15 February 1996
POLICY REVIEW BODY: REVIEW OF VENEZUELA
TPRB'S EVALUATION Back to top
The Trade Policy Review Body of the World Trade
Organization (WTO) conducted its first review of Venezuela's trade policies 12 and 13
February 1996. The text of the Chairman's concluding remarks is attached as a summary of
the salient points which emerged during the two-day discussion.
The review enables the TPRB to conduct a collective
examination of the full range of trade policies and practices of each WTO member country
at regular periodic intervals to monitor significant trends and developments which may
have an impact on the global trading system.
The review is based on two reports which are
prepared respectively by the WTO Secretariat and the government under review and which
cover all aspects of the country's trade policies, including: its domestic laws and
regulations; the institutional framework; bilateral, regional and other preferential
agreements; the wider economic needs and the external environment.
A record of the discussions and the Chairman's
summing-up, together with these two reports, will be published in due course as the
complete trade policy review of Venezuela and will be available from the WTO Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon
(1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995),
Côte d'Ivoire (1995), Egypt (1992), the European Communities (1991, 1993 & 1995),
Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994),
India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995),
Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mauritius (1995),
Mexico (1993), Morocco (1989 & 1996), New Zealand (1990), Nigeria (1991), Norway
(1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania
(1992), Senegal (1994), Singapore (1992), Slovac Republic (1995), South Africa (1993), Sri
Lanka (1995), Sweden (1990 & 1994), Switzerland (1991), Thailand (1991 & 1995),
Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995),
Uruguay (1992), Venezuela (1996) and Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
CONCLUDING REMARKS BY THE CHAIRPERSON Back
At its meeting on 12-13 February 1996, the Trade
Policy Review Body held its first review of the trade policies and practices of Venezuela.
These remarks, made on my own responsibility, summarize the salient points of the
discussion and are not intended to substitute the for collective evaluation and
appreciation of Venezuela's trade policies and practices, which will be reflected in the
minutes of the meeting.
We appreciate very much that Venezuela has made a
text of their replies, which includes details on the operation of the Andean Price Band
system, available to all interested delegations and proposed additional written
information in the days to come.
The discussion developed under six main themes: (i)
the general economic situation and reform programme; (ii) exchange controls; (iii) the
role of the State in the economy; (iv) Venezuela in regional agreements; (v) sectoral
questions; and (vi) Venezuela in the WTO.
General economic situation and reform programme
Venezuela was widely commended by members for the
rapid progress of economic and trade reform between 1989 and 1992. Since then, despite
difficult economic and social problems, the process had not, in the main, been eroded.
Venezuela was encouraged to carry forward its reforms and bring greater transparency to
its policies. Further liberalization would also bring to fruition the improvements in
competitiveness initially expected from Venezuela's trade liberalization and accession to
the GATT. A question was posed regarding the acceptance of the reforms by the population.
Note was taken of Venezuela's ongoing negotiations
with the IMF and details were sought on whether such negotiations included closing the gap
between domestic and world prices for fuels. Venezuela was encouraged to pursue
appropriate monetary and fiscal policies to address its domestic and external imbalances
in the least trade distorting manner.
The paramount role of petroleum in Venezuela's
economy was noted. Members stressed the importance, while recognizing the difficulties
involved, of reaching an appropriate balance between the oil sector and the rest of the
economy. Given the vulnerability of the economy to highly variable oil revenues, questions
were asked on efforts being made to diversify the economy, particularly exports.
In response, the representative of Venezuela said
that the reforms initiated in 1989 had been consolidated and deepened since 1994,
following a weakening of efforts in 1992-93. This included liberalization in a regional
context as well as the entry into force of the WTO agreements. Tax reforms had been
approved in 1994 and further reforms were now before Congress. He emphasized the need for
social acceptability of any reform programme; and underlined that the present reforms were
being undertaken after full consultations. He gave details of Venezuela's industrial
policies and their relation to trade commitments.
The Government was concentrating on reducing the
fiscal deficit, aiming at balance in 1997, and was hoping to reduce inflation to 50 per
cent in 1996. Success in achieving macro-economic stability depended on a number of
measures, including the eventual ending of exchange controls and financial support, one of
the reasons the Government was seeking an agreement with the IMF.
The representative also explained that general price
controls had already been reduced to 12 categories of mass-consumption products under
price management, with adjustments every 2-3 months. The Government also recognised the
need for adjustments in domestic prices of petroleum. This was to be undertaken in the
context of changes to public transport services. A number of changes were already being
made in the internal market for non-regulated petroleum products.
Details were also provided on the regularization of
the servicing of bilateral debt as well as a programme to resolve the problems of the
financial sector. He emphasised that new supervisory mechanisms had been established and a
new framework law passed by Congress.
Widely shared concerns were expressed over the
effects of the foreign exchange controls introduced in June 1994 against a background of
serious reserve losses. Details on the operation of these controls were requested,
particularly concerning the type of priority imports and non-discriminatory treatment
among suppliers or applicants. Venezuela was encouraged to remove such controls as early
as possible. Some participants believed that Venezuela's exchange controls lacked
transparency and had detrimental effects on foreign investment, capital inflows and trade.
The régime had not been notified to the WTO until November 1995; according to one Member,
it seemed to have both balance-of-payments and TRIMs implications. Some members raised
specific concerns regarding access for particular products accorded low priority under the
system. Additional questions were asked on the consistency of the foreign exchange
restrictions with Venezuela's IMF commitments and a possible deadline for their removal.
In reply, the representative of Venezuela said that
the exchange controls were intended to arrest serious capital flight in the light of the
lack of confidence that had developed after the political crisis of 1992. He emphasised
that the crisis did not result from a "balance of payments problem" in the sense
of trade in goods and services. The controls were temporary and exceptional and,
consistent with this approach, they had been progressively liberalized. Venezuela was
committed to reaching understanding with the IMF in the short term, and to dismantling
both exchange and price controls as part of the Government's macroeconomic programme.
Details of various steps in the liberalization were provided. The Venezuelan Government
had focused on maintaining reserves, not on limiting trade flows or payments related to
foreign investments; imports had not fallen, but had continued to grow. Certain changes in
the direction of trade could not be related to exchange controls, but rather to
developments in regional integration. As reserves had also fallen sharply in late 1995,
the Government had been obliged to introduce certain product priorities; however, no
applications had been refused and the priority list had since been expanded to include new
sectors. There was no discrimination between domestic and foreign applicants.
Role of the State in the economy
Participants noted the crucial role of the State in
key sectors of Venezuela's economy. Members stressed the importance of completing
Venezuela's notification of enterprises subject to Article XVII of the GATT and sought a
complete list of products covered by state trading enterprises.
Information was requested on developments in the
privatization programme. The partial opening to foreign investment of the oil and
financial sectors was welcomed and Venezuela was encouraged to continue the process;
questions were posed on conditions for privatization of aluminium and steel, including the
scope for foreign participation. Further details of the legislation on foreign direct
investment were also requested. A number of Members sought information on Venezuela's
policies and practices on government procurement.
In response, the representative of Venezuela said
the privatization programme had been weakened in 1992/93, following initial successes in
1991, but at the end of 1994, in its new Stabilization and Recovery Programme, the present
Government had announced its new concept for the reduced role of the state and re-launched
the liberalization programme, including petroleum and the financial sector. Details were
provided on the specific privatization programmes for petroleum, aluminium and steel.
Proposals for further reforms would be presented to the next two sessions of the Congress.
The creation of the Ministry of Industry and Trade in November 1995 was intended to play a
major part in the new concept of public-private sector relations.
Venezuela in regional agreements
Members recognized the importance attached by
Venezuela to participation in regional agreements. The Andean Group had become the major
destination of Venezuela's non-oilexports. Members emphasised the need to ensure that all
such trade agreements remained outward looking and the importance of full notification to
the WTO. Information was sought on Venezuela's interests in NAFTA and MERCOSUR as well as
the initiative to establish a Free Trade Area of the Americas.
The representative of Venezuela responded that his
country's participation in regional agreements was in the form of open regionalism and was
not at the expense of the multilateral system. The Andean Group was consolidating free
trade and moving towards a full customs union, in which the establishment of a common
external tariff in 1995 was the first step. The four-tier structure of the CET, decided
after extensive negotiations, was intended to foster increased value-added. The eventual
integration of the Andean Group and MERCOSUR was also being promoted actively, and member
states were actively renegotiating their existing bilateral preferences. Such strengthened
ties would lead to greater balance in relations in the negotiation of a Free Trade Area
for the Americas, in which Venezuela was participating actively. Negotiation of an FTAA
would be very complex and needed to take account of different stages of development.
Sub-regional agreements could be consolidated and progressively converge towards an FTAA.
The representative also said that Venezuela's regional agreements all fell within the
context of the LAIA, and an updated report on Venezuela framework of regional agreements
would be provided to the WTO.
The use of tariff escalation as Venezuela's main
instrument of industrial policy was noted. Information was sought on patterns of
escalation in specific industries as well as their effects in an environment of regional
duty-free trade. Details were in particular sought on objectives and effects of the
automotive regime in force.
Members pointed out that liberalization of
agriculture had been relatively limited. Concerns were widely expressed about the
potential trade-distorting effects of the Andean Price Band System, and its compatibility
with WTO commitments; in this connections, details were requested on steps taken by
Venezuela to ensure that its application did not violate tariff bindings.
Members welcomed the opening of Venezuela's banking
and insurance sectors and expressed the hope that Venezuela would also make binding
commitments within the GATS negotiations on basic telecommunications.
In response, the representative of Venezuela
outlined the broad framework of agricultural policy objectives and how these had evolved.
The intention was to modernize the sector, increasing specialization, productivity and
competitiveness while preserving the environment. In this regard, the Programme for
Agricultural Investment was being negotiated with the IDB and the World Bank. The overall
programme of modernization had many elements, of which tariff protection was only one
minor element. There had been major trade liberalization in the sector since 1990,
including tariff reductions and rationalization, elimination of minimum and maximum
prices, elimination of import licences, elimination of fertilizer subsidies, elimination
of state monopolies in coffee and cocoa, the implementation of price stabilization plans
for a number of products, harmonization with Andean policies,including reduction of export
subsidies, liberalization of trade in seeds, and finally the adoption of the Andean Price
Band System, on which operational details were tabled. Import surcharges on cereals had
been eliminated in 1994 and others would be abolished on the forthcoming publication of
the new customs tariff. Information was also provided on the operation of sanitary and
Venezuela in the WTO
Members commended Venezuela for the increased
transparency in its trade régime following its accession to the GATT. Tariffs had been
reduced and rationalized and the scope of tariff bindings had improved in the Uruguay
Round. Prohibitions and import licenses had been largely eliminated.
An overall assessment was requested on the benefits
or difficulties arising from Venezuela's membership in the WTO, as well as progress in
meeting WTO obligations, including notification requirements in a number of areas such as
State trading and import licensing. Members were interested in the legislative changes
required for implementation of the WTO Agreements. Venezuela was asked whether it was
considering adherence to the Plurilateral Agreement on Government Procurement. Information
was requested with respect to the elimination of the one per cent customs service charge,
the coverage of the import licensing régime, the elimination of import surcharges, the
implementation of internal taxes on imported alcoholic beverages and the operation of the
standards and SPS regimes.
The representative of Venezuela recognized that
certain notification obligations had not been fully met but action was to be taken to
remedy the situation promptly. He also recalled the difficulties in reforming the legal
and administrative framework at times of financial and economic crisis. A new Customs
Tariff would shortly be published. The one per cent customs change was intended to
approximate the cost of services provided; however, Venezuela was actively looking at
In conclusion, the TPRB appreciates Venezuela's
efforts to maintain a liberal trade policy, under very difficult circumstances and its
active participation in the GATT/WTO system since its accession in 1990. We took note of
the efforts to re-establish of macro-economic stability as a basis for future growth. We
are sure that the Venezuelan authorities will give serious consideration to all the
concerns raised during the review, and look forward to receiving the notifications and
written replies promised by Venezuela in the course of the meeting. We also look forward
to the consolidation of the economic reforms and to further advances in the process of
economic liberalization and integration in the world trading system. Back to top