VENEZUELA Country Profile

Public Procurement and Contracting

Business Corruption

According to the Venezuelan regulation on tenders, national and international tenders should be treated equally. However, local preferences in government procurement are increasingly applied. The president can authorise temporary changes in the bidding process under certain circumstances, such as to promote national development or to offset adverse conditions for national tenders. Those changes could include, among other things, reservation of contract for nationals and requirements for domestic contents. Besides that, according to the Bertelsmann Foundation 2008, the communitarian sector, that is cooperatives and socialist productions units, often receive privileges in government procurement.

The business community asserts that corruption continues to be an important problem in public contracting. Tenders are frequently not published, although this is a requirement. There have been many complaints over subjective decisions made without legal justification. Fair bidding practices are being neglected in favour of quick and direct handouts of public contracts. In practice, public procurement officials have a great deal of discretionary power over procurement processes. Companies should note that it is common among public procurement officials to demand commissions in exchange for awarding contracts. It is recommended that companies use a specialised public procurement due diligence tool in order to mitigate the risks associated with public procurement in Venezuela.

In the process of nationalising the oil sector, private companies had their operating service agreements cancelled and were forced into joint ventures with the state oil company, PDVSA, without negotiation. Concerns have thus been raised over the respect for contracts.

Read more about public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

According to the US Department of State 2009 and Global Integrity 2009, public contracting lacks transparency and effective competition in the awarding of contracts. Contracts tend to be handed out without a proper tendering process and are instead given in accordance with political preferences.

Examples of corruption cases include the Supreme Court judge Luis Velazquez, who has been investigated for taking kickbacks involving a new judicial building.

The Bolivar 2000 Plan - managed by the armed forces and emphasising social service work - has been permeated by corrupt practices. Former General Comptroller Eduardo Roche Lander found irregularities in the Bolivar 2000 Plan, among them purchases that were either not properly documented or were validated using forged invoices and overpricing by as much as 2,000% in certain cases. There were also examples of contracts having been made with nonexistent suppliers. Around half of the programme's budget of USD 300 million was never accounted for. Lander was subsequently removed from his post by the National Assembly.

Read more about public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 1.8 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 1.9 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').