learns to diversify after turbulent political times

Introduction - Infrastructure - Tourism - Diversification - Reforms and deregulation -
The states
- Technology - The information age - Business - Outlook

Reforms and deregulations

Political reform finally takes a backseat

Deep-rooted political upheaval has seen the country's two largest parties Democratic Action (AD) and the Christian Socialists (Copei) dominant for the past 40 years, relegated to minority forces in the 165-seat National Assembly.

On Dec. 15 Venezuelans approved a new constitution to replace the anachronistic 1961 version. The gradual dismissal of incompetent and corrupt judges has also been the first step in strengthening the judicial system.

Government officials accept that the political process has been a little too long and winding, but that it is now coming to a close.

"The political process has finished, now we are in a process of economic participation where we want to establish a dialogue that generates an agreement to create a new business attitude. We need new investments, new business people and for those ends we are offering tax breaks and credits," says Mr. Giordani, Venezuela's Planning Minister..

With the approval of the new constitution many existing laws have been contradicted. To overcome this problem, President Chavez has been granted a special powers law. The bill allows him to fast track important legislation in banking and tourism without congressional approval.

Deregulation beckons

Nestling into the Northern most tip of the South American continent, Venezuela is surrounded by countries that opened up the economy to free competition. Despite being a late-starter, investors will be able to take advantage of Venezuela's virgin consumer markets as deregulation in electricity, telecoms and gas gathers speed.

A new telecommunications law coupled with the end of CANTV's monopoly on basic phone services should pull in $10 billion in investments in the next five years. A new electricity law and the privatization of two state-held electricity companies will also see the sector opened up to competitive pricing and greater efficiency.

In the vanguard of companies eager to get a foot in the door has been U.S. power giant AES Corp. which snapped up local power company Electricidad de Caracas (EDC) for $1.8 billion in the second half of 2000.

President Chavez has repeatedly said that he welcomes foreign companies into the country, as a way of breaking a historical cycle of over-privileged local business elites constraining free competition and fixed pricing.

"We have to find a balance between the market and the state," says former Vice President Rodriguez. "Some times monopolies arrive and have more power than the state. We have never suggested that the state will try to outdo the private sector. On the contrary we have opened up the country and the telecommunications law is a good example of this. We are aware of the fact that you cannot develop a country with the state as the main motor."

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© World INvestment NEws, 2002.
This is the electronic edition of the special country report on Venezuela published in Forbes Global Magazine.
April 2002 Issue.
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