PRESS/TPRB/27
15February 1996
TRADE POLICY REVIEW BODY
Review ofVenezuela
TPRB 'sEvaluation
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) conducted itsfirst
review ofVenezuela 'stradepolicies 12and13February 1996. ThetextoftheChairman 'sconcluding
remarks isattached asasummary ofthesalient points which emerged during thetwo-day discussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairman 'ssumming-up, together withthese tworeports,
willbepublished induecourse asthecomplete tradepolicy review ofVenezuela andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: 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), Côted'Ivoire (1995),
Egypt (1992), theEuropean Communities (1991, 1993&1995), Finland (1992), Ghana (1992), Hong
Kong (1990 &1994), Hungary (1991), Iceland (1994), India(1993), Indonesia (1991 and1994), Israel
(1994), Japan (1990, 1992 &1995), Kenya (1993), Korea, Rep.of(1992), Macau (1994), Malaysia
(1993), Mauritius (1995), Mexico (1993), Morocco (1989 &1996), NewZealand (1990), Nigeria
(1991), Norway (1991), Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania
(1992), Senegal (1994), Singapore (1992), Slovac Republic (1995), South Africa (1993), SriLanka
(1995), Sweden (1990 &1994), Switzerland (1991), Thailand (1991 &1995), Tunisia (1994), Turkey
(1994), theUnited States (1989, 1992 &1994), Uganda (1995), Uruguay (1992), Venezuela (1996)
andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
Trade Policy Review ofVenezuela
Concluding Remarks bytheChairperson
Atitsmeeting on12-13 February 1996, theTrade Policy Review Body helditsfirstreview
ofthetrade policies andpractices ofVenezuela. These remarks, made onmyownresponsibility,
summarize thesalient points ofthediscussion andarenotintended tosubstitute theforcollective
evaluation andappreciation ofVenezuela 'strade policies andpractices, which willbereflected inthe
minutes ofthemeeting.
Weappreciate verymuch thatVenezuela hasmade atextoftheirreplies, which includes details
ontheoperation oftheAndean Price Band system, available toallinterested delegations andproposed
additional written information inthedaystocome.
Thediscussion developed under sixmainthemes: (i)thegeneral economic situation andreform
programme; (ii)exchange controls; (iii)therôleoftheStateintheeconomy; (iv)Venezuela inregional
agreements; (v)sectoral questions; and(vi)Venezuela intheWTO.
General economic situation andreform programme
Venezuela waswidely commended bymembers fortherapid progress ofeconomic andtrade
reform between 1989and1992. Since then,despite difficult economic andsocial problems, theprocess
hadnot,inthemain, beeneroded. Venezuela wasencouraged tocarry forward itsreforms andbring
greater transparency toitspolicies. Further liberalization would alsobring tofruition theimprovements
incompetitiveness initially expected fromVenezuela 'stradeliberalization andaccession totheGATT.
Aquestion wasposed regarding theacceptance ofthereforms bythepopulation.
Note wastaken ofVenezuela 'songoing negotiations withtheIMFanddetails were sought
onwhether suchnegotiations included closing thegapbetween domestic andworld prices forfuels.
Venezuela wasencouraged topursue appropriate monetary andfiscal policies toaddress itsdomestic
andexternal imbalances intheleasttrade distorting manner.
Theparamount roleofpetroleum inVenezuela 'seconomy wasnoted. Members stressed the
importance, while recognizing thedifficulties involved, ofreaching anappropriate balance between
theoilsector andtherestoftheeconomy. Given thevulnerability oftheeconomy tohighly variable
oilrevenues, questions wereasked onefforts being made todiversify theeconomy, particularly exports.
Inresponse, therepresentative ofVenezuela saidthatthereforms initiated in1989 hadbeen
consolidated anddeepened since 1994, following aweakening ofefforts in1992-93. Thisincluded
liberalization inaregional context aswellastheentry intoforce oftheWTO agreements. Taxreforms
hadbeenapproved in1994andfurther reforms werenowbefore Congress. Heemphasized theneed
forsocial acceptability ofanyreform programme; andunderlined thatthepresent reforms werebeing
undertaken afterfullconsultations. Hegavedetails ofVenezuela 'sindustrial policies andtheirrelation
totrade commitments.
TheGovernment wasconcentrating onreducing thefiscal deficit, aiming atbalance in1997,
andwashoping toreduce inflation to50percentin1996. Success inachieving macro-economic stability
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depended onanumber ofmeasures, including theeventual ending ofexchange controls andfinancial
support, oneofthereasons theGovernment wasseeking anagreement withtheIMF.
Therepresentative alsoexplained thatgeneral price controls hadalready beenreduced to12
categories ofmass-consumption products under pricemanagement, withadjustments every 2-3months.
TheGovernment alsorecognised theneedforadjustments indomestic prices ofpetroleum. Thiswas
tobeundertaken inthecontext ofchanges topublic transport services. Anumber ofchanges were
already being made intheinternal market fornon-regulated petroleum products.
Details were alsoprovided ontheregularization oftheservicing ofbilateral debtaswellas
aprogramme toresolve theproblems ofthefinancial sector. Heemphasised thatnewsupervisory
mechanisms hadbeenestablished andanewframework lawpassed byCongress.
Exchange controls
Widely shared concerns were expressed overtheeffects oftheforeign exchange controls
introduced inJune1994 against abackground ofserious reserve losses. Details ontheoperation of
thesecontrolswererequested,particularlyconcerningthetypeofpriorityimportsandnon-discriminatory
treatment among suppliers orapplicants. Venezuela wasencouraged toremove suchcontrols asearly
aspossible. Some participants believed thatVenezuela 'sexchange controls lacked transparency and
haddetrimental effects onforeign investment, capital inflows andtrade. Therégime hadnotbeen
notified totheWTO untilNovember 1995; according tooneMember, itseemed tohavebothbalance-of-
payments andTRIMs implications. Some members raised specific concerns regarding access for
particular products accorded lowpriority under thesystem. Additional questions wereasked onthe
consistency oftheforeign exchange restrictions withVenezuela 'sIMFcommitments andapossible
deadline fortheirremoval.
Inreply, therepresentative ofVenezuela saidthattheexchange controls wereintended toarrest
serious capital flight inthelightofthelackofconfidence thathaddeveloped afterthepolitical crisis
of1992. Heemphasised thatthecrisis didnotresult from a"balance ofpayments problem" inthe
sense oftrade ingoods andservices. Thecontrols weretemporary andexceptional and,consistent
withthisapproach, theyhadbeenprogressively liberalized. Venezuela wascommitted toreaching
understanding withtheIMFintheshort term, andtodismantling bothexchange andprice controls
aspartoftheGovernment 'smacroeconomic programme. Details ofvarious stepsintheliberalization
were provided. TheVenezuelan Government hadfocused onmaintaining reserves, notonlimiting
trade flows orpayments related toforeign investments; imports hadnotfallen, buthadcontinued to
grow. Certain changes inthedirection oftrade could notberelated toexchange controls, butrather
todevelopments inregional integration. Asreserves hadalsofallen sharply inlate1995, the
Government hadbeenobliged tointroduce certain product priorities; however, noapplications had
beenrefused andthepriority listhadsince beenexpanded toinclude newsectors. There wasno
discrimination between domestic andforeign applicants.
RoleoftheState intheeconomy
Participants noted thecrucial roleoftheStateinkeysectors ofVenezuela 'seconomy. Members
stressed theimportance ofcompleting Venezuela 'snotification ofenterprises subject toArticle XVII
oftheGATT andsought acomplete listofproducts covered bystatetrading enterprises.
Informationwasrequestedondevelopmentsintheprivatizationprogramme.Thepartialopening
toforeign investment oftheoilandfinancial sectors waswelcomed andVenezuela wasencouraged
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tocontinue theprocess; questions wereposed onconditions forprivatization ofaluminium andsteel,
including thescope forforeign participation. Further details ofthelegislation onforeign direct
investment werealsorequested. Anumber ofMembers sought information onVenezuela 'spolicies
andpractices ongovernment procurement.
Inresponse,therepresentativeofVenezuelasaidtheprivatizationprogrammehadbeenweakened
in1992/93, following initial successes in1991, butattheendof1994, initsnewStabilization and
Recovery Programme, thepresent Government hadannounced itsnewconcept forthereduced role
ofthestateandre-launched theliberalization programme, including petroleum andthefinancial sector.
Details wereprovided onthespecific privatization programmes forpetroleum, aluminium andsteel.
Proposals forfurther reforms would bepresented tothenexttwosessions oftheCongress. Thecreation
oftheMinistry ofIndustry andTrade inNovember 1995wasintended toplayamajor partinthenew
concept ofpublic-private sector relations.
Venezuela inregional agreements
Members recognized theimportance attached byVenezuela toparticipation inregional
agreements. TheAndean Group hadbecome themajor destination ofVenezuela 'snon-oil exports.
Members emphasised theneedtoensure thatallsuchtradeagreements remained outward looking and
theimportance offullnotification totheWTO. Information wassought onVenezuela 'sinterests in
NAFTA andMERCOSUR aswellastheinitiative toestablish aFreeTrade Area oftheAmericas.
TherepresentativeofVenezuelarespondedthathiscountry'sparticipationinregionalagreements
wasintheformofopenregionalism andwasnotattheexpense ofthemultilateral system. TheAndean
Group wasconsolidating freetradeandmoving towards afullcustoms union, inwhich theestablishment
ofacommon external tariff in1995 wasthefirststep. Thefour-tier structure oftheCET, decided
afterextensive negotiations, wasintended tofoster increased value-added. Theeventual integration
oftheAndean Group andMERCOSUR wasalsobeing promoted actively, andmember states were
actively renegotiating theirexisting bilateral preferences. Suchstrengthened tieswould leadtogreater
balance inrelations inthenegotiation ofaFreeTrade AreafortheAmericas, inwhich Venezuela was
participating actively. Negotiation ofanFTAA would beverycomplex andneeded totakeaccount
ofdifferent stages ofdevelopment. Sub-regional agreements could beconsolidated andprogressively
converge towards anFTAA.
Therepresentative alsosaidthatVenezuela 'sregional agreements allfellwithin thecontext
oftheLAIA, andanupdated report onVenezuela framework ofregional agreements would beprovided
totheWTO.
Sectoral questions
Theuseoftariff escalation asVenezuela 'smain instrument ofindustrial policy wasnoted.
Information wassought onpatterns ofescalation inspecific industries aswellastheireffects inan
environment ofregional duty-free trade. Details wereinparticular sought onobjectives andeffects
oftheautomotive regime inforce.
Members pointed outthatliberalization ofagriculture hadbeenrelatively limited. Concerns
werewidely expressed about thepotential trade-distorting effects oftheAndean Price Band System,
anditscompatibility withWTO commitments; inthisconnections, details wererequested onstepstaken
byVenezuela toensure thatitsapplication didnotviolate tariff bindings.
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Members welcomed theopening ofVenezuela 'sbanking andinsurance sectors andexpressed
thehopethatVenezuela would alsomake binding commitments within theGATS negotiations onbasic
telecommunications.
Inresponse, therepresentative ofVenezuela outlined thebroad framework ofagricultural policy
objectives andhowthese hadevolved. Theintention wastomodernize thesector, increasing
specialization, productivity andcompetitiveness while preserving theenvironment. Inthisregard,
theProgramme forAgricultural Investment wasbeing negotiated withtheIDBandtheWorld Bank.
Theoverall programme ofmodernization hadmany elements, ofwhich tariffprotection wasonlyone
minor element. There hadbeenmajor trade liberalization inthesector since 1990, including tariff
reductions andrationalization, elimination ofminimum andmaximum prices, elimination ofimport
licences, elimination offertilizer subsidies, elimination ofstatemonopolies incoffee andcocoa, the
implementation ofprice stabilization plans foranumber ofproducts, harmonization withAndean
policies,including reduction ofexport subsidies, liberalization oftradeinseeds, andfinally theadoption
oftheAndean Price Band System, onwhich operational details were tabled. Import surcharges on
cereals hadbeeneliminated in1994 andothers would beabolished ontheforthcoming publication
ofthenewcustoms tariff. Information wasalsoprovided ontheoperation ofsanitary andphytosanitary
controls.
Venezuela intheWTO
Members commended Venezuela fortheincreased transparency initstrade régime following
itsaccession totheGATT. Tariffs hadbeenreduced andrationalized andthescope oftariff bindings
hadimproved intheUruguay Round. Prohibitions andimport licenses hadbeenlargely eliminated.
Anoverall assessment wasrequested onthebenefits ordifficulties arising from Venezuela 's
membership intheWTO, aswellasprogress inmeeting WTO obligations, including notification
requirements inanumber ofareas suchasStatetrading andimport licensing. Members wereinterested
inthelegislative changes required forimplementation oftheWTO Agreements. Venezuela wasasked
whether itwasconsidering adherence tothePlurilateral Agreement onGovernment Procurement.
Information wasrequested withrespect totheelimination oftheonepercentcustoms service charge,
thecoverage oftheimport licensing régime, theelimination ofimport surcharges, theimplementation
ofinternal taxes onimported alcoholic beverages andtheoperation ofthestandards andSPSrégimes.
Therepresentative ofVenezuela recognized thatcertain notification obligations hadnotbeen
fullymetbutaction wastobetaken toremedy thesituation promptly. Healsorecalled thedifficulties
inreforming thelegalandadministrative framework attimes offinancial andeconomic crisis. Anew
Customs Tariff would shortly bepublished. Theonepercentcustoms change wasintended to
approximate thecostofservices provided; however, Venezuela wasactively looking atalternatives.
***
Inconclusion, theTPRB appreciates Venezuela 'sefforts tomaintain aliberal trade policy,
under verydifficult circumstances anditsactive participation intheGATT/WTO system since its
accession in1990. Wetooknoteoftheefforts tore-establish ofmacro-economic stability asabasis
forfuture growth. WearesurethattheVenezuelan authorities willgiveserious consideration toall
theconcerns raised during thereview, andlookforward toreceiving thenotifications andwritten replies
promised byVenezuela inthecourse ofthemeeting. Wealsolookforward totheconsolidation of
theeconomic reforms andtofurther advances intheprocess ofeconomic liberalization andintegration
intheworld trading system.
END