Summary: US cables show the attitude towards Venezuela's adoption of freedom-respecting software

AS we showed earlier this year, US diplomats and Microsoft fight GNU/Linux in Venezuela and according to the following Cablegate cable, they also try to paint the move with the 'piracy' brush. "In an effort to move away from proprietary software products, the Government of Venezuela in 2004 introduced a law mandating the use of open-source software in government and public institutions," says one cable. But it continues: "This is expected to reduce the demand for U.S. software products somewhat, though much software currently in use is unlicensed or pirated."

Microsoft never seemed to mind this. Gates and other Microsoft executives openly admitted that this so-called 'piracy' was beneficial to Microsoft. Let us carry on with ۦ29 of the same cable that says: "Unfortunately, pirated software, music and movies remain readily available throughout the country. In the 2003 Annual Review, Venezuela remained on USTR's Special 301 Watch List."

We are going to write more about this in the next post. Basically, open source gets mentioned in most such cables and it is lumped in with all sorts of unrelated issue that have it painted as "piracy" and illegalities.

The Cablegate cable is as follows:

UNCLAS  CARACAS 003940 




SIPDIS 




STATE FOR WHA/AND 
STATE FOR EB/MTA/MST 
NSC FOR CBARTON 
TREASURY FOR OASIA-GIANLUCA SIGNORELLI 
USTR FOR G. BLUE 
USTR FOR B. HARMON 




E.O. 12958: N/A 
TAGS: ECON [Economic Conditions], EFIN [Financial and Monetary Affairs], ETRD [Foreign Trade], VE [Venezuela] 
SUBJECT: VENEZUELA 2005 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 




REF: STATE 240980 




ۦ1. (U) Summary: The Following is Embassy Caracas' submission 
for the 2005 National Trade Estimate Report. This document 
was also submitted as a MS Word document to G. Blue and B. 
Harmon at USTR by e-mail on December 23, 2004. End Summary 




------------- 
TRADE SUMMARY 
------------- 




ۦ2. (U) The estimated U.S. trade deficit with Venezuela for 
2004 is projected at $19.5 billion, an increase of $5.2 
billion from the trade deficit of $14.3 billion in 2003. 
U.S. goods exports to Venezuela were approximately $4.5 
billion, up $1.8 billion from 2003.  U.S. imports from 
Venezuela are estimated at about $24 billion in 2004, an 
increase of $7 billion from the level of imports in 2003. The 
large increase in imports is related primarily to the 
increase the price of petroleum, which represents the vast 
majority of U.S. imports. 




ۦ3. (U) The stock of U.S. foreign direct investment (FDI) in 
Venezuela in 2003 was $10.8 billion according to U.S. 
Department of Commerce statistics.  U.S. FDI in Venezuela is 
concentrated largely in the petroleum, telecommunications, 
manufacturing and finance sectors. 




--------------- 
IMPORT POLICIES 
--------------- 




Tariffs 
------- 




ۦ4. (U) Venezuela is part of the Andean Community.  In 2002, 
the five member countries of the Andean Community (Venezuela, 
Peru, Ecuador, Colombia, and Bolivia) agreed to establish an 
Andean free trade zone, a common external tariff (CET), and a 
customs harmonization policy by January 2004.  The CET 
agreement established a unified tariff schedule that would 
have come into effect at the end of 2003 (decision 535).  In 
October 2002 the member Ministers of the Andean Community met 
and agreed upon tariff rates for 62 percent of import items. 
In April 2003 all the Andean members except Peru reached 
consensus on a CET for the remaining 38 percent. 




ۦ5. (U) In December 2003, however, the members decided to 
postpone implementation of the CET, previously set for 
January 1, 2004, until May 10, 2004.  In May members again 
decided to postpone the implementation of the CET, this time 
for a year until May 2005. The members have agreed to review 
the CET,s effect on individual tariffs with the intention of 
possibly modifying the rates.  The CET has a four-tiered 
tariff structure of zero, five percent, ten percent and 
twenty percent. 




ۦ6. (U) In December 2003 the Andean Community signed a free 
trade agreement with MERCOSUR, the Southern Cone Common 
Market. Key elements of the agreement such as the length of 
phase-in periods for tariff removal require further 
negotiation.  In Mid-2004, Venezuela joined MERCOSUR as an 
associate member, which does not provide access to the tariff 
benefits of full membership. Venezuela was among the 12 South 
American countries that signed the "Cuzco Declaration" on 
December 8, 2004 announcing the formation of the South 
American Community of Nations which would ultimately unite 
and replace both the Andean Community and MERCOSUR. Work on 
the mechanics of the new entity is slated to begin in 2005. 




ۦ7. (U) Venezuela has been using the tariffs established under 
the Andean Community,s price band system since 1995 for 
certain agricultural products, including feed grains, 
oilseeds, oilseed products, sugar, rice, wheat, milk, pork 
and poultry.  Yellow corn was added to the price band system 
in 1996, and processed poultry was added in 2001.  Ad valorem 
rates for these products are adjusted according to the 
relationship between commodity market reference prices and 
established floor and ceiling prices.  When the reference 




price for a particular commodity falls below the established 
floor price, the compensatory tariff for that commodity and 
related products is adjusted upward.  Conversely, when the 
reference price exceeds the established ceiling, the 
compensatory tariff is eliminated.  Floor and ceiling prices 
are set once a year based on average prices during the past 
five years.  Venezuela publishes these prices each April. 




ۦ8. (U) In addition to the traditionally high import tariffs 
of the Andean Community,s price band system, Venezuela also 
protects its agricultural producers through a non-legislated 
system of guaranteed minimum prices and the restrictive use 
of import licenses and permits.  Management of tariff-rate 
quota commitments by the Government of Venezuela has been 
arbitrary and nontransparent and has negatively affected 
trade in basic agricultural commodities as well as processed 
products.  The Venezuelan Government has denied import 
licenses for both in-quota and over-quota quantities, even 
though importers are willing to pay the over-quota tariff for 
additional quantities of products. 




ۦ9. (U) U.S. agricultural exporters advise that the Venezuelan 
Government also routinely fails to open the quotas in a 
timely manner, and for some products, such as pork, has 
refused to "activate" the quota at all.   Venezuela announced 
in 2001 that it would not grant import licenses for corn 
until all domestic white corn had been marketed, resulting in 
an effective import ban.  Venezuela also has restricted the 
issuance of import licenses for sorghum, soybean meal, yellow 
grease, pork, poultry, oilseeds, and some dairy products. 
The government no longer publishes information and statistics 
on license requests or license issuance. 




ۦ10. (U) Under the Andean Community,s Common Automotive 
Policy (CAP), assembled passenger vehicles constitute an 
exception to the 20 percent maximum tariff and are subject to 
35 percent import duties. 




Non-Tariff Measures 
------------------- 




ۦ11. (U) In response to the rapid decline in the value of the 
national currency, the Bolivar, following a two-month general 
strike that brought oil production to a near standstill, the 
Central Bank of Venezuela halted trade in Bolivars on January 
22, 2003.  President Chavez announced the creation of an 
Exchange Administration Board (CADIVI) on February 5, 2003 to 
regulate the purchase and sale of foreign currency.  During 
much of 2003, CADIVI was unable to process requests for 
authorization of foreign exchange in an efficient and timely 
manner and only supplied $3.6 billion or approximately two 
months worth of transactions.  There has been significant 
improvement over time.  The supply of foreign currency 
reached a level of approximately $15 billion in 2004, or 55 
percent of approved authorizations.  A number of goods have 
also been added to the list of imports eligible for foreign 
exchange including intangibles such as services and the 
repatriation of capital, which totaled $1.5 billion at the 
end of the third quarter.  A new resolution allows importers 
to ship products without pre-approval by the government. 
There continue to be delays with pre-inspection companies 
thereby increasing storage costs.  Although the number of 
currency certificate approvals has increased steeply, 
operating with a 50 percent backlog in liquidations puts 
significant constraints on imports which accounted for 68.5 
percent of requests, followed by private foreign debt with 
12.5 percent and foreign investments with 8.6 percent. 
Exchange control authorities have repeatedly said that the 
exchange control system will be eased but will remain a 
permanent long-term mechanism. 




ۦ12. (U) Agricultural products have received the majority of 
dollars under the CADIVI system, since most basic food 
products are on the import list.  Even so, the problems with 
coordinating the timing of access to dollars, approval of 
import permits and licenses, and contracting the shipments 
have led to numerous delays and cancelled shipments.  Trade 
in higher value products, such as apples, pears, grapes, 




nectarines and other fruits and nuts, has been dramatically 
reduced as they are not included among the list of high 
priority products for which foreign exchange is available 
under the current currency control regime. 




ۦ13. (U) Venezuela also requires that importers obtain 
sanitary and phytosanitary (SPS) permits from the Ministries 
of Health and Agriculture for most pharmaceutical and 
agricultural imports.  The government increasingly has 
appeared to use this requirement to restrict agricultural and 
food imports without providing evidence of a scientific 
basis, raising concerns about the consistency of these 
practices with World Trade Organization (WTO) requirements. 
The Venezuelan Government continues to issue SPS permits in 
an arbitrary manner without citing specific phytosanitary 
concerns. This restriction in particular affects trade in 
pork, poultry, beef, apples, grapes, pears, nuts, onions and 
potatoes. 




ۦ14. (U) Though the GOV has not published requirements on 
absorption agreements, it has been common practice for years 
to require the purchase of domestic production before issuing 
import licenses or permits.   Imports of yellow corn are 
dependent upon the purchase of local sorghum and/or white 
corn.  Soybean imports are dependent upon the purchase of 
"locally produced" soybean meal, and permits for grape and 
black bean imports have been tied to the purchase of local 
product.  The use of absorption requirements is extremely 
subjective, since Venezuela lacks a good statistical system 
to track levels of domestic crop production. 




ۦ15. (U) This discretionary use of import licensing and permit 
procedures to curtail agricultural imports has become a major 
problem for the United States and other countries.  Various 
countries have notified Venezuelan government officials that 
these and other licensing practices appear to violate their 
WTO commitments.  In 2002, the United States Trade 
Representative initiated formal WTO consultations with 
Venezuela on its agricultural import license procedures for a 
wide-range of products.  Canada, the EU, Chile, Argentina, 
and New Zealand participated in the first round of 
consultations and posed questions to the government of 
Venezuela. 




ۦ16. (U) Venezuela prohibits the importation of used cars, 
used buses, used trucks, used tires and used clothing.  No 
other quantitative import restrictions exist for industrial 
products.  Some products such as cigarette paper, bank notes, 
weapons of war and certain explosives can only be imported by 
government agencies, (tax authorities calculate the cigarette 
tax on the volume of cigarette paper imported by the 
manufacturers).  The government can delegate authority to 
import on its behalf, and can place orders for such products 
with the local sales agents of the foreign manufacturers. 




ۦ17. (U) Venezuelan officials continue to discuss plans to 
improve customs procedures to better control the entry of 
illicit merchandise.  The Venezuelan Commission on 
Antidumping and Safeguards has started investigations on the 
importation of steel and paper products as well as clothing 
and footwear.  It appears that deficient customs procedures 
and the proliferation of contraband were contributing factors 
in those industries, calls for protection. 




--------------------------------------------- - 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
--------------------------------------------- - 




ۦ18. (U) Some Venezuelan importers of U.S. products have 
alleged that the Venezuela applies product standards more 
strictly to imports than to domestic products. The 
certification process is expensive, increasing the cost of 
U.S. exports relative to domestic products.  The Venezuelan 
Commission for Industrial Standards normally requires 
certification from independent laboratories located in 
Venezuela but at times accepts a certificate from established 
standards institutes abroad. 




ۦ19. (U) In 2003 the Government of Venezuela passed Decree 




2444, which requires importers of goods to Venezuela to 
obtain pre-shipment inspections of all imports.  Four 
companies are certified to do these inspections: Bivac 
Venezuela (Veritas Group), SGS Trade Assurance Services, 
COTECNA, and Intertek Foreign Trade Standards. 




ۦ20. (U) With regard to labeling, U.S. industries have raised 
concerns regarding Venezuela,s labeling regulation for 
clothing and footwear.  The regulations as proposed by 
Venezuela,s Autonomous National Service for Standardization, 
Quality, Metrology and Technical Regulations (SENCAMER) were 
notified to the WTO Technical Barriers Trade Committee in 
July 2002 and the notice was published in the Official 
Gazette of Venezuela in August 2002.  The regulations, which 
became effective in December 2002, establish the register of 
domestic manufacturers and importers of clothing and footwear 
and minimum labeling requirements for all clothing and 
footwear products marketed in Venezuela.  Of primary concern 
to U.S. manufacturers is the requirement that labels must be 
customized to include detailed information about the importer 
of the goods. 




---------------------- 
GOVERNMENT PROCUREMENT 
---------------------- 




ۦ21. (U) Venezuela,s government procurement law covers 
purchases by government, national universities, and 
autonomous state and municipal institutions.  The law 
requires a contracting agency to prepare a budget estimate 
for a given purchase based on reference prices maintained by 
the Ministry of Production and Commerce.  This estimate is to 
be used in the bidding process.  The law forbids 
discrimination against tenders based on whether they are 
national or international.  However, the law also states that 
the President can mandate temporary changes in the bidding 
process "under exceptional circumstances" or in accordance 
with "economic development plans" to promote national 
development, or to offset adverse conditions for national 
tenders.  These measures can include margins of domestic 
price preference; reservation of contracts for nationals; 
requirements for domestic content, technology transfer and/or 
the use of human resources; and other incentives to purchase 
from companies domiciled in Venezuela.  For example, 
government decree 1892 establishes a 5 percent preference for 
bids from companies with over 20 percent local content.  In 
addition, half of that 20 percent of content must be from 
small to medium sized domestic enterprises. 




ۦ22. (U) In an effort to move away from proprietary software 
products, the Government of Venezuela in 2004 introduced a 
law mandating the use of open-source software in government 
and public institutions.  This is expected to reduce the 
demand for U.S. software products somewhat, though much 
software currently in use is unlicensed or pirated. 




ۦ23. (U) In the international arena, Venezuela has 
reinstituted state controlled purchases of basic food 
products for its new internal distribution system, Mercal, a 
network of state-owned stores aimed at low-income 
Venezuelans.  The state-trading entity, CASA, has to date 
purchased sugar, rice, wheat flour, black beans, milk powder, 
edible oil, margarines, poultry and eggs from a variety of 
countries.  The private sector has complained that CASA has 
an unfair advantage in that its access to dollars is assured, 
as is its access to import licenses and permits. Furthermore, 
CASA, as a government entity, brings in products without 
tariffs and customs duties. 




ۦ24. (U) A new ministry has been created called the Ministry 
of Food. The new ministry is now responsible for a large 
number of activities formerly under the Ministries of 
Agriculture and Lands, Health and Social Development, and 
Production and Commerce.  Among the duties taken away from 
the Ministry of Agriculture and Lands are the issuances of 
sanitary permits and import licenses.  Price setting for all 
food and feed products has been moved from the Ministry of 
Production and Commerce into the Ministry of Food.  In 
addition, the government is working to move food registration 




from the Ministry of Heath and Social Development into the 
new food ministry. 




ۦ25. (U) Venezuela is not a signatory to the WTO Agreement on 
Government Procurement. 




---------------- 
EXPORT SUBSIDIES 
---------------- 




ۦ26. (U) Exporters of selected agricultural products - coffee, 
cocoa, some fruits and certain seafood products - are 
eligible to receive a tax credit equal to 10 percent of the 
export,s value. 




--------------------------------------------- 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
--------------------------------------------- 




ۦ27. (U) Venezuela is a member of the World Intellectual 
Property Organization (WIPO).  It is also a signatory to the 
Berne Convention for the Protection of Literary and Artistic 
Works, the Geneva Phonograms Convention, the Universal 
Copyright Convention, and the Paris Convention for the 
Protection of Industrial Property.  Through Andean Community 
Decision 486, Venezuela has ratified the provisions of the 
WTO Agreement on Trade-Related Aspects of Intellectual 
Property Rights (TRIPS). 




ۦ28. (U) The Venezuelan Industrial Property Office (SAPI) 
leaves much room for improvement, and its actions and 
occasional publicly stated antagonism towards IPR often draw 
criticism from IPR advocates and rights holders. Protection 
of IPR is also hindered by the lack of adequate resources for 
the Venezuelan copyright and trademark enforcement police 
(COMANPI) and for the special IPR prosecutor,s office. 
Venezuela's tax agency SENIAT is promoting several measures 
to fight piracy in an effort to reduce tax evasion, including 
a new anti-piracy law and the introduction of a tax on street 
vendors.  According to industry representatives, SENIAT seems 
to be a promising enforcement entity due to its better 
technical and financial capabilities. 




ۦ29. (U) Unfortunately, pirated software, music and movies 
remain readily available throughout the country.  In the 2003 
Annual Review, Venezuela remained on USTR's Special 301 Watch 
List. 




Patents and Trademarks 
---------------------- 




ۦ30. (U) Venezuela provides the legal framework for patent and 
trademark protection through Andean Community Decision 486 
and the 1955 National Industrial Property Law.  Andean 
Community Decision 486 takes major steps towards bringing 
Venezuela into WTO TRIPS compliance.  However, without 
corresponding local laws, Venezuela is not completely TRIPS 
compliant.  Andean Community Decision 345 covers patent 
protection for plant varieties. 




ۦ31. (U) U.S. companies remain concerned about the impact of 
the Andean Tribunal's 2002 interpretation of Articles 14 and 
21 of Decision 486, which do not allow for the patenting of 
"second-use" products.  Under pressure from the Andean 
Community and in line with some changes in leadership at 
SAPI, Venezuela has revoked previously issued patents.  Very 
few patents were awarded in 2004.  Since 2002, Venezuela's 
food and drug regulatory agency (INH) began approving the 
commercialization of new drugs, which were the bioequivalents 
of already patented drugs, thereby denying the patent-holding 
companies protection of their test data.  In effect, the 
government now allows the test data of patented drugs or 
those for which patents have been requested, most of which 
required lengthy and expensive development, to be used by 
others seeking approval for their own unlicensed versions of 
the same products. 




Copyrights 
---------- 




ۦ32. (U) Andean Pact Decision 351 and Venezuela's 1993 
Copyright Law provide the legal framework for the protection 
of copyrights.  The 1993 Copyright Law is modern and 
comprehensive and extends copyright protection to all 
creative works, including computer software.  A National 
Copyright Office was established in October 1995 and given 
responsibility for registering copyrights, as well as for 
controlling, overseeing and ensuring compliance with the 
rights of authors and other copyright holders.  Industry 
experts are concerned about a proposed new copyright law 
proposal, which would require the mandatory registry of 
works, reduce protection terms, hamper distribution 
agreements and increase royalties. 




ۦ33. (U) The Venezuelan copyright and trademark enforcement 
branch of the police (COMANPI) continues to provide copyright 
enforcement support with a small staff of permanent 
investigators.  A lack of personnel, coupled with a very 
limited budget and inadequate storage facilities for seized 
goods, has forced COMANPI to work with the National Guard and 
private industry to improve enforcement of copyrighted 
material.  COMANPI can only act based on a complaint by a 
copyright holder; it cannot carry out an arrest or seizure on 
its own initiative, which leads to weaker enforcement. 




----------------- 
SERVICES BARRIERS 
----------------- 




ۦ34. (U) Venezuela maintains restrictions on a number of 
service sectors.  Professions subject to national licensing 
legislation (e.g., engineers, architects, economists, 
business consultants, accountants, lawyers, doctors, 
veterinarians and journalists) are reserved for those 
individuals who meet Venezuelan certification requirements. 
In addition, only Venezuelan nationals may be licensed as 
architects.  Some (particularly government-related) 
accounting and auditing functions require Venezuelan 
citizenship, and only Venezuelan nationals may act as 
accountants for companies with public stock greater than 25 
percent.  Also, foreign professionals wishing to work in 
Venezuela must revalidate their credentials at a Venezuelan 
university on the condition of reciprocity.  A foreign lawyer 
cannot provide legal advice on foreign or international law 
without being licensed in the practice of Venezuelan law. 




ۦ35. (U) Foreigners are required to establish a commercial 
presence for the provision of engineering services.  Foreign 
consulting engineers must work through local firms or employ 
Venezuelan engineers.  There is a law for public tenders, 
which gives preferential treatment to Venezuelan companies if 
they have the capability to carry out the work and if the 
project is financed by public funds.  Foreign capital is 
restricted to a maximum of 19.9 percent in professional 
associations. 




ۦ36. (U) Venezuela limits foreign equity participation (except 
from other Andean Community countries) to 20 percent in 
enterprises engaged in television and radio broadcasting, 
Spanish language newspapers, and professional services whose 
practice is regulated by national laws.  Finally, in any 
enterprise with more than 10 workers, foreign employees are 
restricted to 10 percent of the work force, and Venezuelan 
law limits foreign employee salaries to 20 percent of the 
payroll. 




ۦ37. (U) The government enforces a "one-for-one" policy that 
requires foreign musical performers giving concerts in 
Venezuela to share stage time with national entertainers. 
There is also an annual quota regarding the distribution and 
exhibition of Venezuelan films.  At least half of the 
television programming must be dedicated to national 
programs, and at least half of FM radio broadcasting must be 
dedicated to Venezuelan music. 




Financial Services 
------------------ 




ۦ38. (U) By signing the 1997 WTO Financial Services Agreement, 
Venezuela made certain commitments to provide market access 
for banking, securities, life and non-life insurance, 
reinsurance and brokerage activities.  Venezuela did not make 
commitments on pensions, or on maritime, aviation and 
transportation insurance, and it reserved the right to apply 
an economic needs test as part of the licensing process. 
Only local insurers may insure imports that receive 
government-approved tariff reductions or government financing. 




ۦ39. (U) New rules governing civil aviation, maritime 
activities and transportation insurance also have been issued 
in the package of 49 laws passed under enabling powers by 
President Chavez.  Many of the laws still need implementing 
regulations.  The impact of the legislation is, therefore, 
still unclear. 




------------------- 
INVESTMENT BARRIERS 
------------------- 




ۦ40. (U) The government continues to control key sectors of 
the economy, including oil, petrochemicals and much of the 
mining and aluminum industries.  Venezuela began an ambitious 
program of privatization under the Caldera administration, 
but under President Chavez further privatization has been 
halted. 




ۦ41. (U) Foreign investment continues to be restricted in the 
petroleum sector.  The exploration, production, refining, 
transportation, storage, and foreign and domestic sale of 
hydrocarbons are reserved to the state.  However, private 
companies may engage in hydrocarbons-related activities 
through operating contracts or through equity joint ventures 
with state owned PDVSA.  The Venezuelan constitution reserves 
ownership of the state oil company (PDVSA) to the Venezuelan 
government.  It does allow the sale of subsidiaries and 
affiliates of PDVSA to foreign investors.  In the early 
1990's, the Venezuelan government partially opened the sector 
to private investment in order to promote new petrochemical 
joint ventures and to bring inactive oil fields back into 
production.  Almost 60 foreign companies, representing 14 
different countries, participated in this process.  PDVSA and 
foreign oil companies signed 33 operating contracts for 
marginal fields after three rounds of bidding. 




ۦ42. (U) The Hydrocarbons Law of 2001 has raised concerns in 
the industry as it mandates a minimum 50 percent national 
participation in future projects and increases most royalties 
from 16.67 percent to 30 percent.  No projects have yet been 
negotiated under this law. The Gaseous Hydrocarbons Law 
offers more liberal terms, and Venezuela's government has 
sought foreign investment to develop offshore natural gas 
deposits near the Orinoco delta.  The Venezuelan Government 
recently unilaterally eliminated a royalty holiday ceded to 
joint venture projects devoted to the development of 
Venezuela's extra heavy crude. These projects created as 
strategic associations during the partial opening of the 
sector enjoyed 35 year contracts endorsed by the National 
Congress. 




ۦ43. (U) The government passed legislation in 1998 aimed at 
introducing domestic and foreign competition into the 
domestic gasoline market.  The law allows foreign and 
non-governmental Venezuelan investors to own and operate 
service stations, though the government retains the right to 
set product prices.  Government controlled gasoline prices 
have not risen in several years and a number of currency 
devaluations and a high inflation rate have eliminated profit 
margins. 




ۦ44. (U) Hydroelectric power generation in Venezuela is 
reserved to the state, although private sector participation 
is permitted in transmission and distribution.  In early 
2000, the U.S. power generating company, AES Corporation, 
successfully took control, by means of a stock swap, of 
Electricidad de Caracas (EDC), the local electrical company 
that provides power to the Caracas metropolitan area. 




ۦ45. (U) A range of other natural resources - including iron 
ore, coal, bauxite, gold, nickel and diamonds - is gradually 
being opened to greater private investment by means of 
strategic alliances.  In 1996, CVG, the state-owned mining 
firm, announced its first joint venture with a foreign 
company to develop the Las Cristinas gold mine.  President 
Chavez personally announced the beginning of operations in 
May 1999. Low gold prices, however, forced CVG and its 
partners to suspend the project.   In 2001, the concession 
was revoked on grounds of the concessionaire's alleged 
inability to comply with the contract by not developing the 
reserves as stipulated, and the concession has been granted 
to another firm.  In April 1999, the Venezuelan Government 
updated the 1945 Mining Law in order to encourage greater 
private sector participation in mineral extraction.  However, 
in 2003 in line with a policy to centralize mining rights 
under the Ministry of Energy and Mines (MEM), the government 
ratified a 1996 decree requiring CVG to turn over to the 
Ministry the original files on concessions granted by CVG. 
In September 2003 the Ministry acted unilaterally to 
terminate some concession areas of a private diamond mining 
company in southern Venezuela alleging failure to comply with 
the terms of the concession. 




ۦ46. (U) Under the Andean Community Common Automotive Policy, 
Venezuela, Colombia and Ecuador impose local content 
requirements as a condition for reduced duties on imports. 
The local content requirement for passenger vehicles was 32 
percent in 1997.  It was raised to 33 percent for 1998, and 
was then lowered to 24 percent for 2000.  Under the WTO 
Agreement on Trade-Related Investment Measures (TRIMS 
Agreement), the three countries were obligated to eliminate 
local content requirements by the year 2000.  However, in 
December 1999, the Andean Automotive Policy Council 
determined that it would not eliminate the local content 
requirement as it had initially indicated, but instead 
decided to increase it gradually to 34 percent by the year 
2009.  This automotive policy may be inconsistent with 
Venezuela's WTO obligations under the TRIMS Agreement. 
Brownfield 




NNNN 
      2004CARACA03940 - UNCLASSIFIED

The next post will look at other responses, derived from other cables. ⬆