Venezuela achieves very low overall compliance with international standards and codes, with a score of 7.5 out of 100 in our Standards Compliance Index. Venezuela's regulatory environment and compliance with international standards remain extremely weak. Seven out of twelve standards are at an "insufficient information" level, indicating a serious lack of transparency. In the macroeconomic fundamentals category, Venezuela is non-compliant with all three standards. Only in the areas of accounting and auditing does Venezuela provide positive information as to its intent to adopt the international standards. The country appears to suffer from rampant corruption, politicization of economic processes, centralization of control by the presidential government, inadequate powers in financial sector regulators, and a serious lack of accountability. A positive development in 2005 was the passage of the Organic Law against Organized Crime, which addresses money laundering, but the law has major flaws hampering its efficacy.

Macroeconomic Policy and Data Transparency

Venezuela is not a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS). However, the country participates in the IMF's General Data Dissemination System (GDDS), which is less stringent than the SDDS. The main organizations responsible for the production and dissemination of statistics are the Central Bank of Venezuela, the National Statistics Institute and the Government Finance Statistics Office of the Ministry of Finance. The main laws governing the collection and dissemination of statistics in Venezuela are the Law on the Public Statistical Service of May 2001 and the Law on the Central Bank of Venezuela of October 2001. More »

Over the past years, monetary policy transparency in Venezuela has been on the decline. In its 2006 assessment of monetary policy transparency in Venezuela, Oxford Analytica (OA) asserted that ongoing reduction of the operational autonomy of the Central Bank of Venezuela (Banco Central de Venezuela, or BCV) has been the consequence of the implementation of the amendment to the BCV Law on July 19, 2005. In fact the BCV no longer sets the long-term monetary policy targets, and it is the government which announces the annual inflation target. Furthermore, the government's new Treasury Bank (Banco del Tesoro) became operational in 2006, taking over previous BCV responsibilities such as management of internal and external public debt. Three developments are particularly worrisome with regard to monetary policy transparency. First is the dominance of the government's fiscal operations, which prevent the BCV from assuming its role in implementing monetary policy. Second, new government agencies such as the Treasury Bank as well as the National Development Fund, have taken over classical agency roles of the Central Bank without having its accountability structure. Last, partially as a result of a severe loss of staff as well as political pressure, the previously highly regarded quality of data reporting by the BCV is increasingly doubted. More »

The re-election of President Chavez, paired with revenue windfalls from high oil-prices, does not contribute to an improvement in Venezuela's fiscal policy transparency. On the contrary, fiscal policy transparency is deteriorating, mainly due to the continued growth of the so-called "parallel public sector" that has been established over the last few years by the Chavez administration with the revenues from the national oil company, Petróleos de Venezuela S.A. (PDVSA), and the Central Bank of Venezuela. This parallel sector, institutionalized via the establishment of the National Development Fund (Fonden) in 2005 and the Treasury Bank (Banco del Tesoro), which became operational in 2006, is operating largely free from transparency and accountability. However, as Oxford Analytica (OA) notes in it its 2006 Report on Fiscal Policy Transparency, there are also some positive developments, with the shift in the formal budgetary process now toward more project-based financing and the planned introduction of a multi-year budgetary framework for 2008. More »

Institutional and market infrastructure

All matters of insolvency in Venezuela are regulated in the Civil Code of 1982 and Commercial Code of 1955. The Commercial Code specifies two procedures available to distressed companies - moratorium (atraso) and bankruptcy. Several publications on the insolvency issues in Venezuela have pointed out that the Commercial Code has not been updated to reflect the changes in business practices, and hence does not include many provisions necessary to deal with today's bankruptcies. The bankruptcy and moratorium procedures were found to be inflexible and insufficient to addressing the needs of modern insolvency cases. Moreover, traditional security interests are ill-suited for modern restructuring. However, there is no publicly available information as to Venezuela's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

In April 2004, the Venezuelan Federation of Certified Public Accountants (Federacion de Colegios de Contadores Publicos de Venezuela, or FCCPV), the standard-setter of accounting standards in Venezuela, declared its intent to fully adopt International Financial Reporting Standards (IFRSs) as Venezuela's Generally Accepted Accounting Principles (VGAAP), and to adopt the International Standards on Auditing (ISAs) and International Public Sector Accounting Standards (IPSASs) issued by the International Federation of Accountants (IFAC). On June 19, 2004, the FCCPV adopted a draft Plan on the Adoption of the International Standards, which was to be executed within 3 years and involved mandatory adoption of the international standards for periods commencing on January 1, 2007. Subsequently, in August 2006, the FCCPV approved the adoption of IFRSs in Venezuela. All companies, except for public companies and Small and Medium-size Enterprises (SMEs), shall adopt international standards for the periods ending on December 31, 2008. SMEs shall adopt the above mentioned standards for the periods ending on December 31, 2010. Finally, for public companies, the date of the adoption is to be determined by the National Securities Commission. Meanwhile, companies are required to follow VGAAP which, according to Deloitte & Touche, in general, are based on the U.S. accounting system. However, VGAAP differ both from the Statements of Financial Accounting Standards (SFASs), which form the U.S. GAAP, and from IFRSs. Ernst & Young, in its 2006 report "Business and Investment Guide - Venezuela," points out that the main difference between Venezuelan and international standards lie in the areas of accounting for inflation, deferred taxes, and developmental costs and expenses. More »

In July 2003, the Venezuela's Association of Executives (Asociacion Venezolana de Ejecutivos - AVE) launched a program to disseminate knowledge about corporate governance issues and in August 2003 established an Executive Council for Corporate Best Practices, with the participation of a broad range of private sector and public sector entities, including the Securities Commission (Comision Nacional de Valores - CNV) and the Caracas Stock Exchange (Bolsa de Valores de Caracas - BVC). No code has been issued to date. However, the Venezuelan economy primarily consists of non-listed closed-capital companies and the focus of the Chavez administration has shifted from privatization to de-privatization. Overall, there is not enough publicly available information to make an assessment as to Venezuela's overall level of compliance against the (Organisation for Economic Co-operation Development's) OECD's Principles of Corporate Governance. More »

On June 19, 2004 the Venezuelan Federation of Certified Public Accountants (Federacion de Colegios de Contadores Publicos de Venezuela, or FCCPV), adopted a draft Plan on the Adoption of the International Standards, including International Standards on Auditing (ISAs) and International Public Sector Accounting Standards (IPSASs) issued by the International Federation of Accountants (IFAC), as well as International Financial Reporting Standards (IFRSs). The plan was to be executed within 3 years, and involved mandatory adoption of the international standards for periods commencing on January 1, 2007. In August 2006, the FCCPV approved the schedule of adoption of IFRSs in Venezuela. All companies, except for public companies and Small and Medium-size Enterprises (SMEs), should adopt international standards for the periods ending on December 31, 2008. SMEs should adopt the above mentioned standards for the periods ending on December 31, 2010, and finally, for public companies the date of the adoption will be determined by the National Securities Commission (CNV). Meanwhile, auditors are required to apply Venezuelan auditing standards which, according to Deloitte & Touche, are based on the U.S. auditing standards. More »

Information provided in the 2007 U.S. Department of State (DoS) report indicates that in 2006 the Venezuelan authorities took several measures to counter money laundering. The report notes that the 2005 Organic Law against Organized Crime (Organic Law) brought about improvements in the anti-money laundering regime in Venezuela by improving the investigative and prosecutorial capabilities of the authorities and enhancing the asset forfeiture regime. The Organic Law criminalizes money laundering and defines terrorism as a crime against public order according to the U.S. DoS report. However the report notes that with regards to the financing of terrorism there is no law establishing terrorist financing as a separate crime and there are inadequate measures for freezing terrorist assets. The Organic Law, according to the 2007 U.S. DoS report, is deficient in that it failed to establish the financial intelligence unit (Unidad de Inteligencia Financiera, or UNIF) as an autonomous agency. Further, the UNIF and the Superintendent of Banks and Other Financial Institutions (Superintendencia de Bancos y Otras Instituciones Financieras, or SUDEBAN) -- the regulator of the financial sector -- is viewed by the financial sector as a political tool in the hands of the government and thus lacks credibility. Apart from the 2007 U.S. DoS report, there is insufficient information as to Venezuela's compliance with the Financial Action Task Force's (FATF) Forty plus Nine Recommendations. More »

The Economist Intelligence Unit (EIU) in a 2005 report notes that Venezuela's payment system arrangement consists primarily (90 percent) of large-value transactions, however, at the time of the report, the EIU also notes that there was no clear distinction between large and low value payments. The EIU report indicates that there are two clearinghouses operated by the Central Bank of Venezuela (Banco Central de Venezuela, or BCV), namely for checks and large value transactions. As per the report, the low-value check clearinghouse uses a semi-automated multilateral net settlement arrangement and the large-value payments are settled through single accounts that financial institutions hold with the BCV. A 2002 report by the Center for Latin American Monetary Studies and World Bank (CEMLA/WB) states that, per the Law of the Central Bank of Venezuela (BCV Law), the BCV is responsible for setting operational rules with regards to payment systems and in regulating the functioning of the payment systems in the country. In spite of the availability of the 2005 EIU report and the 2002 CEMLA/WB report there is insufficient information regarding Venezuela's compliance with the Bank for International Settlements' Core Principles for Systemically Important Payment Systems. More »

Financial Regulation and Supervision

The agencies responsible for banking supervision in Venezuela are the Central Bank of Venezuela (BCV), the Superintendency of Banks and Other Financial Institutions (SUDEBAN), the Fund for Deposit Warranties (FOGADE), and the National Banking Advisory Board (CBN). The U.S. Department of Commerce reports in 2007 that the Banks and Other Financial Institutions General Law of 2001 increased the supervisory authority of SUDEBAN over financial institutions. A 2006 Working Paper published by the International Monetary Fund (IMF) indicates that, although the Venezuelan banking sector appears to have strong Financial Soundness Indicators (FSIs), this is the case only if the country is experiencing economic growth. The IMF paper further notes that there are several deficiencies in the banking supervisory framework, especially in the areas of consolidated supervision, offshore operations of Venezuelan banks and connected lending. In addition, the report notes that the Chavez government has introduced several changes in the regulatory environment resulting in increased government intervention in the banking sector. Nonetheless there is insufficient information publicly available as to Venezuela's compliance with the Bank for International Settlements' Basel Core Principles for Effective Banking Supervision. More »

The Capital Market Law, first implemented in 1998, charges the National Securities Commission (CNV) with the promotion, regulation, surveillance, and supervision of the capital market. In an effort to account for the evolving economy, the Law gave the CNV autonomy and assigned it promotion and sanctioning duties. The CNV's principle objective is to oversee transparency in the securities market and to provide investor protection through better disclosure of financial information and compliance with the laws, as well as all other rules and regulations However, there is not enough publicly available information to make an assessment as to Venezuela's overall level of compliance against the Principles of Effective Securities Regulation developed by the International Organization of Securities Commissions. More »

The insurance sector in Venezuela is regulated by the Superintendency of Insurance (Superintendencia de Seguros, or SUDESEG) in accordance with the Insurance and Reinsurance Law of 1995. According to the U.S. Department of State, Decree No. 1.505, issued in November 2001, instituted contracts as the basis of insurance activity and established mechanisms to protect the rights of the consumers. The insurance sector in Venezuela has been opened for foreign investment since 1994. However, there is insufficient information publicly available as to Venezuela's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). More »

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Credit Ratings

Moody's B2/Stable

Fitch BB-/Negative

Standard & Poor's BB-/Stable

Macroeconomic Data

2007 GDP (Current Prices): 236.4 billion USD (IMF)

2007 GDP (Per Capita): 8,596 USD (IMF)

2008 GDP (Growth Forecast): 5.7% (IMF)

2008 Inflation (CPI): 25.7% (IMF)

2007 Unemployment: 9.1% (CIA)

2006 Foreign Direct Investment

FDI (Inward): -0.5 billion USD (UNCTAD)

FDI (Outward): 2.1 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 58 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)