Venezuela Corruption Report

The security apparatus has a high corruption risk, and the police are ranked as the country’s most corrupt institution (GCB 2013). Companies evaluate the ability of the police to protect them from crime and to enforce the law as very weak. Most companies in Venezuela pay for security, while close to the same percentage identify crime, theft, and disorder as major constraints to doing business.

Police officers are generally poorly trained and funded, and impunity among police officers is a serious problem (HRR 2014). Furthermore, appointments to law enforcement agencies are sometimes based on non-professional criteria, and party loyalties may be considered in some cases (GI 2011).

The public services sector carries a high corruption risk. Public institutions are rather opaque, and the unpredictable regulatory system suffers from corruption and a lack of transparency (ICS 2015). Irregular payments and bribes are reportedly widespread, and companies often complain about the burden of government regulations (GCR 2015-2016). Furthermore, business inspections carried out by government officials to ensure public health and safety standards are usually carried out in an arbitrary and ad hoc manner. Bribes are often paid by companies in return for favorable treatment or expedited processing (GI 2011).

Dealing with construction permits is more time-consuming but less costly than the regional average, while starting a business is much more time-consuming and more costly than elsewhere in the South Asian region (DB 2016).

Venezuela’s land administration carries a high corruption risk. Corruption and over-regulation negatively affect property rights (FitW 2015). Property rights are guaranteed under the Constitution but are not respected in practice (BTI 2014). Likewise, businesses perceive property rights to be very poorly protected (GCR 2015-2016). Authorities sometimes expropriate land and private property arbitrarily and without compensation (BTI 2014). The Law on Fair Prices and Costs has rendered administrative prices the norm putting further strain on private property rights (BTI 2014).

Registering property in Venezuela is less time-consuming and less costly compared to the regional average (DB 2016).

Dealing with imports and exports involves a high corruption risk for business. The border administration lacks transparency, and irregular payments are widespread when trading across Venezuela’s borders (GETR 2014). Customs and excise laws are not always enforced uniformly or without discrimination, and some groups, most notably well-connected individuals or companies, are likely to evade customs and excise laws due to corruption and connections (GI 2011). Furthermore, customs procedures are very burdensome (GCR 2015-2016). In addition, smuggling represents a major problem, with gasoline smuggling alone costing the government several USD billions each year (FitW 2015).

Foreign investors may find relevant information on customs and tax regulations on the SENIAT (in Spanish, Servicio Nacional Integrado de Administracion Tributaria de Venezuela) website.

The public procurement sector carries a high risk of corruption. More than two-thirds of companies reported that they expect to give gifts to officials in order to secure government contracts. Public funds are often diverted to individuals and companies due to corruption, and favoritism among procurement officials is widespread (GCR 2015-2016). In fact, most public contracts are subject to ’emergency’ policies, and thereby are exempt from open tenders (BTI 2014). Furthermore, impunity is reportedly widespread among procurement officials, while companies that are found guilty of corruption are not blacklisted (BTI 2014).

The National Development Fund (FONDEN) is responsible for overseeing public spending. FONDEN holds the status of a corporation owned by the Venezuelan Finance Ministry, exempting it from being subject to the reporting and disclosure requirements that apply to government entities, in part contributing to the diversion of public funds (BTI 2014). Companies are generally recommended to use a specialized public procurement due diligence tool to mitigate the corruption risks associated with public procurement in Venezuela.

Transparency in the natural resources sector is weak. Reportedly, business inspections by government officials to ensure public environmental standards are often carried out in an arbitrary and ad hoc manner, also bribes are usually extracted from companies in return for favorable treatment or expedited processing (GI 2011).