VII. INVESTMENT CLIMATE Openness to Foreign Investment The Venezuelan government has reduced most barriers to foreign investment and has moved toward a more export-oriented, diversified, and competitive economy. INVESTMENT STATUTES AND REGULATIONS: Venezuela's main legal framework for foreign investment is provided in Presidential Decree 2095, which was published in Official Gazette No. 34930 on February 13, 1992. Decree 2095 implemented Decisons 291 and 292 of the Cartagena Agreement (Andean Pact) and made further improvements to liberalize foreign investment regulations in Venezuela. The Decree allows 100 percent foreign investment in all sectors of the economy, except those specifically restricted; allows foreign investors to repatriate 100 percent of profits; and permits shares of foreign companies to be publicly sold. Foreign companies may now operate in most sectors formerly reserved to companies with a Venezuelan majority interest, including retail sales, export services, telephone and telecommunication services, electrical services, and water and sewage services. Foreign investments in sectors covered by Decree 2095 do not require prior authorization. The decree requires only that new investors register with the Superintendent of Foreign Investment (SIEX) within 60 days. Foreign companies may also establish branch operations without prior authorization from SIEX. Proposals to use new technology need only be registered as well. No prior authorization is required for technical assistance, transfer of technology, or trademark use agreements, provided they are not contrary to existing legal provisions. Also, intangible technological contributions are now accepted as foreign direct investments. Venezuela's new Banking Law, which became effective January 1, 1994 also opened the banking and financial services sector to 100 percent foreign ownership. Foreign banks may now enter the Venezuelan market in one of three ways: acquisition of shares of existing commercial banks or other financial institutions; creation of a new bank or other financial institution wholly owned by foreign banks or investors; or establishment of a branch of a foreign bank or financial institution. Applications for entry into the sector are submitted to the Bank Superintendency, which must seek an opinion from the Central Bank before granting authorization. Aside from the provisions of Decree 2095 regulating the amounts of foreign capital participation allowed in national and mixed companies and in "special laws" covering investment in hydrocarbons, iron, banking and insurance, Venezuela has no regulations governing joint ventures. SECTORAL RESTRICTIONS: Under decree 2095, foreign capital is restricted to a maximum of 19.9 percent in enterprises engaged in radio, television, the Spanish language press, and professional services subject to licensing legislation (e.g. attorneys, architecture and engineering, medical professions, veterinary practice, economists, business administration /management, and accounting). Basic industries, that is those designated as basic by the President in the Council of Ministers, may be reserved for "mixed companies." INVESTMENT IN THE MINING SECTOR: The mining sector is subject to a Mining Law which dates back to 1944 and a complex set of executive decrees. Under the present structure, potential mining concessionaires are often faced with an obscure investment regime, mainly due to the overlapping roles of the Ministry of Energy and Mines (MEM) and the Corporacion Venezolana de Guayana (CVG) regarding approval, registration, and oversight. However, the government has reduced mining taxes (to 30 percent) and has successfully promoted more "mixed" companies, i.e., those with a maximum of 49 percent foreign capital. New mining legislation designed to promote private participation and reduce red tape is expected to be considered by the Venezuelan Congress this year. INVESTMENT IN THE PETROLEUM SECTOR: Venezuela's 1975 Hydrocarbons Law reserves exploration, production, refining, transport, storage, and marketing of hydrocarbons to the State. However, Article V provides that private companies (foreign or domestic) may engage in hydrocarbons related activities through operation contracts or, when found to be in the public interest, through equity joint ventures (generally referred to as "strategic associations") as long as the state maintains control over the project, the contract is for a pre-determined amount of time, and the Congress has been made aware of all of the pertinent circumstances and has granted its approval. Operation of marginal or inactive fields by private companies under service contracts does not require congressional approval. In the last two years, PDVSA affiliates have signed ten such service contracts with private firms to reactivate marginal fields throughout Venezuela. The fields were offered up in two separate bidding rounds. The private firms commit themselves to investing a minimum amount of capital over a fixed period of time. If the reactivation is successful, the operators are paid a set fee per barrel of oil produced. However, the oil itself is turned over to PDVSA. Four of the marginal field units offered in the second round of bidding were unassigned while a fifth unit was abandoned by the winning bidder before a contract was signed. PDVSA is still seeking companies interested in operating these units and has already held another round of bids for one of these, Colon, in Western Venezuela. PDVSA and its affiliates might also offer up new marginal field units in the future. In August 1993, the Venezuelan President and Congress approved the first three equity joint ventures with private companies in the hydrocarbons sector. These are the Cristobal Colon liquified natural gas project involving PDVSA affiliate Lagoven and Shell, Exxon and Mitsubishi, and two heavy crude project in the Orinoco oil belt involving PDVSA affiliate Maraven and Conoco on the one hand and Total and Itochu Marubeni on the other. (Note: Joint ventures in the petrochemical and coal sectors do not require congressional approval). The state oil company, Petroleos de Venezuela (PDVSA), is expected this year to present to the government a proposal to allow foreign companies to participate in the exploration and production of light and medium crude oils in Venezuela. PDVSA has not yet decided on the formula that would be used for private sector participation, but it will likely be either production- or profit-sharing. PRIVATIZATION: Venezuela's privatization program has resumed following suspension during the interim Velasquez administration in 1993. In the last couple years, Venezuela has sold off 40 percent of the national telephone company, CANTV; a cellular telephone concession; Viasa, a state-run airline; state-run banks; hotels; and sugar mills. Future privatization being proposed include additional hotels, ports, and electrical generation and distribution facilities. The airline Aeropostal is also included on the government's list for future sale, notwithstanding a recent privatization attempt which failed due to the high base price, an unattractive labor agreement, and uncertain economic conditions. Government decentralization has also opened up investment opportunities for toll concessions on major highways and possibly, other public works. There are no limits to foreign participation in privatization bids, except for those sectors in which foreign investment is generally restricted (see the Sectoral Restrictions section above). INVESTMENT INCENTIVES: Investment incentives take the form of tax credits for certain industries, exemption from customs duties and some tax rebates. Incentives are available to both domestic and foreign companies and encourage production for the export market. Tax credits are usually for five years. The only industry tax incentives presently available under the income tax law are (1) a 10 percent credit on the value of new investments in fixed assets, excluding land, for investments in mining operations, forestry, generation and distribution of electricity, tourism, telecommunications, and approved industrial activities other than hydrocarbon exploitation; (2) a 10 percent credit on the value of investments for research and technological development or for the production of new goods; and (3) a 10 percent credit on the amount paid for new investments to eliminate or avoid environmental contamination. INVESTMENT INCENTIVES IN THE PETROCHEMICAL SECTOR: Decree 1058 dated April 2, 1986, established a five-year tax holiday, beginning with the date of commercial operation, for companies *(domestic and foreign) investing in the petrochemical sector. To qualify, the project must make extensive use of goods and services produced in Venezuela; the foreign financing must not require guarantees or securities from the Venezuelan government or a state-owned company; and a portion of the capital raised must be offered to small, private investors through the stock exchange, promoting private ownership of the industry. DISCRIMINATORY OR PREFERENTIAL EXPORT/IMPORT POLICIES: Venezuela's export and import policies do not discriminate based on nationality of an enterprise. Although at present, Venezuela does not have import price controls, the government is considering imposing minimum reference prices for selected imports. EXPORT INCENTIVES: Ministry of Finance Resolution number 2603, dated June 10, 1994, established a program which enables exporters to receive a rebate on duties paid on imported inputs. To obtain a rebate, exporters must submit to Venezuelan customs information on the quantity of imported and national inputs and production waste. Customs will then calculate the level of rebate by means of a formula which takes into account the exporter's production efficiency. The rebate, which will be denominated in local currency, is expressed as a percentage of the export FOB price converted at the official exchange rate on the day of export. Maximum rebate percentages have been established by subsector based on the United Nations Standard Industrial Classification. Exporters will receive rebates in the form of "Certificados de Reintegro Tributario" (CERTs), instruments which are negotiable and transferable and can be used to cancel duty payments. The recently enacted Wholesale and Luxury Tax Law also allows for the rebate of the wholesale tax paid on imports which are used for inputs for exported products. A joint resolution of the Foreign and Finance Ministries, published in the Official Gazette 34,735 on June 13, 1991, lists those agricultural products for which an export bonus is available. The program provides a credit against an exporter's tax liability of one percent for certain agricultural items whose national value added is from 30 to 98 percent. For products for which value added is from 99 to 100 percent, exporters are eligible for a credit of 10 percent of the free-on-board value. "Maquila" operations in Venezuela are regulated by Decree 3175. The Decree provides for temporary suspension of both customs duties and customs service fees for goods imported solely for the purpose of processing within the country. Venezuela also operates three free-trade zones (see the section on FREE TRADE ZONES/FREE PORTS below). Conversion and Transfer Policies CONVERSION OF FOREIGN EXCHANGE: Prior to May 1994, companies experienced no difficulties in converting funds from the local currency, the bolivar, to dollars. A crawling peg system was used to determine the exchange rate. However, foreign exchange controls were introduced following a run on the bolivar which was prompted by the resignation of Venezuela's Central Bank director in April 1994. The auction system was subsequently modified in mid-May and suspended entirely at the end of June. On July 11, a fixed exchange rate system was established with an initial rate of 170 bolivars to the dollar. Access to foreign exchange is now controlled by the Technical Exchange Management Office (OTAC). All requests for foreign currency must be submitted to OTAC through an approved intermediary, i.e. banks, financial institutions, and exchange houses. Importers and exporters are required to register with OTAC through their commercial banks, prior to submitting currency applications. Private debt must also be registered before it will be considered by OTAC. Under current regulations, OTAC will only recognize net private debt, that is, total debt held minus dollar assets held by the same person or legal entity inside or outside the country. The new system also sets limits on the amount of foreign exchange available for certain activities, such as foreign travel, remittances to students studying overseas, and transfers to families abroad. Persons holding transient working visas are not eligible to obtain foreign exchange. Currency transactions conducted outside the official system are illegal and carry heavy penalties. Implementation of the new foreign exchange control system is still being worked out and future changes in the regime are possible. REINVESTMENT AND REPATRIATION OF EARNINGS AND CAPITAL: Decree 2095 permits companies to repatriate 100 percent of profits and capital, including proceeds from the sale of shares or liquidation of the company, and allows for unrestricted reinvestment of profits. The government claims that these activities are not restricted by the new foreign exchange control system. The exchange control decree states that companies which wish to repatriate profits, capital or dividends must register with OTAC. The decree does not, however, provide details on the procedures to be used to obtain the foreign currency and further regulations have not been published. Therefore, implications of the exchange control regime for the repatriation of profits remain unclear as of writing. ROYALTY PAYMENTS: Royalty payments to foreign companies, parent company or otherwise, is permitted without limit or prior official authorization. Subsequent notice must be given to the Superintendency of Foreign Investment (SIEX). Expropriation and Compensation Venezuela typically compensates foreign investors for expropriated or nationalized property and compensation is based on the registered value of the investment. Final settlement of most claims arising from the 1975 nationalization of the Venezuelan petroleum industry were settled in 1986. A single outstanding case was settled early in 1990. There have been no expropriations in the recent past. Although President Caldera has as an emergency measure suspended a constitutional guarantee against expropriation of private property, expropriations, particularly of foreign-owned property, are not expected. Dispute Settlement Decree 2095 allows for arbitration of disputes as "provided by domestic law." ARBITRATION: A Code of Civil Procedure, effective March 17, 1989, provides for the enforcement of arbitration clauses in commercial contracts, as well as for the enforcement of arbitral awards as final decisions of the court. Although still not common, Venezuela has allowed dual jurisdiction or extra-territorial arbitration of commercial disputes, and international arbitration has been approved for technology licensing contract disputes in the past. The Venezuelan government has signed bilateral investment agreements with Italy and the Netherlands, both of which provide for international arbitration in the event of investment disputes. In the case of the Netherlands agreement, which was approved by the Congress in August 1993, such arbitration will take place under the auspices of the World Bank's Center for the Settlement of Investment Disputes (ICSID). INVESTMENT DISPUTES: The foreign investor should note that contractual arbitration clauses notwithstanding, Venezuela's legal system permits criminal charges to be filed in what may appear to a U.S. investor as strictly a commercial dispute. Although this has occurred in several instances, investment disputes are not common. Performance Requirements AUTOMOTIVE INDUSTRY: The Andean Pact Common Automotive Policy which was signed between Venezuela, Colombia, and Ecuador in September 1993 and became effective January 1, 1994, retained exchange balancing requirements for automotive assemblers in Venezuela through 1994. The policy requires that the automaker's business activity generate foreign exchange equal to 57 percent of the total value of its imported components for category 1 vehicle models in production as of January 1, 1994 and 50 percent of new category 1 vehicles (passenger cars, four-wheel drive vehicles, vehicles for transporting up to 16 passengers, and certain trucks). Under the policy, Venezuela's local content rules for 1994 are as follows: 40 percent for category 1 vehicles and 30 percent for category 2 vehicles. Local content is defined as one minus the ratio of total imports divided by total sales for the category (less VAT and sales tax). Tariff levels were also set at 35 percent for imports of category 1 vehicles ; 15 percent for category 2 vehicles (other vehicles); and 5 percent for locally assembled (CKD) vehicles. An addendum to the original automotive policy was signed in May 1994. This agreement, which will become effective January 1, 1995, eliminates the Venezuelan exchange balancing requirement and modifies the formula for calculating local content. Local content requirements for category 1 vehicles will be 30 percent for 1995 and 1996; 32 percent for 1997; and 33 percent for 1998. Category 2 will have a local content requirement of 15 percent for 1995 and will increase by one percent each year through 1998. Right to Private Ownership and Establishment Aside from restrictions contained in The 1975 Hydrocarbons Law, Venezuela does not restrict private ownership and establishment. Nonetheless, the Caldera administration has as an emergency measure suspended certain constitutional guarantees, including the right to own property. Patent, Trademark and Copyright Protection Venezuela is an active member of the World Intellectual Property Organization (WIPO) and a signatory to the Bern Convention on the protection of copyrights and intellectual property. Venezuela has a Patent and Trademark Law dating from 1955. However, the country's legal framework for patents and trademarks is provided by Andean Pact Decision 344, which entered into force January 1, 1994. Decision 345 provides protection for vegetable varieties. These decisions have improved industrial property protection in Venezuela and throughout the Andean Pact. New national patent and trademark legislation is expected to be introduced in Congress this year, but it will likely focus on judicial reform rather than on changes to the legal framework. Venezuelan law states that a patent or trademark is the property of the individual who first registers it in Venezuela. Foreign investors must be sure to register patents and trademarks appropriately and in as many categories as are applicable. In October 1993, a new copyright law entered into effect in Venezuela which provides improved protection for software and enhanced sanctions against copyright infringement. The law establishes a National Copyright Office for the registration and protection of copyrights. However, due to budgetary problems, the office has not yet been established. Although industrial property protection in Venezuela has improved, U.S. companies continue to express concern about inadequacies in enforcement of patent, trademark, and copyright protection, particularly as applied to pharmaceuticals, computer software, and motion pictures. Regulatory System: Laws and Procedures LEGAL ENVIRONMENT: As part of its economic reform program, the Government of Venezuela adopted three new laws to promote free market competition and prevent unfair trade practices: an anti-trust law, an antidumping law, and a consumer protection law. Venezuela also replaced its former government contract law, the "Buy Venezuela" decree, with a new Law of Tenders dated July 20, 1990. The law provides that for selection between offers within a reasonable range the Venezuelan Government may choose the bid which offers the greatest Venezuelan participation in technology and engineering, human resources, and other factors. Venezuela's Criminal Environmental Law (CEL), which entered into force April 4, 1992, established rules comparable to those in the United States and Europe. A major difference, however, is that the CEL has criminalized Venezuela's environmental rules. Although the CEL more seriously addresses environmental problems in Venezuela than an earlier law, it has been criticized as too vague in certain sections and to have extended overly broad criminal liabilities. Some investors have expressed concern over provisions governing the disposal of industrial and hazardous wastes, claiming that Venezuela's infrastructure is inadequate to meet the new standards of the CEL. TAX TREATMENT OF FOREIGN-OWNED FIRMS: Except for the petroleum sector, the current Venezuelan income tax law does not differentiate between foreign-owned and Venezuelan-owned firms. The maximum and most widely applicable individual and corporate tax rate is 34% under a new income tax law which came into effect on July 1, 1994 for tax years commencing on or after that date. For those paying tax on a calendar basis, it will be applicable from January 1, 1995. All companies and individuals are required to register with the national tax authority. Income received from any economic activity carried out in Venezuela is subject to taxation. There are several different corporate tax situations to which foreign investors could be subject, depending upon the type of economic activity in which they are engaged. Venezuela has international double taxation agreements in the areas of air and sea transport with several countries, including the U.S. Venezuela is currently negotiating a double taxation agreement with the U.S. which covers most business sectors. On December 1, 1993, a 1 percent business assets tax entered into force. The assets tax is assessed on the gross value of assets (with no deduction for liabilities) after adjustments for depreciation and inflation. It is deductible for income tax purposes. A new wholesale and luxury tax law, which became effective August 1, 1994, was published on May 27, 1994 in the official Gazette No. 4.727. The wholesale tax, which is applied at both the wholesale and import levels ranges from 5 to 20 percent. The wholesale tax rate is currently set at 10%, but may be modified by the next budget law. The law also established an additional luxury tax of 10 or 20%, to be levied on certain luxury items. These are three basic taxes applied to the petroleum industry. First there is a 16.7 % royalty payment on production. Next, there is a 67.7% income tax, ad fially an export reference value tax. The export reference value could vary between 0 and 20%. However the surcharge is being phased out: it fell to 8% in 1994 and will drop to 4% in 1995, before being eliminated entirely in 1996. Joint ventures with the state oil company, PDVSA, in the development and refining of heavy and extra-heavy crudes and the processing of unassociated natural gas are subject to a reduced income tax rate of 34% in addition to the 16.7% royalty payment. However, joint ventures with PDVSA for exploration and production of light and medium crudes, which are expected to be proposed in late 1994, will be subject to the full 67.7% income tax and production royalty. LABOR: Venezuela's labor law places quantitative and financial restrictions on the employment decisions made by foreign investors. Article 27 of the law requires that the number of foreigners hired by an investor not exceed 10 percent of employees, while salaries paid to foreigners may not exceed 20 percent of the total company payroll. Article 28 allows for temporary exceptions to Article 27 and outlines the requirements to hire technical expertise when equivalent Venezuelan personnel is not available. Bureaucratic procedures and corruption may hamper efforts to seek an exception. Capital Markets and Portfolio Investment CAPITAL MARKETS: Access to the Venezuelan secondary capital market is relatively easy, and U.S. firms essentially enjoy national treatment. Foreign companies may issue common and preferred stock, bonds, and other securities in the Venezuelan capital markets. Foreign investors may also buy shares directly in national or mixed companies or on the stock exchange. The Capital Markets Law of 1975 regulates the public offering of shares and medium- and long-term securities, except public debt bonds and credits. The Caracas Stock Exchange is a privately owned corporation in operation since 1947. A second regional exchange was opened in Maracaibo in 1986, but its volume is less than five percent of the transactions handled by the Caracas exchange. Membership in the stock exchange is open to both individuals and legal entities. Trading on the Caracas exchange is thin and highly concentrated. Market capitalization, which was $7.9 billion at year end, has declined as a percentage of GDP for three successive years. The Caracas Exchange's broad index has also declined in recent years, falling in real terms 17.5 percent for 1993. CREDIT MARKETS: The Venezuelan financial system is small and seriously undercapitalized. As a result of lax supervision in the past and the collapse of the second largest bank earlier in the year, the system is presently experiencing a severe structural crisis, with some institutions facing insolvency. Total financial system assets have grown in recent years from $18.1 billion at the end of 1989 to $25.6 billion at the end of 1993. Nonetheless, financing is available from a variety of sources and does not discriminate against foreign investors seeking access to credit. Commercial banks are required to make a percentage of their loans available to priority sectors, such as agriculture. Political Violence There have been no recent incidents of politically motivated damage to foreign projects and/or installations. Bilateral Investment Agreements The Government of Venezuela recently signed bilateral investment agreements with Argentina, Chile, Ecuador, Italy, the Netherlands Switzerland and Denmark. Venezuela is in the process of negotiating bilateral investment agreements with a number of other countries, including Portugal and the United States. OPIC and other Investment Insurance Programs Venezuela participates in the Overseas Private Investment Corporation (OPIC) country program. The U.S. signed an Investment Incentive Agreement with Venezuela on June 22, 1990, thereby granting investment insurance and guarantees by OPIC. Also, on January 17, 1991, the Government of Venezuela approved Foreign Government Approval (FGA) procedures. Venezuela has also joined the World Bank's Multilateral Investment Guarantee Agency (MIGA). MIGA encourages foreign investment in developing countries by providing investment guarantees against risks of currency transfer, expropriation, war and civil disturbance, and breach of contract by the host government; and advisory services to developing member countries on means of improving their attractiveness to foreign investment. Labor According to government statistics, the local labor market was composed of 7.6 million persons in the first half of 1993. The official unemployment rate for that year was 6.6 percent. This figure is believed to have increased sharply in recent months. The informal economy absorbs approximately 40 percent of the labor force. The country's major labor organization is the Venezuelan Workers Confederation, which represents a high percentage of all unionized workers in Venezuela. About 25 percent of employed workers are covered by collective contracts. Labor relations throughout 1993 were characterized by an increased tendency on the part of public sector workers to strike. Most strikes remained rare in the private sector. The labor movement pressed throughout the year for an increase in the basic urban monthly wage rate to 20,000 bolivars (from 9,000). The issue was left to the Caldera Administration, which raised the minimum wage to 15,000 bolivars (12,000 in rural areas) in May 1994 and also granted a public sector wage increase. In the private sector, labor-management relations are relatively good. The labor law which took effect in 1991 expanded existing fringe benefits, reduced the standard work week to 44 hours, and increased rates of overtime and holiday pay. Critics of the legislation compare it to a lengthy collective contract and claim its lack of flexibility limits the ability of employers and unions to adapt to individual circumstances. Many benefits--such as generous severance pay, profit sharing, vacation bonuses, and employer contributions to social security, housing funds, and unemployment insurance--are mandatory. Others, including allowances for lunches, transportation, and health and education services, depend on the workers' salary level and the number of workers employed. The labor law includes a provision for 365 days of sick leave in certain cases, as well as maternity leave. It also provides employers with three options to provide child care: Build a government-approved day care center; pay for the day care of each child at a private day care center; or pay 15 percent of the minimum wage for every worker to a children's foundation. Foreign Trade Zones / Free Ports In August 1991, the Venezuelan Congress approved a Free-Trade Zone Law. The two existing zones are Paraguana (industrial), and Margarita Island (commercial). Investors in the industrial free zone on the Paraguana Peninsula on Venezuela's northwest coast can receive a 10-year exoneration from income taxes on all profits earned from goods produced for export. The government may extend such benefits for an additional 10 years. Both Paraguana and Margarita zones provide exemptions from most import and export duties and offer foreign-owned firms the same investment opportunities as host country firms. Capital Outflow Policy Venezuela currently offers no incentives for investment outside the country. However, the state-owned oil company, PDVSA, is the sole owner of its U.S. subsidiary, CITGO, which represents the sixth largest foreign investment in the United States. Foreign Direct Investment Statistics By the end of 1993, registered direct foreign investment in Venezuela totaled $6.1 billion, 11 percent more than a year earlier. As a percentage of GDP, foreign direct investment stock was 10.5 percent by the end of 1993. U.S. investors still account for the lion's share (53.2 percent) of foreign investment with the Netherlands a distant second (9.7 percent). Foreign investment is concentrated in the manufacturing sector, principally in the following areas: fabrication of metal products, machines and equipment (20.3 percent); chemicals (13.4 percent); and food, drink, and tobacco products (11.3). Substantial foreign investment also exists in the financial services sector (25.3 percent). New direct foreign investment totaled $52.4 million in the first four months of 1994. The United States continues to account for the majority of new investment flows, but at a lower share than of the foreign investment stock. In the first trimester, the United States supplied $17.1 million (32.6 percent) of new foreign investment followed by Denmark ($11.7 million), and Switzerland ($10.5 million). New foreign investment is concentrated in manufacturing (62.4 percent), transport and warehousing (17.2 percent), and financial services (12.7 percent). The foreign direct investment figures presented above have been compiled by Venezuela's foreign investment registry, SIEX. Note, these figures do not include foreign direct investment in the petroleum, and mining sectors. Three petroleum sector joint ventures, the Cristobal Colon Liquefied Natural Gas project and two Orinoco Belt Heavy Crude Oil projects, were approved in late 1993 and represent around $11.0 billion in foreign investment over the long-term. They have not produced significant foreign investment inflows to date. Foreign investors active in the mining industry include Greenwich Resources, Phelps Dodge, and Monarch. Although Venezuela plans to promote domestic and foreign investment in the mining sector, investment inflows have been small to date. Although the U.S. remains Venezuela's major trading partner, foreign products and services are increasingly competitive on a quality basis and offer very attractive financing. European and Japanese firms have shown a long-term commitment to developing a major presence in Venezuela. U.S. manufacturers still can find excellent opportunities in major projects planned for the aluminum, pulp and paper, and petrochemicals sectors. There are also significant opportunities for U.S. firms in mining, transportation, telecommunications, and tourism. Major Foreign Investors Major U.S. investors in Venezuela include GTE, AT&T, American Cyanamid Co., Aluminum Company of America (ALCOA), A.V.C.O. International, Avon Product Corp., Bellsouth Enterprises, Black & Decker, Bristol Myers Squibb, Colgate-Palmolive Co., Continental Can Co., Dow Chemical Co., Eastman Kodak Co., Firestone Tire and Rubber Corp., Ford Motor Co., General Electric Co., General Motors Corp., I.B.M., Kraft Inc.,Minnesota Mining & Manufacturing Inc., Pfizer Corp., Philip Morris, Proctor & Gamble Co., Ralston Purina Co., Revlon International Corp., Reynolds International Inc., Warner Lambert & Company, and Westinghouse Electric Corp. Major third-country investors in Venezuela include AGA A.B., Allied-Lyons Netherlands B.V., Atlas Copco Venezuela, British American Tobacco, Ciba-Geigy, Citadel Corp., Fiat, Guiness Distillers, Hitachi de Venezuela, Hoechst, Kobe Steel, Mitsubishi Corp., Nestle, Shell, Showa Denko K.K., Siemens, Sony, Sumitomo Aluminum, Toyota, The Unilever Group, and The Vestrey Group.