This Country Commercial Guide is designed to provide U.S. exporters with general guidance regarding business opportunities in Venezuela and prevailing business practices. When pondering commercial opportunities in Venezuela, U.S. companies are strongly encouraged to contact the U.S. Commercial Service in Caracas, as well as other U.S. Embassy officials there. What follows is a summary of the information detailed within this report.

Market Overview

• In light of current conditions, particularly President Chavez' January 2007 statements on the nationalization of several sectors of the Venezuelan economy, 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.

• With a population of 27 million, Venezuela is the sixth most populous nation in Latin America.

• The political relationship between Venezuela and the U.S. has cooled significantly and is characterized by harsh anti-U.S. rhetoric by President Hugo Chavez (elected 1998 and re-elected in 2000 and 2006).
  The U.S. remains Venezuela’s most important trading partner, claiming more than half of Venezuela’s exports (primarily petroleum and petroleum products) and about a quarter of imports.

• Venezuela is the U.S.’s third-largest export market in Latin America.

 
Macroeconomic Overview

• GDP (est. 2006):  $169 billion
• GDP Real Annual Growth Rate (est. 2006): 10.3%
• GDP per capita (est. 2006): $6,250
• Petroleum Industry (est. 2006): 15% of GDP
• Exports (2006): $68 billion (57% to the US)
• Imports (2006):  $30 billion (28% from the US)
• Inflation (est. 2006): 17% (15.3% in 2005, 19.2% in 2004)

Foreign Exchange Controls: All forex requests require government approval.

Exchange Rate as of January, 2007: $1US = Bolivares (Bs.) 2,150.

Market Challenges

• Political tensions between Venezuela and the U.S. and within Venezuela itself.

• Commercial uncertainties from government’s on-going “Bolivarian reforms”, vis-à-vis, e.g., private property rights, the government-private sector relationship, currency controls, and the democratic process.

• Currency controls remain an issue and implementation procedures have changed frequently and significantly over the last twelve months.

• Lack of transparency in the public procurement process, coupled with an anti-U.S. company bias in government procurements.

• Inadequate Intellectual Property Rights protection.

• Lack of judicial certainty and independence.

• Aggressive tax collection and potential business closures for tax policy violations and minor infractions by the Venezuelan Tax Authority (SENIAT).

• Maintenance issues and occasional closure of the major highway between Caracas and its principal port and international airport.

Market Opportunities

• Venezuela’s growth is primarily related to high petroleum earnings and government spending, which have stimulated demand.  Economic growth is projected to continue on the strength of oil prices.

• U.S. companies still benefit from established commercial ties between the two countries, e.g., strong consumer preference for U.S. products, preference for U.S. technologies, and the long tradition of U.S. foreign direct investment in Venezuela. Venezuelans are avid consumers of imported products.

• Geographic proximity to the U.S., and much shorter shipping times (three to five days) compared to other suppliers.

• Relatively low tariff rates and transparent customs administration on imported goods. The Venezuelan government has announced plans to develop new port, storage, and silo facilities.

• Leading sectors for U.S. exporters include: oil & gas machinery, IT equipment and services, telecommunications equipment and services, auto parts/service equipment, electrical power generation systems and electrical equipment, medical equipment, chemicals, travel and tourism, agricultural commodities, aircraft/parts and aviation services, educational services, safety and security equipment, and transportation equipment.

Market Entry Strategy

• Venezuela is a relationship-based, rather than rules-based, society. Don’t expect a quick or satisfactory legal remedy in Venezuela if the relationship goes bad.  Rather, U.S. companies are well-advised to invest considerable effort upfront in identifying the right partner, agent, distributor, or representative. Use all the resources available to you, e.g. counseling from your district office, the International Partner Search, Gold Key, Video Gold Key, and/or Customized Market Research services offered by the Commercial Service in Caracas, both to assess the market and to identify a partner.

• Anticipate the special conditions of doing business in this particular market, e.g., current political risk issues (which might legitimately look significantly more challenging to an investor than they would to an exporter), an overvalued local currency, and the cost and time added by the foreign exchange controls. Build these factors into your business plan.

• Decide whether your particular product/business will benefit from being identified with the U.S. or might be hurt by the identification. This plays out differently in different sectors, with different buyers, and with different products. Some are more popular because they are “American,” whereas in other situations a low-profile identity will work better. In either event, be prepared to promote and support your product with professional quality Spanish language materials if at all possible, prepared either before or shortly after market entry.

• Look for relevant trade events in Venezuela to promote your products or to test the market interest. Our Commercial Service office in Caracas tries to keep U.S. companies apprised about events in Venezuela and the ways they can participate.

• Let the Commercial Service (CS) in Caracas know if you are participating in a trade show in the U.S. and you are interested in being visited by a Venezuelan company. CS Caracas promotes International Buyer Program trade events in the United States and will be glad to pass your company information on to Venezuelan companies in advance of an event.

To get the entire report, we invite US companies to visit the section "Country & Industry Market Research" in the site Export.gov