Venezuelan Business Customs

Business Hours

Normal working hours: 08:00 am – 05:00 pm
Retail opening hours: usually stores open at 9:00 am and close at 07.00 pm

Business Customs Tips

Venezuelan businesspeople prefer face-to-face meetings in addition to using e-mail communications, letters or telephones contacts.

It is a custom to shake hands when arriving or leaving a place; also you need to know that in a meeting your Venezuelan contact may arrive slightly late. However, they can be punctual especially if they are accustomed to work with international companies.

Also, be sure to have an ample supply of business cards. Although not essential, it is beneficial to have cards printed in Spanish, as well as in English.

Labor

Unions are powerful and large in Venezuela. Workers are protected by strong labor laws that provide them many different rights.

Social Security and Health Care cost are equally split up between the employee and the employer. Average working hours are 40 hours/week and annual leave varies between 15 and 30 working days.  Currently proposed constitutional reforms would reduce the work schedule to 6 hours per day or 36 hours per week. 

For additional information on labor in Venezuela please visit the labor ministry web site: http://www.mintra.gov.ve/

Fiscal Policy and Taxation

The price and production rates of the oil sector profoundly affect the state of government finances; petroleum production royalties and taxes contribute approximately 70 percent of government revenues.

All non-oil taxes and customs duties are collected by SENIAT, the national tax authority.

Use of Agents/Distributors - Finding a Partner

A commissioned sales agent, or manufacturer's representative, finds customers, passes the order to the foreign company and receives a commission on the sale. The amount of commission will vary between 5 percent and 30 percent depending on the nature of the product and the amount of work or time required by the agent. Foreign company requirements as to minimum orders, or even minimum annual sales, may meet with strong resistance from prospective distributors or agents.

There are numerous ways to find a business partner. The various USCS services, such as the International Partner Search, Gold Key Service, Video Gold Key Service, Contact Lists (screened/unscreened), Trade Missions, Catalog Shows and USDOC-Certified trade shows are commonly used. No service or list of potential leads can replace a visit to the country to study and interview prospects.

On the other hand, placing a Venezuelan citizen on the company's payroll can be costly in case of separation, since in that case he/she is entitled to all benefits of the very generous labor laws. Absent unusual circumstances, commissioned agents are not considered employees.

Franchising

Franchising is allowed under the existing foreign investment laws. Franchise payments, royalties, patent or technical assistance agreements must be registered - but are not subject to re-negotiation or other controls - with the Superintendent of Foreign Investment SIEX. Certain payments for the use of franchised rights may be subject to withholding taxes. Decree 2095 guarantees the ability to remit funds for franchising rights.

From a marketing standpoint franchises will most likely only be successful if they bring technology, services or systems that are not generally available in the country. Franchising currently provides some of the best investment opportunities.

Venezuela, the third largest franchise market in Latin America after Mexico and Brazil, is suffering the fallout from Venezuela's economic crisis. Since the late 90's the growth in the franchise sector created 80,000 direct employees and 160,000 indirect employees countrywide. Some of the forces creating a negative growth in this sector; as well as in all sectors of the economy are: a very strong decrease in consumer spending due to unemployment, inability of franchisees to re supply imported inventory due to lack of dollars imposed by the exchange control, high interest rates, rents in dollars and the bank transaction’s tax, which has been extended by the government for another year.

While opportunities for the traditional turnkey franchise operations are not encouraging, the Venezuelan Franchise Association - Profranquicias - has expressed interest in expanding the existing 40 plus Venezuelan franchises already being exported worldwide. This initiative has the potential of creating opportunities for U.S. manufacturers of kitchen and bottling equipment, operational and management training, and many other ancillary products and services.

Joint Ventures / Licensing

Joint ventures formed by establishing a new company with local and foreign capital or by buying into an existing local company are quite common. The only requirement is registration of the venture with Investment SIEX. The law imposes no limit on the amount of dividends, reinvestment, or repatriation. Similarly, manufacturing under license is permitted, but to pay license fees, royalties or trademark and patent fees the license must first be registered with SIEX. See Investment Climate (Chapter VII) in the Venezuela Country Commercial Guide for more information.

Joint ventures and wholly owned subsidiaries of foreign companies are treated the same as Venezuelan firms. Such enterprises as security companies (guard services, armored cars, etc.), TV and radio broadcasting and the publication of Spanish language newspapers are restricted from foreign investment of more than 20 percent of the capital. Professional services (attorneys, medical services, CPAs, architects, etc.) are also restricted, falling under the Law of Professions. Foreign professionals wishing to work in Venezuela must revalidate their title at a Venezuelan university. This, however, does not eliminate consulting services under contract for a specific project. Banking, insurance and brokerage services and companies have recently been opened to foreign investment.

Steps to Establish an Office

A business must first be registered with the Venezuelan Municipal "Commercial Registry" to be legally established. The opening and operating of a coordinating or reporting office is not considered foreign investment or a business activity as long as the office does not sell and is being financed from the home office. Any other more detailed activity would fall under the Commercial Code. Business enterprises can be registered as corporations, as limited liability companies, as partnerships or as sole proprietorships.

It is advisable to have a local attorney draft the registration documents. Registration itself is fast and inexpensive. After that, a municipal business license has to be obtained, which also requires the payment of a small quarterly tax. The final step is to obtain the income tax registration number (RIF) from the Ministry of Finance. The RIF must be shown on all fiscal documents and bills and serves generally as an identification number for the entity.

Office space is widely available for rental or purchase, although prices, especially in the capital, can be very expensive. Foreign companies without restriction can purchase real estate. Standard lease contracts do not cover utilities. Telephone lines have become more available, and some office buildings do lease office space with at least one phone line. Cellular telephone service is available from three competitive firms, two of which are U.S.-backed.

Important Links:

Venezuela’s Stock Exchange:

Caracas Stock Exchange

Government on line

Economy

Currency:

The Bolivar is the legal currency for Venezuela. In January 1st, 2008 a Currency Conversion will take place. From that date onwards, three zeroes will be remove from the monetary unit. Therefore, 1,000 current Bolivars (Bs.) will be 1 "Bolivar Fuerte" (Bs.F) or "Strong Bolivar" with the conversion being  implemented over an as yet undetermined period. As of October 1, 2007, all goods must show sale prices in both current and new bolivares. For more information Banco Central de Venezuela

Currency Exchange:

The Venezuelan government banned free currency conversion shortly after the nation-wide economic stoppage of late 2002 and early 2003. The Foreign Exchange Commission, CADIVI http://www.cadivi.gov.ve, is tasked with the administration of all foreign exchange transactions.

All purchases of foreign currency at the official rate must be approved by CADIVI, which has authority to prioritize essential items such as food and medical supplies. All requests for foreign currency to purchase imports must demonstrate insufficient local production. The official rate has been set at Bs. 2,150 per $1 USD since February 2005.

CADIVI - Import Authorizations per Economic Sector, January-May 2007

Food	10.52%
Health	9.12%
Commerce	15.85%
Automotive	18.40%
Telecommunications	6.55%

Source: CADIVI

Authorizations for foreign currency are not expeditious, and imply the submittal of a significant amount of supporting documents by the Venezuelan importer with the support or collaboration of the exporter. The procedure is usually lengthy and its outcome somewhat unpredictable, although usually positive if the proper procedures are followed. In this regard, Venezuelan importers going through CADIVI usually require the following documents from the U.S. exporter:

Detailed invoice (specify merchandise or service provided, provide Harmonized Tariff Code of item, as well as quantities. Make sure the form of payment is clearly detailed). The importer may request that the invoice be notarized or an apostille affixed.

Freight (only if the U.S. firm is paying for the shipment of the merchandise or has agreed to negotiate for transportation).

Insurance (pertaining to the shipment of the merchandise).

Commissions or any additional fees over the value of the merchandise at factory point.

U.S. exporters might be able to obtain payment from the Venezuelan importer through sovereign bonds recently issued by the Venezuelan government and shares of the local telephony company (CANTV). These procedures, if available, may provide swifter access to foreign exchange to the Venezuelan importer but at rates considerable higher than the official exchange rate of USD 2,150 granted by CADIVI and Venezuela’s Central Bank. No other parallel market transactions are allowed and may be penalized with fees and jail time by Venezuelan authorities. U.S. firms are strongly advised to exercise caution when dealing with Venezuelan counterparts and ensure that all exchange requirements are met under the Venezuelan law.

For additional information on the Venezuelan market and the foreign exchange control, please contact us at [caracas.office.box@mail.doc.gov.]

Other Links:

Venezuelan Central Bank

CADIVI

Exchange Rate

1 USD = 2.150 bolívares.

Economic Data:

Year	Average Unemployment rate 1	Annual Inflation rate 2
2002	15.85%	31.20%
2003	18%	27.10%
2004	15.25%	19.02%
2005	15.14%***	14.40%
2006	N/A	17.0%
2007	N/A	10.9%***

1 Source for Average Unemployment: Venezuela Central Bank

2 Source for inflation rate: Labor Ministry

*** Through September 2007

GDP

Year	GDP (Million US $)
2002	76
2003	78.6
2004	82
2005	74.7
2006	147.9
2007	157.9

Source: Economic Freedom Index by Heritage. 

U.S. Exports and Imports to Venezuela: (Million of U.S. dollars)

United States is the leading commercial partner with Venezuela 29.6%, in 2006 followed by Colombia 10%, Brazil 9.7%, China 7.2% (2004)

Year	Exports to Venezuela	Imports from Venezuela	Balance
2002	4,429.7	15,093.6	-10,663.90
2003	2,831.0	17,136.1	-14,305.10
2004	4,767.4	24,920.6	-20,153.10
2005	6,420.9	33,978.1	-27,557.2
2006	9,011.6	37,165.0	-28,153.4
2007**	6,770	23,804	-17,034

Source: Census

** January-August 2007

Main Exports by Commodity to Venezuela* (2006)

Note: all figures in Millions of U.S. Dollars

Commodities	Exports	Imports
Food and live animals	137.52	243.98
Beverages and Tobacco	3.3	1
Crude materials, inedible, except fuels	115.88	88.81
Mineral fuels, lubricants and related materials	16251.9	124.32
Animal and vegetable oils, fats and waxes	0.07	38.79
Chemicals and related products, n.e.s.	492.66	543.87
Manufactured goods classified chiefly by material	832.09	229.39
Machinery and transport equipment	154.68	1825.18
Miscellaneous manufactured articles	24.72	208.22
Commodities and transactions not classified elsewhere in the SITC	82.17	70.09

Source: Venemcham http://www.venamcham.org/economia/

* Until September 2004

Exports - commodities:

petroleum, bauxite and aluminum, steel, chemicals, agricultural products, basic manufactures

Imports - commodities:

raw materials, machinery and equipment, transport equipment, construction materials