Venezuela: Investing in Venezuela
Despite the attractiveness of the country due to its petroleum manna, the size of its national market and the wealth of natural resources, the FDI flow towards Venezuela has decreased in the last years due to the country's political and economic instability. However, according to UNCTAD's World Investment Report 2021, the country recorded a slight increase in FDI inflows reaching USD 959 million in 2020, compared to USD 934 million in 2019, despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at USD 25.5 billion in 2020. Nevertheless, the climate of uncertainty arising from the “Bolivarian” reforms (violation of the private property rights, currency control, increasing regulation, nationalisations, etc.), the inefficiency of the port system, and the fall of petroleum prices (96% of currency entries) are all obstacles to investment. Venezuela’s government keeps balancing regional and revolutionary policies, without closing the door to foreign investments which it is in dire need of. Nevertheless, “Bolivarian” socialism put in place by the government, mostly interventionist, does not allow the flow of FDI to develop and fulfil the country’s potential. A law of 2014 on foreign investments reduces the statutory rights of foreign investors compared to the previous regime.
As a consequence, Venezuela is listed 188th out of 190 countries in the last Doing Business Report, published by the World Bank in 2020, the same as the previous year. While Venezuela has the world's largest oil reserves, and a strategic geographical location, the country also has the highest inflation rate in the world, endemic corruption, high levels of poverty and violence, economic and political instability, government intervention, and a restrictive legal framework. Additionally, the judiciary is highly politicised and is often influenced by the executive branch, and even though Venezuela’s legal system is open to FDI, it is manipulated by the executive branch. For that reason, FDI in Venezuela has been lower in recent years in comparison to the majority of Latin American nations. Furthermore, numerous multinational companies (including United States’ General Mills, General Motors, Kimberly-Clark, Exxon Mobil, Bridgestone Firestone, Kellogg’s, United Airlines, and Delta Airlines) left the country in recent years, to sell their assets at a low price or gave them up completely. Around 150 multinational companies maintain their presence waiting for an upturn. They have interrupted or reduced their production and laid-off workers while continuing to provide them with a minimum wage and, in numerous cases, meals.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | -1,278 | -456 | -761 |
FDI Stock (million USD) | 22,314 | 21,948 | 21,187 |
Number of Greenfield Investments* | 2 | 2 | 1 |
Value of Greenfield Investments (million USD) | 774 | 43 | 5 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Venezuela | Latin America & Caribbean | United States | Germany |
Index of Transaction Transparency* | 3.0 | 4.1 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 2.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 3.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
Apart from the extremely tense political and social situation, Venezuela's economy can rely on certain strengths:
The country's economic situation is clear: the World Bank's Doing Business ranks 188th out of 190 countries ranked for the quality of its business environment.
The Constitutional Law of Productive Foreign Investment is in place since 2017, this norm aims to regulate everything related to foreign investment in the country and to promote a productive and diversified contribution of foreign origin that participates in the development of the existing productive potential in the country.
Any Comment About This Content? Report It to Us.
© Export Entreprises SA, All Rights Reserved.
Latest Update: January 2023