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Legal keys for foreign investment in Venezuela

Since September 2020, the Ministry of the People's Power for Economy, Finance and Foreign Trade has been in charge of the foreign investment area.

Foreign investment is vital to boost a country's economy. In Venezuela, since 2017 there has been a Constitutional Law on Productive Foreign Investment, this law has the purpose of regulating everything related to foreign investment in the country. It defines investment as all resources obtained in a lawful manner and destined to the production of goods and services that generate decent jobs and promote small and medium industry.

"Promote a productive and diverse contribution of foreign origin that contributes to the development of the productive potentialities existing in the country, in order to consolidate a framework that favors and grants legal security to investment, guarantees economic sovereignty and contributes to the well-being of the people."The general provisions of this regulation, which serves as a reference framework for special legislation in specific sectors of the economy such as hydrocarbons, mining, telecommunications, among others, read in the general provisions.

The broadly defined purposes of this regulation are as followsThe promotion of productive foreign investment to strengthen and diversify the national economy; the generation of technology transfer; respect for national independence and sovereignty. in the negotiationsThe creation of decent, fair and productive jobs; and the attraction of foreign investment in non-traditional sectors of the Venezuelan economy, either through the substitution of imports or the promotion of exports. To achieve this, all the articles of this law are based on the principles of sovereignty, independence, territorial integrity, solidarity, honesty, effectiveness, efficiency, transparency, cooperation, legal certainty, equal treatment between foreign and domestic investors and economic and productive complementarity. 

Foreign companies and their subsidiaries are subject to this Law.It also covers foreign companies, subsidiaries or related companies, as well as other forms of foreign organizations with economic and productive purposes that make investments in the territory of the Bolivarian Republic of Venezuela. Likewise, it covers Grand National companies whose objectives and operation are subject to a strategic plan of two or more States and national private, public and mixed companies, and their affiliates, subsidiaries or related companies, whether or not governed by international agreements and treaties and other organizations with economic and productive purposes that receive foreign investment, as provided for in the legal system of the Bolivarian Republic of Venezuela. 

It also regulates the performance of accredited national natural persons. as residents or domiciled abroad, foreign individuals residing abroad who make investments in the national territory and foreign individuals residing in the country who make foreign investments. 

Basic definitions

Foreign investment is productive investment made through the contributions of foreign investors, which may be tangible or intangible. There are two types of investment to consider: 

  • DirectIt is the productive investment of contributions made up of tangible or financial resources, destined to form part of the patrimony of the subjects receiving foreign investment in the national territory. The contributions must be equal to or greater than 10% of the corporate capital.
  • PortfolioAcquisition of shares or equity interests in all types of companies that represent a participation of less than 10%.

In both types, the forms of investment may be in foreign currency or any other means of exchange; in physical or tangible capital goods; or in intangible goods such as trademarks, patents, copyrights, among others.

Legal framework

The Ministry of the People's Power in charge of the area (Ministry of the People's Power of Economy, Finance and Foreign Trade) is responsible for the execution of foreign investments in Venezuelan territory. This Ministry will be in charge of centralizing the Foreign Investment Registry and of requesting the competent bodies to comply with their functions for the granting of the mentioned registration in accordance with the Law. 

Official Gazette number 41.965 published on September 15, 2020 declared the process of suppression of the Superintendence of Foreign Investments concluded. (Siex), which was disincorporated as an administrative unit integrated to the People's Ministry of Economy, Finance and Foreign Trade. This Ministry, together with the National Foreign Trade Center (Cencoex), is in charge of resolving and directing any pending issues related to this action. 

On the other hand, decree 4.310 of September 2020 accredits the People's Ministry of Economy, Finance and Foreign Trade to all matters relating to the country's foreign trade, foreign direct investment, export promotion policies and productive foreign investment. 

The Law on Productive Foreign Investment (2017) also states that foreign investment may be made in any area.The investment must be in a sector or economic activity permitted by Venezuelan law. In addition, the investment must remain in the territory of the Bolivarian Republic of Venezuela for a minimum period of two years from the date on which the Foreign Investment Registration was received.

A very important legal aspect of this legislation is the consideration and treatment of foreign investment. in Venezuela, in the same manner (and for all purposes) as the investment of resident nationals. There will not be a differentiated treatment beyond the requirements established by law for special regulations and strategic or preferential sectors. 

Foreign companies commit to responsible business conduct and at no time may they hinder or stop their own production process or that of related companies.

These are the most important conditions for foreign investment listed in the regulatory framework:

  • Contribute to the production of domestic goods and services to meet domestic demand, as well as to increase non-traditional exports. 
  • Support national economic development and the country's research and innovation capabilities.
  • Participate in the policies dictated by the National Executive aimed at the development of local suppliers that guarantee the necessary linkages, so that national companies incorporate the technologies, knowledge, human talent and innovation capabilities required by the company receiving the foreign investment.
  • Channel the monetary resources from foreign investments made in the Venezuelan territory through the national financial system. 
  • To participate in the national economic activity and its consequent link with the social life of the country, in its strictly economic character of foreign investment. 
  • They shall be prohibited from participating directly or indirectly in the national political debate.
  • Notifying the governing body of any type of investment in national or foreign companies located in the national territory, which is made after the initial Foreign Investment Registration.
  • To be subject to the national legislation in force on commercial, labor, tax, customs, environmental and all those areas that arise on the occasion of the foreign investment. 

In Alan Aldana & Abogados we have a qualified team to assist and provide detailed advice in the preparation of projects that require or are subject to Foreign Investments, our goal is to ensure that all financial transactions comply with the necessary requirements in Venezuela, adhering to international standards applicable to this area.

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