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Venezuela: February 1996

“ 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.”

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First press release
Summary of Secretariat report
  > Summary of Government report

15 February 1996

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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).

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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.

Exchange controls

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.

Sectoral questions

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 phytosanitary controls.

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 alternatives.

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