried out by Electricidad de Caracas, which completes the inspection and makes the connection. An excavation permit from the municipality must also be obtained, and there are several costs to consider throughout the whole process, which should take around 158 days to complete.
Registering Property
Property registration is the most streamlined task of the entire procedure, and can usually be completed within 38 days. The cost and procedures involved largely match the OECD norm.
Getting Credit
The biggest chores in Venezuela are banking ones. There is a lot of suspicion around financial transactions and many bureaucratic measures have been put into place as a result. This makes obtaining credit an extremely time consuming and difficult task.
Protecting Investors
The World Bank and IFC rank Venezuela in 181st place out of 185 economies for investor protection. It has rankings below five in each of its indices.
Paying Taxes
There are a huge 71 tax payments to make taking an average of 792 business hours to process. Although most taxes are charged at very competitive rates, the amount of time it takes to process them can be a drain on business time.
Trading Across Borders
Trading across borders is a costly and time-consuming task. It takes 49 days to export and 71 to import, costing more than double the OECD average and far more than in other Latin American nations.
Enforcing Contracts and Resolving Insolvency
Enforcing contracts takes 510 days on average and requires navigating 30 procedures. Resolving insolvency takes four years and the recovery rate is meagre in comparison to the OECD norm.
Culture
There are around 40 languages spoken in Venezuela, and although some of these are becoming extinct as more indigenous people move to the cities, Venezuelans remain very proud of their country and heritage. They will go out of their way to make guests feel welcome and comfortable, although flowers - particularly orchids - should be sent in advance of the event.
TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Venezuela or just want to streamline your Venezuelan operations, talk to us.