Guidance

Overseas Business Risk: Venezuela

Updated 5 June 2023

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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-venezuela/overseas-business-risk-venezuela--2

1. Political

Venezuela’s most recent presidential election took place on 20 May 2018, where Nicolás Maduro claimed victory. The UK’s position is that the 2018 presidential election was not held in accordance with international democratic standards. The UK does not accept the legitimacy of the administration put in place by Nicolás Maduro.

On 6 December 2020, fraudulent legislative elections were held where the ruling party, Maduro’s PSUV, claimed over 90% of the seats. The UK does not consider the elected parliament legitimate and continues to consider the National Assembly elected in 2015 as the last democratically elected National Assembly in Venezuela.

On 30 December 2022 the 2015 National Assembly of Venezuela democratically voted to disband the interim Government and the position of constitutional interim President held by Juan Guaidó, with effect from 5 January 2023. The UK respects the result of this vote and considers the 2015 National Assembly the last democratically elected institution in Venezuela. Primary elections are due to be held in October 2023 followed by Presidential elections in 2024.

The Foreign, Commonwealth & Development Office (FCDO) advises against all but essential travel to Venezuela, due to ongoing crime and instability. More information on political risk, including political demonstrations, is on FCDO Travel Advice.

2. Economics

2.1 Major economic facts

Venezuela’s economy experienced a sustained recession from 2014 to 2020, shrinking around 70% in 7 years and rebounded since 2021, mainly due to the easing of constrains imposed by the COVID-19 pandemic and rising oil prices. The IMF estimates GDP growth to be 5% in 2023 and 4.5% in 2024.

The country experienced hyperinflation from December 2017 until December 2021. The IMF’s April 2023 report outlined that annual inflation reached its peak at 65,374% in 2018. In 2022, the annual rate was 310.1%, the lowest since 2016.  The report forecasts that inflation is likely to reach over 400% in 2023 and 200% in 2024.

Soaring inflation and low wages for the vast majority of the population have reduced Venezuelans’ purchasing power significantly throughout the years.

Venezuela’s economy is heavily dependent on oil production. Oil exports represented at least 83% of total exports in 2022. According to OPEC’s direct sources, average oil output was 717,000 barrels per day (bpd) in 2022. This represents a 73% decrease when compared to the output of around 3 million bpd produced in 2014. This is mainly due to a significant underinvestment and lack of maintenance.

Basic services have crumbled for over a decade. Despite regular blackouts and main water shut-offs, prices of water and electricity have soared since 2022, as subsidies were significantly reduced.

In 2019, the legal reserve requirement for banks was increased to 100% in efforts to contain inflation. In 2022, it decreased to 73%. Such high requirements have resulted in severe liquidity problems for the banking sector and a practical halt to credit lines in the country.

Since 2019, the United States has established a sanctions regime on Venezuela. These include state-owned oil company PDVSA and the Central Bank. For more information visit the OFAC Venezuela site.

The UK has also imposed certain financial, limited trade and immigration sanctions relating to Venezuela. Further information and guidance is available regarding UK sanctions relating to Venezuela. Businesses should review the UK Sanctions List which identifies entities and individuals designated under the Regulations, and details of the sanctions regimes in respect of which they have been designated.

Businesses operating in Venezuela should remain aware of developments in relevant sanctions.

2.2 Exchange rate system

In 2018, the Exchange System and its Illicit Activities Law were repealed. Most exchange controls in place since 2003 were removed and a new system was established through which foreign exchange transactions are carried out through local commercial banks. However, the Central Bank continually intervenes as the main source of foreign currency in the official market to stabilise prices.

Since 2019, it has been common for businesses and individuals to conduct transactions in foreign currency (particularly US dollars). This transactional dollarisation has allowed the private sector to reduce its exposure to price increases in local currency.

Even though prices in local currency have fallen, inflationary pressures still prevail. As the dollarisation has been partial and informal, the economy’s multicurrency ecosystem has stimulated Venezuelans to price their goods and services in foreign currency in a way to curb price volatility. However, this has increased the cost of living in foreign currency. In 2022, the cost of living in dollars had an estimated annual increase of 52%, and a 3% tax on transactions in foreign currency was implemented.

2.3 Foreign direct investment

Since 2006 the Venezuelan government has pursued a policy of assuming State control of strategic sectors in the economy to promote national development. Such sectors include oil, power, metals and mining, and cement, among others. Foreign companies, including some British-owned businesses, have been affected by this policy.

2.4 Trade

We advise that UK businesses currently operating in Venezuela may continue to do so while the political, economic and societal environment allows and that businesses should comply with standards of responsible business conduct, including respecting human rights. You should read FCDO Travel Advice. The UK government is clear that UK businesses must fully comply with relevant UK sanctions.

We strongly recommend that UK companies thinking of doing business in Venezuela undertake thorough market research and contact a Department for Business and Trade (DBT) export adviser on market entry strategies and how to agree payment terms: [email protected].

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Venezuela.

2.5 Recent economic surveys

For more information, read the World Bank’s in-depth publication and guidance for business, Economy Profile 2020: Venezuela.

3. Human rights

The UK government remains concerned over the human rights and humanitarian situations in Venezuela. The Venezuelan Constitution of 1999 provides a comprehensive framework to guarantee the respect of human rights, incorporating many examples of international best practice. Venezuela is also a signatory party to the main UN human rights instruments.

International bodies have raised concerns over the human rights situation in Venezuela. In 2019, the Human Rights Council established the UN Fact Finding Mission on Venezuela to assess alleged human rights violations committed since 2014, and its mandate has been renewed until 2024. The Office of the High Commissioner for Human Rights closely monitors the situation in the country and periodically reports to the Human Rights Council. The International Criminal Court has an open investigation against Venezuela.

The country is also facing a complex humanitarian emergency. The UN Office for the Coordination of Humanitarian Affairs reports that 7 million people require some form of humanitarian or protection assistance in Venezuela.

In 2016, the then Foreign and Commonwealth Office designated Venezuela as a Human Rights priority country due to increasing concerns over the erosion of the rule of law and the overall deterioration of the human rights situation. Further information is in the FCDO Annual Human Rights and Democracy Report.

Venezuela ranks 192 out of 192 in the Rule of Law Index (World Bank, 2020).

4. Bribery and corruption

The Bribery Act applies to non-UK companies operating in the United Kingdom, and to UK companies working overseas. It created 4 prime offences:

  • two general offences covering the offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage
  • an offence of bribing a foreign public official
  • a new offence of failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage (should an offence be committed, it will be a defence that the organisation has adequate procedures in place to prevent bribery)

The Act recognises that no bribery prevention regime will be capable of preventing bribery at all times. A company will have a full defence if it can show that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing. Companies must therefore make sure that they have strong, up-to-date and effective anti-bribery policies and systems in place to prevent bribery by persons associated with them.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Venezuela.

See the information provided on our bribery and corruption page.

5. Terrorism threat

See the information provided in the FCDO travel advice terrorism section.

6. Protective security advice

See the information provided in our protective security advice page.

7. Intellectual property

Venezuela is a country with limited support for intellectual property (IP) rights as IP laws remain outdated, insufficient and unimplemented. The UK government’s advice globally is that it is essential to register your rights as soon as possible in order to be able to defend and enforce them. IP rights are territorial in nature which means that registrations in the UK or another country’s jurisdiction are not automatically enforceable in others. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

See the information provided on our intellectual property page.

8. Organised crime

See the information provided on our organised crime page. Read the FCDO Travel Advice for Venezuela regarding the threat from general criminality.

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