Secretary Mosbacher leads mission to Venezuela; emphasis on private sector and market reforms points to promising business opportunities - Secretary of Commerce Robert A. Mosbacher led a Business Development Mission to Venezuela

Business America, Feb 25, 1991 by Kurt Wrobel

Secretary Mosbacher Leads Mission to Venezuela; Emphasis on Private Sector and Market Reforms Points to Promising Business Opportunities

Secretary of Commerce Robert A. Mosbacher led a Business Development Mission to Venezuela, Jan. 15-17, 1991. The mission consisted of 13 CEOs of leading U.S. companies in the telecommunications, steel, energy, aluminum, chemical, petroleum, financial services, engineering, and food processing industries. Also on the mission were John D. Macomber, President and Chairman of the Export-Import Bank; Ambassador Frederick Zeder, President of the Overseas Private Investment Corporation; W. Henson Moore, Deputy Secretary, U.S. Department of Energy; and other U.S. Government officials. The mission met with Venezuelan President Carlos Andres Perez, members of his cabinet, and leaders of Venezuela's private sector.

The primary purpose of the mission was to promote greater bilateral trade and investment. The mission also sought to increase contacts between U.S. and Venezuelan private sectors, emphasize support for President Bush's Enterprise for the Americas Initiative, and encourage continued economic reforms in Venezuela.

The Secretary and mission members emphasized that the United States firmly believes a strong private sector, a free market, and democratic institutions are the best guarantors of economic, social, and political stability and that the U.S. private sector is interested in doing business in Venezuela. The Secretary voiced the Administration's support for President Perez' economic reform program, stating that "Venezuela is moving from a state-dominated, oil-driven economy to one that is dynamic, market-oriented, and diversified. Because of Venezuela's success in modernizing its economy, the U.S. private sector is more interested than ever in doing business with Venezuela."

The visit provided a unique opportunity for the private sectors of both countries to meet and discuss economic and commercial issues affecting bilateral relations in the context of President Bush's Enterprise for the Americas Initiative.

Meetings were held with the Venezuelan-American Chamber of Commerce and Industry, the National Council of Trade and Industry Associations, the U.S.-Venezuela Business Council, and the National Commission for Investment Promotion.

Steve Hutchcraft, Jr., President of Kaiser Aluminum and Chemical Corp. of Oakland, Calif., a mission member, commented: "We feel that the direction President Perez has set for economic development is creative and bodes well for the future of Venezuela." Another member, Raul Gutierrez Jr., President and CEO of Calmaquip of Miami, Fla., said he found new opportunities that he was not previously aware of. Dr. Robert V. West, Jr., Chairman, Tesoro Petroleum Corp., San Antonio, Tex., said that "the mission brought home to the Venezuelan government the fact that U.S. private capital is interested in investments in Venezuela."

Trade and Investment Mostly Liberalized

Under the Administration of President Carlos Andres Perez, which took office in February 1989, Venezuela has undertaken significant measures to liberalize international trade and foreign investment.

Trade measures include:

* the elimination of nearly all quantitative restrictions on manufactured goods imports and the beginning of similar liberalization of agricultural commodities;

* the elimination of foreign exchange licenses and the establishment of a free market for foreign exchange;

* the progressive lowering of the top tariff rate to 20 percent by 1993; and

* accession to the GATT.

Foreign investment rules have also been significantly liberalized.

* foreigners may now hold 100 percent equity in most sectors;

* there are no restrictions on the remittance of earnings and capital abroad through the free foreign exchange market;

* foreign investments generally do not need the prior approval of a government agency--they need only be registered subsequent to the investment; and

* government policy is to welcome and promote foreign investment.

While these changes are encouraging, a number of important restrictions to foreign investment remain, affecting the oil and gas, and the financial and services sectors.

The $3 billion Cristobal Colon liquid natural gas project is a major test case of the Venezuelan government's ability to attract foreign investors to the oil and gas sectors. This project is a joint venture between the state-owned oil company, Petroleos de Venezuela (PDVSA) as minority equity partner, and three foreign companies--Exxon, Shell, and Mitsubishi. However, the project must still be approved by the Venezuelan Congress; if Congress approves this would be the first foreign investment to go ahead in the Venezuelan oil and gas sector since the 1976 nationalization of the foreign oil companies.

Venezuela is seeking foreign capital to carry out its long-range oil and gas sector development plan, which calls for investments of some $21 billion over the 1990-95 period. This includes investments in related fields such as petrochemicals, coal mining, and tankers. Foreign capital is particularly sought to develop and refine Venezuela's heavy oils and to develop marginal fields; foreign investors are already active in the petrochemicals sector and PDVSA, through its subsidiary PEQUIVEN, welcomes additional investments to carry out projects valued at $2.6 billion. These include increases in output of fertilizers, olefins, plastics, and industrial chemicals. Some of the capital needed for these projects is to be raised through debt-equity conversions.