VIII. TRADE AND PROJECT FINANCING The Banking System The Venezuelan financial system is small and seriously undercapitalized. At present, it is experiencing a severe structural crisis, with some institutions facing insolvency. Total financial system assets have grown in recent years from U.S.$ 18.1 billion at the end of 1989 to U.S.$ 25.6 billion at the end of 1993. The Venezuelan banking industry is characterized by the dominance of financial groups. There is a trend toward consolidation and concentration, which is expected to continue. New banking legislation has reinforced the autonomy of the Central Bank and strengthened the powers of the Bank Superintendency. The Superintendency can now require greater disclosure and higher levels of capitalization. However, as the recent collapse of Banco Latino and problems of many other banks have shown, actual regulatory supervision is still weak and inefficient. The government of Venezuela has substantially reduced its ownership in the banking sector. However, the recent banking crisis has forced the government to assume responsibility for problem banks comprising roughly 30 percent of the deposit base. Continued difficulties led to the creation of a new Banking Council, with significant powers (for example, over disposition of reserves) which affect the autonomy of non-government banks. Because of past discriminatory practices, the U.S. presence in the banking sector remains small. Currently, Citibank is the only U.S. bank with a presence in the retail banking sector. Many other U.S. banks have representative offices. New Venezuelan banking legislation provides full national treatment for U.S. banks as of January 1, 1994, and will allow foreign investors to take controlling interests in local banks, or to establish new banks or branches. The new laws should lead to a more efficient and better regulated banking system. Foreign Exchange In July, 1994, the Venezuelan government enacted strict emergency exchange controls to halt the decline of the bolivar against the dollar. The controls, described as "temporary" by the Government, make it extremely difficult for importers or any other individuals or legal entities to obtain dollars for foreign obligations (for details of the system at time of writing, see "Conversion and Transfer Policies" in section VII above). General Financing Availability Financing of any type is currently very expensive and difficult to find. Real domestic borrowing rates are very high. During the banking crisis which began in the first half of 1994, many foreign banks, including those in the United States, reduced or cancelled trade credit lines to Venezuelan banks. Importers have thus had trouble finding banks which will confirm their letters of credit. How to Finance Exports / Methods of Payment The recommended methods of selling to Venezuelan buyers remain letters of credit or prepayment, although Venezuelan buyers may have difficulty using either of these in the current financial climate. Other methods, such as sight payment, do not provide sufficient protection to the exporter. Suppliers may also be able to use one of the following programs. Available Export Financing and Insurance Agriculture: Venezuela benefits from several USDA programs which assist U.S. agricultural exports. The primary such program is the Export Credit Guarantee Program, or GSM-102. This provides coverage of commercial credits extended to finance exports, for credit periods up to 3 years. The FY 1994 program provides for coverage of up to $220 million for U.S. exports to Venezuela of wheat, feedgrains, oilseeds, oilmeals, and other products. Venezuela also benefits from USDA's Export Enhancement Program (EEP), the Dairy Export Incentive Program (DEIP), the Sunflower Oil Assistance Program (SOAP), and the Cottonseed Oil Assistance Program (COAP). Merchandise: The U.S. Export-Import Bank (Eximbank) is active in Venezuela, providing guarantees and insurance for exports to Venezuela. Minimum transaction sizes and other requirements may limit the applicability of Eximbank support. Project Financing The International Bank for Reconstruction and Development (IBRD), Inter-American Development Bank (IDB) and the Andean Development Corporation (CAF) are all active in Venezuela. For information on multilateral bank related business opportunities, please contact: Office of Multilateral Development Banks U.S. & Foreign Commercial Service U.S. Department of Commerce, Room H-1107 Washington, DC. 20230 Tel: (202) 482-3399 Fax: (202) 273-0927 The IBRD, a member of the World Bank group makes long-term loans at market-related rates primarily to developing countries. Loans are extended to promote broadly based economic growth and frequently focus on structural adjustment, sectoral reform and individual project lending. Typically, the World Bank does not finance the entire cost of a project, but instead covers components of a project purchased with foreign exchange, which on average is about 40 percent of the total project cost. Each project may cover a wide variety of sectors and can involve anywhere from one to hundreds of separate contracts providing export business opportunities for suppliers worldwide. For further information on IBRD business opportunities please contact: U.S. Department of Commerce Liaison Office of the U.S. Executive Director International Bank for Reconstruction and Development 1818 H Street, NW, Room D-13004 Washington, DC. 20433 Tel: (202) 458-0118 Fax: (202) 477-2967 The Inter-American Development Bank (IDB) provides funding to primarily public sector entities for the design and execution of projects. IDB projects afford U.S. suppliers of goods and services significant export opportunities, mainly in the transportation, environment, health, education, urban development, tourism, agriculture, and energy sectors. U.S. firms seeking information on IDB-financed commercial opportunities should contact: U.S. Department of Commerce Liaison Officer Office of the U.S. Executive Director Inter-American Development Bank 1250 H Street, NW, 10th Floor Washington, DC. 20005 Tel: (202) 942-8265 Fax: (202) 942-8275 List of Venezuelan Commercial Banks The following commercial banks are listed by asset size, largest to smallest. Those marked by an * have been intervened by the government. While Banco de Venezuela and Banco Latino are being restructured and will continue operations, the fate of other intervened banks was uncertain at the time this report was written. Banco Provincial Banco de Venezuela* Banco Latino* Banco Maracaibo* Banco Mercantil Banco Industrial de Venezuela Banco Union Banco Consolidado Banco Metropolitano* Banco Progreso Banco Construccion* Banco Republica Banco Principal Banco la Guaira* Banco Italo Venezolano Banco del Caribe Banco de Lara Banco Bancor* Banco International Banco Exterior Banco Caracas Banco Barinas* Banco del Orinoco Banco Venezolano de Credito Banco Banesco Banco Occidental de Descuento Banco Federal Banco Profesional Banco del Caroni Banco de Fomento Regional de Los Andes (BANFOANDES) Citibank Banco Sofitasa Banco Amazonas* Banco de Occidente Banco Andino Banco Exterior de los Andes y de Espana (EXTEBANDES) Banco Capital Banco Plaza Banco de Fomento Regional Coro (BANFOCORO) Banco Guayana Banco Empresarial Banco Canarias de Venezuela Banco Noroco Banco Ganadero Banco Tequendama Banco do Brasil Banco Popular