The management of Venezuela's oil wealth has been a dominant economic and political issue for most of the past 100 years. Venezuela has a huge investment and economic growth potential and its natural resource wealth has made it an attractive place to invest. Officially, Venezuela welcomes foreign investment and provides equal treatment to local and foreign companies. Nevertheless, political and regulatory uncertainty has seriously weakened Venezuela's capacity to attract foreign investment, as reported by companies in the World Economic Forum Global Competitiveness Report 2010-2011. Other factors too, such as heavy bureaucracy and corruption, inhibit the business climate and should be noted by investors considering doing business in Venezuela. Similarly, the US Department of State 2011 reports that foreign direct investment in Venezuela has been lower in recent years than in most other Latin American countries, as a result of a cumbersome business climate as well as a restrictive legal framework in the country.

Companies operating in Venezuela have experienced a change in conditions under Chávez's presidency. After his re-election in late 2006, Chávez proclaimed that he would accelerate the drive towards '21st century socialism' by further nationalising the economy, and, according to the US Department of State 2011, some of Chávez' reforms have led to reduced property rights. The Bertelsmann Foundation 2010 also states, that property rights are not sufficiently protected in Venezuela, as the government has started taking over so called 'strategic interests' of the people, such in the areas of food production, processing and distribution, construction materials, utilities, media, telecommunications, buildings, real estate and hotels. Acting in 'the people's interest' the government requires no proof in order to seize private goods. Private investment has generally been deterred by this uncertain legal and regulatory framework, although many companies with existing investments in Venezuela have been recording high profits thanks to high economic growth.

Access to foreign exchange is a major barrier to trade in Venezuela. Foreign exchange control is administrated by the Foreign Exchange Commission (Comisión de Administración de Divisas - CADIVI), which authorises the purchase and sale of foreign currency. The Transparency International Global Corruption Report 2009 reports that the government's management of foreign currency makes access to foreign currency a cumbersome bureaucratic process. Applicants fulfilling all the requirements to obtain foreign currency might still have their application denied and there are no appeal mechanisms. The same report also reveals that CADIVI's officials allegedly request illegal commissions of up to 30% of the total value of the currency request in order to speed up the process.

Several sources indicate that corruption is a key constraint for doing business in Venezuela. In Transparency International Global Corruption Barometer 2010, the private sector scores 3.1 on a 5-point scale (1 'not at all corrupt' and 5 'extremely corrupt'). According to the World Bank & IFC Enterprise Surveys 2006, 40% of the companies surveyed identify corruption as a major constraint to doing business. They also cite transport security, customs and ports as serious problems for their business activities. The informal or shadow economy also continues to constitute a significant problem, according to the Bertelsmann Foundation 2010. For example, in the World Bank & IFC Enterprise Surveys 2006, more than one in five companies surveyed report that they identify the practices of competitors in the informal sector as a major constraint. Further, public procurement is tainted by corruption and lack of transparency; thus, the US Department of State 2011 reports that a great majority of public contracts are awarded without open competition, while Global Integrity 2009 reveals that political considerations prevail in most procurement cases. Foreign investors considering establishing themselves in Venezuela are generally advised to consult with experienced attorneys, to develop, implement and strengthen integrity systems, and to carry out extensive due diligence before committing funds or when already doing business in the country.

According to Global Integrity 2009, Venezuela's regulatory environment continues to suffer from inefficiency, and companies investing in the country often face inconsistent application of regulations. Thus, cumbersome bureaucracy is a major constraint on business operations in Venezuela, presenting opportunities for rent-seeking and encouraging corruption. Similarly, business executives surveyed in The World Economic Forum Global Competitiveness Report 2010-2011 perceive government administrative requirements to be quite burdensome. Moreover, business executives also report that government policy-making is fairly opaque and that government officials usually favour well-connected companies and individuals when deciding on policies and contracts. Commercial regulations can be ambiguous and inconsistent, and the lack of transparency increases start-up and overall operational costs. Moreover, according to Freedom House 2010, the Chávez administration has done little to cut down on bureaucratic regulations or registration and licensing requirements. Given the often very time-consuming process of obtaining licenses, many companies resort to irregular methods in order to shorten the waiting time and hire an agent, a so-called 'gestor', with connection to decision-makers, as pointed out by Global Integrity 2009. This overall perception is corroborated by figures from the World Bank & IFC Doing Business 2011, which illustrate that, when compared to the regional averages, starting a company and obtaining business licences in Venezuela can be very time-consuming and bureaucratic. On the other hand, the process is relatively inexpensive and no minimum capital is required. According to the World Bank & IFC Enterprise Surveys 2006, almost 34% of senior management time is spent dealing with regulatory requirements and 34% of the surveyed companies identify licensing and permits as a major constraint for doing business.

According to the US Department of State 2011, the Venezuelan Constitution of 1999 (in Spanish) governing foreign investment in Venezuela generally gives equal treatment to local and foreign companies, except in certain sectors, such as media, engineering and pharmacy, in which Venezuelan nationals or the state must hold at least 80% of the equity. Nationalisation of important economic sectors of society is a high priority for the Chávez administration, and several sectors have already been subject to the nationalisation reform, most notably the oil sector. The Hydrocarbons Law (in Spanish) ensures that all oil production and distribution activities are the domain of the Venezuelan state. As a result, foreign companies already operating in this sector in 2001 had their operating agreements and licences invalidated, and royalties for certain projects were raised considerably. In 2007, foreign-owned companies operating in the Orinoco Belt, such as ConocoPhillips, Chevron, ExxonMobil, BP, Statoil and Total were forced into joint ventures with the state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA). These controversial regulatory measures have led to reluctance on the part of international oil companies to invest further in Venezuela. Foreign companies considering investing in Venezuela are advised to contact the Venezuelan Council for Investment Promotion (CONAPRI - Consejo Nacional de Promoción de Inversiones), which is a private non-profit organisation providing relevant information on investment legislation, registration requirements, visas and licences.

Venezuela's judicial system is accessible to foreign entities seeking to resolve investment disputes and foreign investors may pursue property claims through court. US Department of State 2011 reports that while the judicial system is often slow, inefficient and corrupt, foreign entities do not generally suffer discrimination in legal proceedings. Nevertheless, business executives surveyed in the World Economic Forum Global Competitiveness Report 2010-2011 report that the judiciary is often politically influenced by members of government, individual citizens or companies. Venezuela is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and the New York Convention of 1958; however, there are special regulations that define which arbitration body Venezuelan state-owned companies can use. For instance, the 2001 Hydrocarbon Law prohibits the PDVSA from entering into agreements that provide for international arbitration. Access the Lexadin World Law Guide for a collection of legislation in Venezuela.