This section highlights excerpts of relevant press releases and brief comments on our views regarding such.
“Reuters: PDVSA is negotiating to obtain funding from four oil companies”
PDVSA is reaching out to Rosneft (Russia), Eni (Italy), Repsol (Spain) and Statoil (Norway) to obtain funding for oil and gas projects. The Vice-President of PDVSA Gas argued they are very open to continue to work together.
“The President of Venezuela announces the creation of the Petro, a cryptocurrency supported by oil, gas, gold and diamonds”
Venezuela is trying to create a cryptocurrency similar to Bitcoin, which will be supported in the mineral resources of Venezuela. Venezuela is facing a deep depreciation of its currency, making 1 USD equivalent to its highest bank note Bs. 100.000. Last month, the Bolivar lost 57% of its value. The President did not provide many details, but argued it was to be created to “advance towards currency sovereignty, for financial transactions, to avoid the financial blockage” and to “allow for new international financing for the social and economic development of the country”. Recently Venezuela has shown a significant growth in cryptocurrency mining. Such interest can be attributed to the economic crisis which the country is facing, the local currency devaluation, the low prices of electricity, and the ease of converting cryptocurrency into foreign currency to avoid holding devalued Bolivares.
“These are the results of the election for Governors”
The Chair of the National Electoral Council, Tibisay Lucena, announces the preliminary results for the Governors’ elections, with a 61,14% participation of the registered population; and an irreversible trend – having received the 95,8% of the votes, the results from 22 States concluded in; the opposition winning 5 States namely: Anzoategui, Merida, Nueva Esparta, Tachira and Zulia. Meanwhile the rest of the States were won by the Official Party.
“Venezuela and Aruba will encourage for new maritime and air routes”
In order to promote the commercial exchange, representatives from both governments met to activate new commercial routes. One of the main topics addressed was smuggling; particularly that of strategic materials from the State of Falcon. The possibility of investments in activities such as banking, agriculture and health, was also discussed.
“Maduro demands for recommendations for drastic decisions against smuggling activities”
He declared that was planning to take drastic measures in January against smuggling on the west and the entire Caribbean coast. He affirmed that diamonds, gold and other minerals were being smuggled out of the country through the Caribbean coast. Venezuela and Colombia share a border of about 2,200 km, where he asserted all kinds of essential products such as gasoline and food are normally smuggled. To avoid this activity, the Constituent National Assembly is planning on a new increase on the prices of gasoilne. President Maduro announced that all water and air navigation was to be closed to Aruba, Curacao and Bonaire.
“Maduro increases the minimum wage in 40%”
Before closing the year, President Nicolas Maduro enacted another increase on the minimum wage from 177.507 Bolivares to 248.510, and also included the food bonus, which was increased from 279.000 Bolivars to 549.000. The total earnings of a minimum wage worker are set in the amount of Bolivares 797.510. The reason for such measure was the “economic war”, as alleged by the Executive. There have been six increases over the Last year. On January 2017 the minimum wage was of Bolivares 40,638.15. This is the sixth increase year to date.
“The Electoral Council announces the results of the municipal elections”
On December the 10th the municipal elections took place in Venezuela. Out of 335 municipalities, the Official Party won 298 seats, while 26 remained in the hands of the opposition and 11 to be determined yet. A total of 9.139.564 voters participated in the election. The Council repeated the election for the State of Zulia, after Juan Pablo Guanipa winner of the opposition, refused to take oath before the Constituent National Assembly. Three large political parties did not participate in the election, after denouncing that the Electoral Power manipulated the Governor’s elections on October 15th, which granted 18 States out of 23 to the Official Party. The opposition alleged that the municipal elections were prominently irregular and had very poor participation. After 4:00 pm the day of the election, President Maduro reaffirmed that there will be Presidential elections in 2018, and threatened those parties who did not participate in this elections, that they could not participate in the next – arguing that it was the criteria of the Constituent National Assembly. The United States of America published a communication in which they condemned the threat of President Maduro.
II. CASE LAW
This section comments on relevant case law during the corresponding quarter and our brief comments to it.
Decision by the Civil Chamber of the Supreme Court of Justice dated November 13, 2017 in the matter of Cobramar C.A. v. Banco de Venezuela S.A., Banco Universal.
The defendant appealed to the decision of the Superior Court by arguing that the Court incurred in serious misconduct by omitting the application of article 660 of the Civil Procedure Code (CPC) when initially admitting the claim, considering that the correct procedure was that of a foreclosure, for cases of mortgages. This Chamber’s pacific criterion has been to recognize, as exclusive and mandatory, the mortgage foreclosure proceeding in cases of credits guaranteed by mortgages.
On the other hand, the ordinary enforcement proceeding will only be applicable in cases with mortgage guarantees when the requirements in article 661 CPC are not met. For the reasons above, the Chamber considers that the correct procedure to obtain payment under a Naval Mortgage, as in the present case, is the mortgage foreclosure pursuant to the CPC, and there is no other applicable proceeding – such as the ordinary maritime procedure.
Even when the parties express their will, they cannot choose the proceeding, since this is subject of public policy.
The Courts were in judicial recess from December 21, 2017 to January 8, 2018.
This section expands on National and International Legislation adopted in the country and relevant to the industry.
Official Notice from the Venezuelan Central Bank dated October 24th 2017.
Tax Offices and the public in general were informed that the official exchange rate to be used to set the taxable amounts originated from contracts concerning PDVSA, its subsidiaries and any other mixed/joint company, created in accordance with the Organic Law of Hydrocarbons, with any of its exclusive providers of specialized goods in the national territory, which are directly linked with the oil industry and whose payments have been agreed in foreign currency, will be that determined by Exchange Agreement N° 35 of March 9th 2016 (article 1). This article sets down a rate of Bs. 9,975 x USD for the purchase and Bs. 10 x USD for the sale. The latter is also used for payments of the foreign public debt.
Resolution N° 104 dated October 31, 2017.
A new representative at the International Maritime Organization (IMO) was appointed, Mrs. Rocio del Valle Maneiro Gonzalez. She becomes the permanent representative of Venezuela before the IMO.
National Decree N° 3.173 dated November 22nd 2017.
Mr. Asdrubal José Chavez Jimenez was appointed as President of CITGO, subsidiary of Petroleos de Venezuela, S.A. PDVSA.
National Decree N° 3.178 dated November 26th 2017.
Mr. Manuel Salvador Quevedo is appointed as acting President of the State company Petroleos de Venezuela, S.A., PDVSA
National Decree N° 3.185 dated December 5th 2017.
This National Decree exonerates any individual resident in the country, from paying income tax if his/her annual income is below 32,000 Tax Units.
National Decree N° 3.196 dated December 8th 2017.
Authorizes the creation of the Superintendence for Cryptocurrencies and related activities, based in the need to develop a new international currency, aligned with the ideas and proposal of the Commander Hugo Chavez, supported in the resources and commodities, such as gold, diamond, coltan, oil, gas, etc.
Resolution N° 164 dated December 6, 2017.
Imposes a regime for review and validation of contracts, both domestic and international, executed by PDVSA, and/or its subsidiaries and joint companies in which PDVSA has shares. The aim of this is to review all executed, current, and contracts to be executed in order to evaluate that all the legal, financial, technical, and budget requirements have been met, to therefore, consider the validity of such contracts; which ultimately could may give rise to civil, criminal or administrative liability in case of wrongdoing.
Constituent Law creating a Sanctioning Tax Unit dated December 21st 2017.
The purpose of this legal instrument is to create a particular Tax Unit to be applied for fines and monetary sanctions, different from the standard Tax Unit. This will be set by the Executive Power during the first days of February and to be modified periodically.
Constituent Law that creates a Tax Regime for the Sovereign Development of the Mining Arc dated December 29th 2017.
This Law creates a special income tax regime applicable to all earnings obtained from the gold sold to the Venezuelan Central Bank or to the entities authorized under the Organic Law that Reserves all Activities of Exploration and Exploitation of Gold and Strategic Minerals extracted in the Mining Arc of the Orinoco to the State. The amounts to be paid will depend on their production and processing capacity as determine by article 2.
The income tax originated by the sale of the gold abroad, duly authorized by the Venezuelan Central Bank, will be determined and paid in foreign currency or with its equivalent in gold.
The Tax Authorities will establish an anticipated payment system. The National Executive may partially or totally exonerate payment of any income tax to a specific party pursuant to the provisions set forth in the Organic Law.
Constituent Law for Productive Foreign Investments dated December 29th 2017.
This law aims to set the principles, policies and procedures to regulate foreign investment in any of its categories.
It seeks to promote the productive contribution of foreign origin that will help develop the existent potentialities already available in the country, guaranteeing economic sovereignty and favoring legal security.
A similar regulation was available in our legal system prior to this new legal instrument, which in summary provides as a novelty, for:
a) A special benefits program to be granted to foreign investments, such as tax exemptions, conditioned to the compliance of several particularities with a noticeable control of the State in the need to orient the investment to the needs of the National government.
b) The foreign company must deploy a responsible and committed conduct at all times. Therefore, they may not participate in any political purpose, boycott or strike that might hinder or obstruct the provision and production of goods and services, or any that might destabilize the democracy and its institutions.
c) Foreign companies may not contribute in any way to any private or public entity without the proper consent of the competent authorities.
d) The Foreign Investors may not participate directly or indirectly in the political debate of the country and may not provide opinion on any of the public matters.
IV. DRAFT REGULATIONS
This section lists draft regulations/bills being proposed to and/or discussed in Congress.
In an attempt to include Venezuelan Ports as a preferred destination for loading/unloading operations in the Caribbean, the President of the Maritime Authority (INEA) aims to promote a plan of incentives with the Ministry of Transportation.
This plan, which was proposed by INEA, mainly includes:
1. A particular project of benefits for the Container Port of la Guaira.
2. A reduction in fees and tariffs by Bolipuertos and INEA.
3. Avoiding further delays due to sub-aquatic surveys.
4. A new set of tax benefits for volumes of cargoes – imported or exported.
5. Unrestricted access of shipping lines of international cargoes operating in the country. 6. 10% reduction in the costs of fuel and oils, in comparison to the market.
7. A plan to return containers on time.