investments opportunities in venezuela

Consejo Nacional de Promoción de Inversiones (CONAPRI) - Copyright - 2007

Investments opportunities in

VENEZUELA


What is CONAPRI?

Why invest in Venezuela

Legal Framework

Investment opportunities: Chemical and Petrochemical sector

Contents


It´s a non-profit civil association, set up in 1990 as a mixed organization supported by the public and private sectors.


Members


Members and international partners


Why Venezuela?Imagen

6,5” x 5”


Our main advantages:

Natural Resources

Legal Framework

Infrastructure

Skilled Human Resources

Advantages


The world’s 6th largest light crude oil reserves

The world’s 1st largest heavy crude oil reserves

The world’s 8th largest gas reserves The 3% of world iron reserves Main exploitable raw materials:

petroleum, iron-ore, bauxite, gold, diamonds, copper, coal, phosphate, zinc

40.000 km. of cultivated lands Large basins The highest waterfall of the world

Natural resources

Advantages


Advantages available to the investor

In the past three years, Venezuela has been one of the countries whose economy has demonstrated a high rate of recovery.

Source: Yearbook 2005. Institute of Management Development (IMD).

2,8

4,4

4,8

6

8,5

10,3

Brasil

Chile

México

Colombia

Argentina

Venezuela

GDP growth 2006


Source: Yearbook 2005. Institute of Management Development (IMD).

• As for energy, Venezuelan has sizeable reserves of oil and gas, besides an electricity industry with an installed capacity of 20,399 MW, according to data from the Venezuelan Chamber of Electricity Industrialists (Caveinel).

• World competitiveness surveys put the Venezuelan energy infrastructure and its costs at very competitive levels compared to its competitors.

Cost of Electricity to Industry

0,021

0,046

0,056

0,064

0,073

0,028

Argentina

Brazil

Chile

Colombia

Mexico

Venezuela

US$ per kilowatt

Quality of Energy InfrastructureMaximum Score: 10

4,4

5,91

2,97

5,68

2,59

6,68

Argentina

Brazil

Chile

Colombia

Mexico

Venezuela

Adequate, Efficient Infrastructure



Venezuela has high quality infrastructure compared with latinamerican average.

95.155 km of roads. 32.300 km of paved roads, superior to the rest of the region.

13 ports and more than 100 airports

369 fixed and mobile lines per 1.000 inhabitants, superior to the Latin American average (359).

Source: World Economic Forum 2003-2004, Cepal 2001.

Infrastructure

Percentage of paved roads

0 10 20 30 40

Bolivia

Colombia

Ecuador

Argentina

Venezuela

Port infrastructure development

0 1 2 3 4 5

Bolivia

Colombia

Venezuela

México

Chile

7= máxi ma puntuación



How to

invest?


Opening up to foreign Investors, regardless of the country of origin of their capital.

There is no treatment discrimination among foreign and local investors.

Legislation establishes international standards for the protection of Investments.

Freedom to invest, without any prior authorization.

Investors have the right to transfer capital and benefits invested once they are in compliance with the foreign currency acquisition legislation.

MNT guarantees and equitable and fair treatment.

Legal Framework


Freedom to hire staff, aliens inclusive..

Many options for using Disputes

Settlement mechanisms related to the

Investment and the commercial activity

bound to it.

Technical Assistance to the Investor

during all Investment stages.

Fostering of Legal Stability Agreement:

LSA.

Legal Framework


Venezuela has suscribed 24 agreements with the following countries:

Protection and Promotion Investment Agreements

Sweden

Argentina

Portugal

Great Britain

Barbados

Czech Republic

Lithuania

Denmark

Switzerland

Netherlands

Belgium

Chile

Iran

Spain

Uruguay

Germany

Costa Rica

Canada

Paraguay

Brazil

Peru

Italy

France

Cuba

Ecuador


Foreign investments Regulations

Constitution of the Bolivarian Republic of Venezuela (Article 301): Establishes equal conditions for local and foreign investments. The Constitution favors the unrestricted presence of both.

Decree 2095: develops content of Decisions 291 and 292.

Law for the Promotion and Protection of Investments (1999):

• System of general protection to the foreign and domestic investments.• Bilateral Investment Agreements.• Equal Treatment for local and foreign investors under similar circumstances with the

exceptions established in special laws.• Fiscal rationality in the imposition of tributes and rates to the industrial and

commerce activities• Incentives Policies and Promotion of Investments in certain sectors and regions to

contribute with specific development objectives.• Negotiable Incentives for the Investors that supports training of human capital,

productive development and inserting Venezuelan economy in the Global Market.

Other Relevant Regulations:Regulations of the Law to Promote and Protect Investments, Code of Commerce and Civil Code, Arbitration Law, tax, labor and other special laws


General:

Comercial Incentives:

• Draw Back return.

• Active and Passive perfection Regimes

• VAT return on production aimed at exportation.

• 10% reduction for new investments

• Income Tax Exoneration for investments in less economic development states and small and medium size industries located in industrial parks (13%)

• Tourism: reduction of 75% of the amount of new investment (infrastructure).

• Agriculture: reduction of 80% of the amount of new investments.

• Possibility of signing legal stability agreements.

Foreign investments Incentives


• Income Tax Law: This tax is levied on annual net and available income, in cash or kind, earned by individuals or businesses residing or domiciled in Venezuela, regardless of whether the origin or source of the income is located in Venezuela or abroad.

• In the case of parties engaged in profit-making activities, other than hydrocarbon-related activities, the tax will be levied based on the rates listed in the following table.

General legal framework

The Tax Unit for 2007 was set at Bs. 37.632.00

15%22%34%Portion over 3,000 tax units

Portion over 2,000 and up to 3,000 tax unitsPortion up to 2,000 tax units


• Value Added Tax (VAT) Law: Pursuant to Article Art. 3 of the law the following activities, transactions and operations are subject to this tax:

• The sale of tangible personal property• Definitive imports of personal property• The rendering of independent services carried out or used in the country in return for

consideration• Export sales of tangible personal property• Exports of services

• This tax is payable provided that during the previous fiscal year the party carried out transactions worth more than 6,000 tax units. The tax is levied on every transaction and must be paid in to the treasury on a monthly basis.

• The rate of this tax is set annually in the Budget Law and must be no lower than 8% nor higher than 16.5%. It is currently 11%. July 9%

General legal framework


Trade Liberalization to Venezuela

Venezuela - Trinidad & TobagoPartial Preferences Agreement

Andean Community – EEUUTIC CAN – EEUU

General Preferences System

Andean Community- Canada TIC CAN – Canada

General Preferences System

Andean Community (*)Free

Non Tariff Reduction

Partially Free

Venezuela - ChileFree Trade Agreement (1993)

Venezuela (**) / Andean Community – MercosurFree Trade Agreement

(*) Venezuela retired from CAN in 2006. Tariff preferences will be in force for five (5) years.(**) Venezuela agreed to become a full member of MERCOSUR in 2006.


Trade liberalization from Venezuela

Venezuela – Central AmericaPartial Preferences Agreements

Venezuela – CARICOMAgreement on Trade and

Investment

Venezuela - Guyana Partial Preferences Agreement

Andean Community Agreement (*)

Venezuela - ChileFree Trade Agreement (1993)

Free Trade Agreement CAN-MERCOSUR / Venezuela (**)

Free

Non Tariff Reduction

Partially Free(*) Venezuela retired from CAN in 2006. Tariff preferences will be in force for five (5) years.(**) Venezuela agreed to become a full member of MERCOSUR in 2006.


Procedures

Company Founding : a minimum payment of 20% of the subscribed capital stock

Capital stock must be divided in common shares

To obtain the Fiscal Information Registry before (SENIAT)

To open a subsidiary company is allowed

All the employees must be registered in the Social Security

I the company has more than five (5) workers or employees it must contribute with the National Institute of Educational Cooperation (INCE) with 2% out of the total salaries.

Foreign investments must be registered at SIEX within sixty (60) calendar days.

Investor or the company shall updated annually (within 120 days of the new economic period) their investment information within SIEX.

Other entities in charge of the authorization, supervision and registry are: Superintendence of Bank (Sudeban), Superintendence of Insurances (Sudeseg) Ministry of Energy and Oil (MEP) and Ministry of Basic Industries and Mining (MIBAM)


How to set up a company

Visa Company RIF: Tributary Information Registry (SENIAT)

Investment Registration of the Company

Social Security Registration l

Registration of the company before INCE

Commercial Visa

Investment Visa

Choose legal form of the company

Checking of the company name

Opening a bank account and deposit the capital

Mercantile Registry

Publication

Banking Oil and Gas

InsurancesMining

Other

Writing up of the legal documents: statutes and

act of incorporation


Where to invest?


Oil producer of longstanding trajectory

The largest conventional reserves in the region and the sixth and ninth petroleum and gas reserves in the world

Currently produces 4% of the world’s crude oil production

The importance of the industry to the economy

Know-how in various activities: exploration production refining trading

Specialized labor

Participation by the private sector: major foreign and national private companies as well as foreign state oil companies in main as well as related activities

Major opportunities within the framework of Pdvsa’s Plan, especially the quantification and certification of extra heavy crude oil and bitumen reserves in the Orinoco Belt which it is estimated can add an additional 200 billion barrels

There are more than 850 service companies waiting to create joint ventures with national and foreign companies to add know-how and increase their operating capacity

Oil services sector


Source: Cámara Petrolera

•Seismic studies•Geosciences and environment•Specialized technical services•Engineering and integrated

services•Oil and gas production facilities•Manufacturing of capital goods•Vendors: commercial strengths•Construction and assembly•Production – national capacity•Machinery and heavy equipment•Operations and maintenance of

facilities•Associated services

Oil services: Opportunities


Oil services: Characteristics

Source: Asoquim

Segments

1. Thermoplastic olefins and resins (El Tablazo)

2. Basic petrochemicals (Paraguaná, Morón, Jose)

3. Fertilizers and inorganic products (Morón)

Basic

Chemicals

Number of Companies

Subsegments

Intermediate

Chemicals

Final

Chemicals

4. Organic intermediate products (Eastern & Western Venezuela)

5. Organic intermediate products (El Tablazo, Central Venezuela)

6. Fibers (Central Venezuela)

7. Auxiliary resins and plasticizers (Central Venezuela)

8. Specialty products (Central Venezuela)

9. End products.

15

15

20

200 more

15


Source: Asoquim

RANK 2005

1 Methanol

2 MTBE

3 Urea

4 Propene (propylene)

5 Anhydrous ammonia

6 Ethyl glycol (ethanodiol)

7 PEAD

8 PCV suspension

9 Dodecylbenzene

10 Sodium tripolyphosphates

Principal export products


Indicators

Source: BCV - Asoquim

The average product for the chemical and petrochemical industry during this period comes to 757 million dollars. The notable recovery in 2004 and 2005 places this indicator at its highest level in the past eight years.

Chemical and petrochemical GDP

in MM US$

800 803

722757

789

685635

868

753

0%

-10%

5% 4%

-13%

-7%

19%

15%

0

100

200

300

400

500

600

700

800

900

1000

1997 1998 1999 2000 2001 2002 2003 2004 2005

-0,15

-0,1

-0,05

0

0,05

0,1

0,15

0,2

0,25

PIB químico y petroquímico Crecimiento


Industrial Indicators

The number of establishments has been dropping gradually since 1997. The number has not changed since 2000, despite higher production in the sector, a sign of higher productivity.

Source: Asoquim

Number of establishments

395365 358

330 320300 300 300 300

1997 1998 1999 2000 2001 2002 2003 2004 2005


Following a sharp drop in 1998, the figure for manpower employed in the sector has remained fairly stable, with a 4% growth rate

Source: Asoquim

Manpower employed

30.500

21.350

26.000 25.000 24.000

21.000 20.000 20.000 20.300

1997 1998 1999 2000 2001 2002 2003 2004 2005

Industrial Indicators


Crude oil, among other natural

resources.

Low cost energy

Access to main export markets.

Chemical-Petrochemical business

Advantages


According to 2004-2009 Pdvsa

business plan, crude oil production will

increase to 5 million barrels per day.

Pdvsa investment is estimated at US$

6,7 billion for 2005.

Pdvsa plans to invest in refination

activities 14.304 MMUS$ between

2006-2012

Sector Outlook

Chemical-Petrochemical business


We offer comparative advantages

(excelent natural resources

endowment) and many competitive

advantages (infrastructure, legal

framework and trade agreements).

MRE, MILCO, MIBAM, MINTUR,

SIEX, BANCOEX y CONAPRI can

help with the invesment

administrative process.

The array of profitable business

opportunities is unique.

Venezuela is your investment location


Get our business profile!

www.conapri.org

investments opportunities in venezuela

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