idb - country strategy with venezuela

8/22/2019 Idb - Country Strategy With Venezuela

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DOCUMENT OF THE INTER-AMERICAN DEVELOPMENT BANK

REGIONAL OPERATIONS DEPARTMENT 3

COUNTRY DIVISION 5

VENEZUELA

COUNTRY PAPER

This document was prepared by a team consisting of Romn Mayorga (COF/CVE), CarlosElas, Humberto Gobitz, Asuncin Galdn, and Jorge Lamas (RE3/OD5), with contributionsfrom the following members of the Banks resident mission in Caracas: Eduardo Zamora,Genevieve Walravens, Martha Arbelez, Toms Muoz, Sergio Urra, Eduardo Casati Pastor,Carlos Allia, Nohora Alvarado, Rudi Cressa, Xiomara Alemn, and Rafael Corts. MoritzKraemer (RE3/OD5), Inder Ruprah (RE3/OD5) and Carlos Oliva (RE3/OD5) contributed toearlier versions of the paper. The team is grateful to Javier Len (RE3/OD5), Kim Staking(RE3/FI3), Alvaro Llosa (RE3/EN3), Mximo Jeria (RE3/SO3), and Jaime Fernndez(RE3/FI3) for their comments on this paper.


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CONTENTS

EXECUTIVE SUMMARY

I. ECONOMIC CONTEXT AND DEVELOPMENT CHALLENGES ................................................. 1

A. Political and macroeconomic context....................................................................... 1B. Development challenges...........................................................................................6

II. BANKOBJECTIVES, STRATEGY AND AGENDA FORDIALOGUE.......................................... 7

A. Objectives..................................................................................................................7B. Strategy......................................................................................................................7

1. Previous Bank support and portfolio review .................................................... 72. Major strategic areas .........................................................................................9

3. Coordination of private-sector instruments ...................................................... 14. World Bank and CAF participation in development projects in Venezuela....15. Financial projections and lending scenarios ..................................................... 16. Risks..................................................................................................................27. Monitoring......................................................................................................... 3

C. Agenda for a country dialogue..................................................................................3

ANNEX


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EXECUTIVE SUMMARY

Venezuela finds itself at a unique juncture that is characterized by sweeping structuralchanges in the political, economic and above all social spheres. Since President Chvez

was elected in December 1998, Venezuelan society has had to make decisions on suchfundamental issues as the framing of a new constitution. As a result of this process,democratically ratified at every stage, the government is committed to carrying out aprogram that responds to the new expectations generated in the economic, political andsocial areas over the past 21 months. The administrations promises are underpinned byoil revenues which make that program sustainable.

Oil provides Venezuela with revenues attainable by very few countries in the region.Now that crude oil prices are improving, Venezuela can capitalize on this to reactivate itseconomy. As a result of the international financial crisis of 1998 and 1999, demand forcrude declined, the terms of trade deteriorated, and fiscal revenues fell. In addition,

torrential rains hit Venezuela in late 1999, causing devastating human and materiallosses. The combination led to a 5.9% economic contraction in 1998 and 1999. Sincethen, however, the international financial recovery and its effects on demand forpetroleum have given Venezuela substantial resources. The country now has theopportunity not only to rebuild the infrastructure lost in the natural disaster of 1999 butalso to make preparations for the future so as to lower its vulnerability due to dependenceon oil.

Against such a backdrop of change, this country paper endeavors to define the Bankswork program over the coming three years. Our analysis of the Venezuelan situationleads us to identify two major challenges. In the short term, the necessary confidence

must be regained for private sector investment. In the medium and long term, Venezuelawill need to diversify an economy that has historically been coupled to its oil industry.Overcoming these challenges calls for maintaining macroeconomic balance, strength-ening public institutions, and deepening regional trade integration, to ensure growth withequity and poverty reduction.

The short-term challenge is reflected in the fact that, with the price of Venezuelanpetroleum at over US$30 a barrel in late 2000, the private sector still hesitates to invest.The environment of political changes and the process of shaping structural changes donot, for the time being, offer the assurances that private enterprise needs in order toinvest, particularly private enterprise in Venezuela, accustomed to a certain degree of

state protection. The government has taken steps to promote private investment byintroducing tax measures, by opening up the telecommunications sector to privateinvestors, and by allocating public funds to economic recovery. A fiscal stabilization fundhas been created in which to accumulate a portion of oil revenues when prices are high,to be used when oil prices fall. Thanks to the expansive fiscal policy pursued in 2000,GDP will grow in real terms both this year and next. The government hopes that thesefiscal measures, in combination with a full agenda of the legislative and executive


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branches to draft laws that will fill the legal vacuum generated by a new constitution, willoffer an institutional framework attractive to private investors.

Over the medium and long term, the Bank can support the governments efforts todiminish its dependence on oil revenues. To this end, the Bank has identified four areasof intervention: the social sectors, economic issues, institutions, and science andtechnology.

In the social sphere, the Bank could support the government in projects that reducepoverty and develop human capital through better access to basic social services. TheBank is now preparing operations to finance support for children and young people, asocial investment fund, low-income housing, basic and preschool education, and trainingfor young people.

In the economic area, the Bank will collaborate through projects to increase theproductivity of nonoil resources, to diversify the economy. Programs and projects that the

Bank would finance, as agreed with the government, are the rebuilding of infrastructuredestroyed in the 1999 natural disaster, consolidation of rural communities, food security,technology and policy management, legalization and registration of rural land titles,control of Lake Valencia water levels, reorganization of the water and sanitation sector,solid-waste management, the national highway and urban transit programs, rehabilitationof mid-sized irrigation and land drainage systems, and a transportation study.

In terms of institutions, the Bank will support the governments efforts to strengthen thepublic sector and thus improve the delivery of public services. Operations planned in thisarea include justice system reform, preinvestment and institutional support for thePlanning and Development Ministry, citizen security and coexistence, and institutional

strengthening for the Finance Ministry.

In the area of science and technology, the Bank will support the generation and use ofknowledge to support human capital development and increase economic productivity.Loans identified include an information technology program and support for technologyinstitutes.

The Banks agenda is clearly quite ambitious and could lead to commitments averagingUS$565 million per annum for the 2001-2003 period. Given the context of change inVenezuela, the Bank understands that the proposed lending program could undergoadjustments. There are two foreseeable risks in implementing this operating strategy. One

is an institutional risk in connection with structural changes in the Venezuelan publicadministration. The other has to do with the administrations execution capacity, if it willbe focusing on the definition of major legal issues. Nevertheless, the proposed workagenda in Venezuela is feasible and could make a significant contribution to thecountrys development.


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I. ECONOMIC CONTEXT AND DEVELOPMENT CHALLENGES

1.1 Venezuela is undergoing a period of structural changes in the political, economicand social spheres that began in late 1998 with the election of the Chvez

administration. Since December 1998, Venezuelans have voted five times: in areferendum to approve the drafting of a new constitution, election of the NationalConstituent Assembly, a referendum to approve the new constitution, and electionof the National Assembly and of President Chvez for a six-year term under thenew constitution. In addition, major changes have been made in the publicadministration, including a reduction in the number of ministries. Within thatdynamic context, this paper presents the Banks work program for Venezuela forthe next three years, in the awareness that major changes in the institutional ormacroeconomic framework could necessitate adjustments to the proposed lendingprogram.

A. Political and macroeconomic context

1.2 Venezuela is undergoing structural change in the political, economic and socialspheres. In the sociopolitical sphere, the Chvez administration took office inDecember 1998 with an agenda that called for fundamental change. At thebeginning of 1999 the government asked the Congress for special legislativepowers, granted under the 1999 Special Powers Act, to restructure the publicadministration and reduce the number of ministries. The government also presenteda proposal to draft a new constitution, approved by referendum by the Venezuelanelectorate, and appointed the National Constituent Assembly to implement theinitiative.

1.3 The Constitution of the Bolivarian Republic of Venezuela was approved byreferendum in December 1999. In July 2000 the governing party won the electionsfor the single-house National Assembly and President Chvez was reelected for asix-year term. The approval of the new constitution left a vacuum that called for thedrafting of legislation in line with the new legal framework to govern political andeconomic activity. The government again obtained authority from the NationalAssembly to legislate matters of national interest for one year, under the 2000Special Powers Act, including the Land and Rural Development Law and theHydrocarbons Law. The coming 12 months are expected to be very busy ones interms of defining matters of national interest that encompass economic andfinancial areas and public administration.

1.4 Within this context of structural change, the government is committed to furnishingthe necessary means to reactivate the economy after the 5.9% fall in GDP in 1998and 1999. That drop came about because of the international financial crisis thathurt most emerging economies through deteriorating terms of trade, a result oflower international demand and smaller lines of credit provided by internationalcounterparts for local financial systems. In late 1999 Venezuela also suffered thedevastating effects of torrential rains that caused enormous human and material


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losses. With recovery of the Asian economies in the last quarter of 1999, combinedwith the thrust of the U.S. economy, terms of trade improved, especially for oil. Theincrease in global demand for petroleum and coordinated action by OPEC to shrink

the supply of crude may in the short term lead to a period of reduced pricevolatility.

Figure 1

1.5 The government is aware of the importance to Venezuelas development ofreducing volatility in oil prices, and has taken the lead within OPEC topromote an oil production strategy to keep prices within a band of US$22 toUS$28 per barrel.1 This strategy was confirmed in late September at thesecond meeting of Heads of State hosted by Venezuela since the foundingof OPEC. The policy has so far been successful: at the end of last October

the price of Venezuelan oil was about US$30 a barrel, 50% higher than ayear before; at the end of 2000 the price closed above US$20 a barrel. Forthe moment there are no signs of any drastic reduction in global demand for

1 OPEC, which produces 40% of the worlds total oil supply, will increase production whenever the price of

crude stays above the band for 20 consecutive days. Friday, 27 October 2000 marked the twenty-first dayon which the price per barrel closed above US$28, and the President of OPEC, Mr. Al Rodrguez ofVenezuela, sent notes to the cartels members to boost production by 500,000 barrels a day.

Price of Venezuelan oil

0

5

10

15

20

25

30

35

01/09

/98

02/08

/98

03/10

/98

04/09

/98

05/09

/98

06/08

/98

07/08

/98

08/07

/98

09/06

/98

10/06

/98

11/05

/98

12/05

/98

01/04

/99

02/03

/99

03/05

/99

04/04

/99

05/04

/99

06/03

/99

07/03

/99

08/02

/99

09/01

/99

10/01

/99

10/31

/99

11/30

/99

12/30

/99

01/29

/00

02/28

/00

03/29

/00

04/28

/00

05/28

/00

06/27

/00

07/27

/00

08/26

/00

09/25

/00

10/25

/00

US$perbarrel

Moving 30-day average

Moving 60-day average

Source: Bloomberg


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oil, and OPECs intention to adhere to the band continues in place. Thispolicy to reduce volatility in petroleum prices is complemented internallyby the creation of the Macroeconomic Stabilization Investment Fund

(FIEM).

2

Petroleum revenues are deposited to the FIEM whenever the pricerises above US$9 per barrel, the aim being to hold reserves that can be usedwhen prices fall, as a fiscal cushion against volatility in the price of crude.Petroleum revenues generated this year have enabled the government to addto FIEM deposits as well as increase public spending, thus reactivating aneconomy that is still suffering the effects of the 1999 recession.

Figure 2

1.6 The internal reactivation strategy includes using petroleum revenues to financeinitiatives that promote growth in accordance with the governments avenues of

action. For this reason, current public spending and investment, which had fallen to

2 The central governments oil royalty revenues are part of current revenue and unrelated to the FIEM. These

resources explain the increase in public spending in 2000. The FIEM is subject to a ceiling and anysurpluses are transferred to the central government, state governments, and Petrleos de Venezuela, S.A.(PDVSA). Funds transferred to the central government would be deposited in the Single Social Fund, theVenezuelan Investment Fund, and the Debt Buyback Fund. There were no drawings on FIEM funds in2000.

Nominal exchange rate and future price of the bolvar

500

550

600

650

700

750

800

850

01/01/98

02/01/98

03/04/98

04/04/98

05/05/98

06/05/98

07/06/98

08/06/98

09/06/98

10/07/98

11/07/98

12/08/98

01/08/99

02/08/99

03/11/99

04/11/99

05/12/99

06/12/99

07/13/99

08/13/99

09/13/99

10/14/99

11/14/99

12/15/99

01/15/00

02/15/00

03/17/00

04/17/00

05/18/00

06/18/00

07/19/00

08/19/00

09/19/00

10/20/00

BolvaresperUS$

12-month NDF

1-month NDF

3-month NDF

Source: Bloomberg


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9.1% in real terms in 1999 as compared to 1998, grew 44.9% in the first half of2000 compared to the same period in 1999.3

Table 1

Key macroeconomic aggregates

1998 1999 2000

GDP at 1984 prices (% change) 0.2 -6.1 3.2OilNonoil

2.0-0.9

-7.4-5.4

3.42.7

Central government deficit (% of GDP) 4.1 2.6 1.8Saving and investment (% of GDP) 1

Total investmentGross fixed capital formation

Public sector

Private sectorChange in inventories

Total savingDomestic savingExternal saving

21.219.18.8

10.32.1

21.218.32.9

15.614.36.3

8.01.3

15.621.9-6.3

18.517.09.0

8.01.5

18.530.4

-11.9Current account external balance (US$million)Gross international reserves (US$million)

Central BankFIEMFIV

-2,56215,45814,849

0609

3,68916,02315,164

215644

13,36521,64716,070

4,5511,026

Exchange rate (bolvares/U.S. dollar) (year-end)

565.0 649.3 697.0

Consumer price index (% change Dec.-Dec.) 31.0 20.1 13.2

Source: Year-end address by the Chairman of the Central Bank, 26 December 2000.1. Gross fixed capital formation data for 2000 estimated by the Bank.

1.7 An expansive fiscal policy has had the anticipated result in Venezuela, leading toeconomic growth of 3.2% in 2000. The bolvar has remained within a band set bythe Central Bank in December 1998, underpinned by substantial petroleum receipts.The external current account balance, which reflects oil revenues, stood atUS$13.365 billion in 2000, more than double the 1999 figure, and internationalreserves totaled about US$21.647 billion, including US$4.551 billion for the FIEM.As a result of a moderate increase in the exchange rate, inflation continues to fall

(13.2% annualized in December 2000) while wages and salaries rose about 5% inreal terms. Real lending rates are approximately 14% while deposit rates are anegative 2%. As the spread between the two narrows, pressure is being exerted onthe financial system, the banking sector in particular. The countrys more than 40

3 Public spending fell 22% in real terms in the first half of 1999 compared to the same period in 1998 as a

result of fiscal adjustment. Growth in public spending in the first half of 2000 is just 13.2% in real terms ascompared to the first half of 1998.


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banks are undergoing a healthy process of consolidation led by foreign-ownedbanks.

1.8 The economic recovery encompasses the petroleum industry and domestic industryselling goods and services to the state and, to a lesser degree, the rest of the privatesector. The Caracas stock exchange, however, reflects the appreciation of nationalassets as oil prices rise, and has shown a spectacular recovery with 54% growthbetween December 1998 and December 2000, though in a context of low liquidity.The private sector has been quite passive during this transition period, in partbecause of the political changes and the ongoing process of shaping structuralchanges. This is reflected in the modest 2.7% growth in nonoil GDP in 2000.Preliminary data indicate that gross private investment will hover around 8% ofGDP, the same as in 1999 and less than the 1998 figure of 10.3%. Private capitalcontinues to flee the country. Steps taken by the government to restore privatesector confidence include lowering the value-added tax from 16.5% to 14.5%,eliminating the tax on bank debits, maintaining the direct tax burden, and issuingregulations to open up basic telephone service to open competition, transparencyand freedom of choice for users. The executive also created the Economic PolicyCommission to foster participation among economic sectors. These steps have yetto be reflected in higher output, and unemployment, despite a small decrease thisyear, continues to be high at about 13%, generating social friction.

Figure 3

The perception of country risk remains steady at about 800 basis points

4.0

4.5

5.0

5.5

6.0

6.5

7.0

01/01/98

01/31/98

03/02/98

04/01/98

05/01/98

05/31/98

06/30/98

07/30/98

08/29/98

09/28/98

10/28/98

11/27/98

12/27/98

01/26/99

02/25/99

03/27/99

04/26/99

05/26/99

06/25/99

07/25/99

08/24/99

09/23/99

10/23/99

11/22/99

12/22/99

01/21/00

02/20/00

03/21/00

04/20/00

05/20/00

06/19/00

07/19/00

08/18/00

09/17/00

10/17/00

Percentage

200

400

600

800

1000

1200

1400

1600

1800

Basispoints

U.S. Treasury bond Venezuelan bond spread

Yield on U.S. Treasury bonds

Venezuelan spread

Source: Bloomberg


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1.9 The perception of Venezuelas country risk is high despite a marked drop in publicexternal debt to 19.3% of GDP in 2000 compared to 24.7% in 1998. The domestic

public debt stock has grown significantly in the past two years but remains low at6.2% of GDP. Prices for Venezuelan government bonds on international marketsremain stable, with a spread of about 800 basis points compared to similar U.S.bonds.4 Rating agencies that gauge country risk place Venezuela well belowinvestment grade,5 reflecting historical volatility in the price of oil and the currentpolitical transition. The government is preparing a swap of Brady bonds for seven-year bonds in the amount of US$1 billion, which could take place next year. Thistransaction would improve the international portfolio of Venezuelan securities.

1.10 Venezuela is actively engaged in the process of globalization and has taken the leadin Central America and the Caribbean by expanding the San Jos Pact agreements

through the Caracas Energy Agreement, doubling the regions petroleum exports to160,000 barrels a day. The Caracas energy agreement, signed in October 2000, callsfor Venezuela to supply petroleum to the signatory countries at market prices butwith payment in foreign exchange for between 75% and 95% of the totaltransaction, in inverse relation to oil prices; the difference may be capitalized atinterest of 2% with a 15-year repayment period, or the country may opt for paymentin goods and services.

1.11 Prospects for the next three years are good assuming no substantive change in theinternational demand for oil. Reserves are more than adequate to ensure that theexchange rate will remain within the band proposed by the government. FIEM

reserves are sufficient to prevent adverse fiscal effects if oil prices fall suddenly. Inthis context, GDP will rise next year, likely topping 3%, thanks to recovery in thenonoil sector.

B. Development challenges

1.12 Venezuela faces two fundamental challenges in the short, medium and long term inthe current context of political, economic and social structural change.

a. In the short term, the governments challenge is to win back the confidence ofthe countrys private sector so it will invest in Venezuela, taking advantage ofthe oil bonanza and thus reactivating the economy and reducing high

unemployment to maintain macroeconomic balance and social stability neededin this period of structural change and institutional strengthening.

4 The last time Venezuela sold bonds on international markets was in March 2000, when 500 million euros in

5-year bonds were sold. Total Brady bonds on the market are US$10.4 billion.

5 Moodys rates Venezuelan long-term external debt at B2; Standard and Poors at B.


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b. In the medium and long term, Venezuela will need to diversify its productivebase in order to diminish its dependence on oil in a context of macroeconomicbalance, institutional strengthening, regional integration through trade

agreements, and development of science and technology, in such a way as toachieve growth with equity and reduce poverty.

II. BANKOBJECTIVES, STRATEGY AND AGENDA FORDIALOGUE

A. Objectives

2.1 The Banks lending program is designed to assist in Venezuelas development planand support the government in its medium and long-range efforts. The programfocuses on four areas of intervention: social, economic, institutions, and science andtechnology.

a. Social: The Bank will support the government in projects whose benefits includepoverty reduction and human capital development, through better access to basicsocial services.

b. Economic: The Bank will carry out projects to boost the productivity of nonoilresources in an effort to diversify the economy.

c. Institutions: The Bank will support the governments efforts to strengthen thepublic sector and thus improve the delivery of public services.

d. Science and technology: The Bank will support the generation and use ofknowledge to develop human capital and boost economic productivity.

B. Strategy

1. Previous Bank support and portfolio review

2.2 As of 31 December 2000, the Banks portfolio contained 23 loans totalingUS$1,972.6 million: 16 investment loans, 6 technical cooperation loans and onefast-disbursing sector loan. In addition, 44 MIF and nonreimbursable technical-cooperation operations have been approved. At this writing, 43% (US$852 million)of amounts approved has been disbursed, close to the Bank average of 42%, even

though funds flows for loans to Venezuela have been negative since 1993, with theexception of 1998 when sector loans were disbursed. The Bank is Venezuelasprimary source of multilateral finance. There are no loans to the private sector orProject Preparation Facility operations.

2.3 The Bank and the government decided early this year, as a result of the emergencycaused by floods and mudslides in Vargas State, to approve an emergencyoperation for US$20 million and reallocate loan balances of US$154 million to


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attend to the natural disaster. The details of these operations and specific problemsare set forth in the portfolio review of August 2000 (document CP-1053-5). Table 2summarizes the main problems affecting project execution, which are the subject of

continuing dialogue with the authorities.

Table 2

Portfolio problems

Problem Manifestation

Financing and timely

availability of local

counterpart funds

There are two sides to this problem. First, on certain occasions the nationalauthorities have resorted to financing the local counterpart contribution withtreasury bond sales. Since the executing agencies in charge of processing thebonds have no access to securities markets, availability of local funds isdelayed, causing problems with project execution. Furthermore, projectsbeing executed with regional governments sometimes lack clear arrange-ments for transferring funds to executing agencies. Second, although

counterpart funds are budgeted, they are not transferred to projects on atimely basis and in some cases are not available until fiscal year-end. Thisleads to delays in contracting and project execution.

Institutional weakness of

some executing agencies

The effectiveness of executing units has been affected by high staff turnover.The units lack knowledge for effective tendering and contracting, with delaysin implementation of recommendations to solve problems identified duringadministration missions. As to procedures, executing units tend to beginexecution (contract signing, fulfillment of conditions precedent and tenderingprocesses) sequentially, rather than in parallel to avoid unnecessary delays.

Inadequate design of some

operations

Some operations have been approved before preliminary designs areavailable and conditions precedent to approval are fulfilled. Nor has sufficientweight been given to the complex Venezuelan institutional environment. Insome cases, then, conditions precedent to first disbursement include actionsthat ought to have been taken prior to project approval.

2.4 The government has taken an important step with approval of the FinancialAdministration and Public-Sector Control Act. This will enable the first of theabove problems to be overcome by having a multiyear budget framework withglobal public borrowing authorizations and better coordination between program-ming and centralized cash management. However, since the Act will be fullyimplemented during the 2001 budget year, short-term measures need to be definedtogether with the government in order to: (i) expedite contract approval,authorization and signing; (ii) allocate global indebtedness by institution to make

ministerial spending more flexible, while expenditure authorizations aresynchronized with the pace of project execution; and (iii) implement a mechanismthat takes into account the needs of executing units and an effective method oftransferring funds in resorting to domestic debt.

2.5 The Bank also suggests that executing units be strengthened through training intendering and contracting, financial administration procedures, and other projectmanagement-related areas, as well as through seminars as execution begins. Finally,


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the Bank will endeavor to keep conditions precedent to first disbursement to aminimum, completing an operations design and negotiation prior to its approvaland taking advantage of this step to provide technical assistance and transfer best

practices. The Bank will also assess the advisability of executing some operationsin stages, linking disbursements to specific targets.

2.6 In view of the foregoing, the portfolio is considered to be in a process of adjustmentand review. The Bank will focus on operations in the last stage of execution, to seethem concluded, and on addressing the new country-program priorities. Another setof operations exhibits low execution levels and should be cancelled because theirobjectives are no longer priorities. The final objective is to adjust the portfolio, tothe extent possible, to the governments development objectives, as well aslowering costs and optimizing the use of funds through planning in accordance withexecution capacity.

2. Major strategic areas

2.7 The Banks four strategic action areas for operations are listed below (see also thesummary in Table 3).

a. Social: poverty reduction and human capital development

2.8 Issues: Lack of equity in income and wealth distributioncombined withinefficiencies in the public and private sectors and inadequate and excessivelygeographically concentrated public resourcesplaces large numbers of people in adifficult situation with deficient access to the social safety net (education, health

care, housing, etc.). Although there is a positive correlation between economicgrowth and poverty reduction by virtue of increased employment, a capital-intensive oil sector and less than effective public policies have not been able toprevent an alarming poverty rate proof that the majority have not gained from theoil bonanza.

2.9 In the area of education, performance indicators are low and insufficient attention isgiven to comprehensive child development. The national employment trainingsystem is weak and has not brought enough young people into the labor market.Low performance indicators are observable also in the health care sector, whereproblems are exacerbated because the ministry continues to undergo restructuring

to strengthen its role as policy and rule maker and grant more powers to the regions.Low-income housing is insufficient, a situation complicated by an underdevelopedmortgage market and the lack of adequate titling and public utility delivery systems.

2.10 Objectives: The Banks participation in support of government programs will bedesigned to:

a. Improve targeting of social programs to vulnerable and low-income groups,thus helping to mitigate poverty.


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b. Strengthen basic education, including by developing preschool programs, todevelop human capital and raise projected income.

c. Collaborate on the design of a new health care model and strengthen new sectorinstitutions.

d. Continue supporting the housing sector by helping to implement new legislationgoverning the financing of low-income housing.

2.11 Current actions: The Local Social Investment Program (loan 658/OC) reinforcingstate and municipal social investment programs has concluded, and the CivilSociety Support Program (1045/OC) now being financed strengthens civil societysrole in providing social services at the local level. In education, a program is beingcarried out to strengthen basic education (1220/OC) by renovating schools andtraining teachers. In health care, the Health Sector Strengthening and

Modernization Program (867/OC) now in execution supports the ministrysrestructuring and institutional strengthening and decentralization of services to thestates. Also approved was a sector loan (1098/OC) accompanied by technicalcooperation (1097/OC) to reform the social security system by clearly separatinghealth care, pension, and unemployment programs. The second and third tranchesof the sector loan have been cancelled, since the government is examining a newsystem reform. A pilot program of housing solutions for low-income households(928/OC) is under way.

2.12 Proposed actions:

a. Support for creation of a social safety net based on the Single Social Fund withan adequate transition of actions under the Bolvar 2000 program. Financing fora Social Investment Fund (US$100 million) is being planned to finance small-scale works in response to emergency needs identified by the community, aswell as to provide direct and indirect employment to help reduce poverty. AUS$30 million program of support for children and youth was approved in lateDecember 2000.

b. In the education sector, the systems management needs to be strengthenedthrough a management and administration approach that focuses on the needsand problems of each locality and works with schools, families and local

communities. TheBasic Education, Phase II, and Preschool Program (US$125million) will continue to strengthen basic education under the loan in execution,and will support increasing preschool coverage to achieve the aim of giving eachchild at least one year of preschool education. Consideration will be given tosupporting the use of new information technology in the school system andevaluating the possibility of setting up nontraditional preschool systems.


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c. In the health care sector, the operation in execution will be reviewed to defineoptions for reformulating the program to address new requirements. Inconnection with social security, technical cooperation will continue and, once

the government defines a model, another loan will be considered for itsimplementation.

d. In housing, the first stage of the pilot program of low-income housing is beingevaluated, and a second stage (PROVIS II, US$120 million) will take in morestates and include a slum improvement subprogram.

b. Economic: Boosting productivity and diversifying output

2.13 Issues: Venezuelas economic growth is built on the petroleum industry, eventhough the country has a rich and varied natural-resource endowment. However, anumber of factors are hindering sustainable development:

2.14 The countrys physical infrastructure problems have to do mainly with:(i) regulatory, institutional, and legal frameworks that are weak, if they exist at all(transportation sector); (ii) an incentives structure that does not spur efficientservice delivery; the result has been poor quality and coverage (water andsanitation); (iii) not enough financing for maintenance or new capital outlays(transportation, water and sanitation, electricity); and (iv) scant private-sectorinvolvement in service delivery.

2.15 The agriculture sector has enormous potential as a source of foreign-exchangeearnings and saving, and as a way of increasing employment, improving production

possibilities in rural areas, and contributing to the nations food supply. But ahistory of fluctuations in real exchange rates, frequent policy changes, and meagerprivate investment have held this sector back. Priority areas of concern here are:(i) land tenure regularization; (ii) lags in agricultural health areas and agriculturalresearch, and the absence of a secure, autonomous financing base for thesesubsystems fundamental operations; and (iii) deteriorating irrigation and landdrainage systems, which are not being well operated or maintained because farmersare not duly organized for that purpose.

2.16 The financial sector has rallied from the mid-1990s crisis thanks largely to theentry of foreign-owned banks and insurance companies. Nevertheless, an

evaluation would need to be done of current conditions in the sector. There areweak points in securities and insurance market regulation and supervision, andcontinuing efforts are needed to bolster bank oversight, complete the liquidation ofassets accumulated during the financial crisis, and review the deposit insurancescheme.

2.17 Even with constructive institutions and legislation, progress in the environmentalsector has been hampered by: (i) the need for the Ministry to operate more


18/31

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efficiently and focus its work; (ii) discharges of raw industrial and householdsewage; (iii) inefficient solid-waste collection and disposal systems; (iv) pollutionin urban areas; (v) the countrys acute vulnerability to natural disasters, and

(vi) inadequate land use (deforestation, degradation).

2.18 Objectives:

a. Support the development of three key infrastructure sectors: transportation,electricity, and water and sanitation. In the transport sector, the Bank willsupport central government and regional institution-strengthening, along withinvestment projects to rehabilitate roads and improve urban transit. The Bankcould assist in the design of regulatory schemes and implementation of new lawson concessions and delivery of water and sanitation services. Concurrent supportwould be provided for reviews of cost and tariff systems, in order to put moreefficient subsidy arrangements in place. Consideration also would be given to

the demarcation of responsibilities among the different levels of government andto infrastructure-rehabilitation project financing, if there were assurances oflong-range sustainability and of user involvement in the services, whereverpossible by intermediary of institutionally and financially autonomous operatingcompanies.

b. Support agricultural development through low-cost standalone projects, in lightof experience to date in this sector where ambitious large-scale, multi-objectiveprojects have proved difficult to implement. Focuses of interest here are:(i) institutional strengthening of the Ministry of Production and Trade; (ii) designand implementation of policies to promote efficient agriculture and improve the

agrifood trade balance, drawing on competitive advantages; (iii) support forregional and local rural development that creates jobs; (iv) regularizing landtenure; (v) sustainable support for agricultural research, animal health and plantprotection; and (vi) transfer of ownership of small irrigation systems to users,and transfer of management of mid-sized systems to their users, includingrehabilitation of the systems in a framework of support for production chains.

c. Continue the process of financial-market strengthening and modernization bysupporting efforts to improve the regulation and oversight of financial,insurance, and securities market operations. There also would be a need toexplore the creation and use of financial instruments that can broaden access to

financing and help achieve sustainable economic growth.

d. Foster environmental management by way of economic and market instruments,and equip the Environment Ministry to administer and enforce its environmentalregulations more efficiently. Another aim is to boost investment innatural-resources management, pollution control, and environmental protectionprograms. Specific issues of interest are: (i) financing for productive forestry andnative-forest management projects; (ii) support for watershed management


19/31

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projects, focusing particularly on strategic watersheds like the Caron Riverbasin; (iii) development of toxic and hazardous waste management and disposalsystems; and (iv) technical assistance to the Ministry so it can concentrate and

optimize its environmental quality control work.

2.19 Current actions: The Bank has supported a variety of infrastructure improvementoperations. At present it is funding expansion of electric power generation and theindustrys regulatory framework through the Caruachi hydroelectric plant program(788/OC). It is assisting in the institutional strengthening of the TransportationMinistry and rehabilitation of the national road network and bridges (732/OC) andurban transit improvements (818/OC). In the water and sanitation sector, the Bankssupport for modernization and rehabilitation is taking the form of a project to helpestablish a regulatory framework and rehabilitate production and distributionsystems in the state of Lara (994/OC). In the agriculture sector, it has been helpingto fund production infrastructure through two operations (692/OC and 696/OC) thatwere reformulated recently to speed up their execution. The Bank is supporting thefinance sector by way of a technical-cooperation loan (893/OC) to restructureagencies in charge of financial oversight, deposit insurance, and the systemsstability.

2.20 Proposed actions: In the infrastructure area, funding would be provided tosupportthe reorganization of the water and sanitation sector, with the aim of segregatingpolicy and regulatory functionswhich would fall to the national governmentfrom delivery of these services, which would become a municipal responsibility. Inthe transport sector, the Bank would finance new stages in the National RoadsProgram and the National Urban Transportation Program once the ongoing

programs have been completed and evaluated. The Andean DevelopmentCorporation (CAF) plans to finance Line 4 of the Caracas subway system. TheBank has no specific electricity-sector operations planned; the above-mentionedobjectives could be pursued using unexpended resources from prior approvals forthe sector. The World Bank is expected to approve technical cooperation in 2002 tosupport reforms in the electric power industry, and the CAF plans to financetransmission lines of Electrificacin del Caron (EDELCA).

2.21 The following agriculture-sector operations are envisaged: (i) rehabilitation of mid-sized irrigation and land drainage systems (US$100 million), to rehabilitateirrigated acreage, help transfer the systems operation and maintenance to their

users, and do a preliminary study of expansion options to pursue national targets inthis area; (ii)food security, policy and technology management (US$40 million), tosupport the financial sustainability of the agencies in charge of those areas, leavethem fully equipped, boost agricultural productivity, facilitate exports, and improvefood quality; (iii) consolidation of rural communities (US$10 million), to attractinvestment in production chains associated with rehabilitation of small Andeanirrigation systems, and improve environmental sustainability (operation approved in


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December 2000); and (iv) regularization of land tenure and registration(US$80 million), to regularize rural land tenure.

2.22 In the financial sector, the Bank would afford support for small and mid-sizedenterprises through a line of credit as part of a multisector global credit program,with a single second-tier institution as intermediary. Support for microenterpriseswould be included in the technical-cooperation loan currently being executed tostrengthen the financial sector, as a component to assist in the coordination ofgovernment-owned banks. As for the credit component, consideration could begiven to a global microenterprise credit program operated through a second-storybank. The government also would explore possible IIC and MIF support in thisarea.

2.23 In the environmental protection sector, the Bank would finance an operation toregulate Lake Valencia water levels, in light of the water being imported from other

watersheds via the central region water supply system. The CAF might cofinancethe project funded by the Banks loan. The viability of other activities would beexamined, based on the above-described objectives, when the government hadconfirmed that they were priorities.

c. Institutional: Public sector institution-strengthening

2.24 Issues: Historically, the countrys enormous oil revenues have gone to waste owingto ineffective public-sector management. The treasury is fragile, in part because itsreceipts are so dependent on oil prices and thus can zigzag (oil revenues make upabout half of aggregate central government revenues). The result of weak fiscal-

management institutions and the rigid budgeting system in place has beeninefficient resource management and, generally, a public sector in need of betterfiscal management along with improvements in the areas of justice and publicsafety.

2.25 Moreover, in transfers of political and administrative functions and resources fromthe national government to states and municipalities, the guiding criterion has beenpopulation size. As a result, the divide between some parts of the country andothers has become more pronounced. The concentration of investment outlays, aweak government presence, and serious infrastructure gaps have kept the countryfrom tapping the huge potential of vast expanses of land, and in the process have

kept private investors at a distance. This same concentration has pointed up theconsiderable differences in institutional development between states andmunicipalities, and in the level of public services each is delivering.

2.26 Objectives: To work with the government on programs to promote more efficientuse of public funds, pursuing institutional and structural improvements in threemutually complementary action areas. The first is to improve financial managementin the central government and build the groundwork for a flexible budgeting


21/31

- 15 -

system. The second is to support the revamping of the public sector apparatus bystreamlining institutions, giving specialized agencies more financial autonomy, andstrengthening management capacity in government, notably in the social sectors.

The third aim is to support government efforts to improve the justice system andpublic safety. Supplementing these efforts would be actions at the regional andlocal levels to give the citizenry a stronger say in decision-making and make formore efficient use of the funds managed by local and regional governments.

2.27 Current actions: A number of operations being funded by the Bank have launchedthe process of reforming the State. The Bank is supporting institutionalstrengthening of the national tax authority (942/OC-VE) to boost nonoil treasuryrevenues. Financing also was provided to set up a Programming andMacroeconomic Analysis Office in the Ministry of Finance and an Economic andFinancial Advisory Office in the National Assembly (945/OC-VE). Anotherapproved operation (1145/OC-VE) will improve fiscal statistics. The aim of allthese programs is to strengthen macroeconomic and fiscal analysis. A sector loanapproved in late 1998 helped create the Macroeconomic Stabilization Fund tocushion the effects of volatile oil prices on the public finances, and supported plansfor tax reform and trimming of the State apparatus. An in-house Bank studyevaluated the efficiency of public spending in recent years. The World Bank ishelping to set up an integrated public-sector management system that willcomplement the fiscal-management enhancement activities.

2.28 There are provisions in some projects in the portfolio to involve states andmunicipalities directly in the projects execution. One feature of the health, basiceducation, and water and sanitation programs currently under way is the prominent

role of states and municipalities. The Bank also approved a loan for a pilot programfor decentralization and modernization of government operations (1101/OC-VE),which promotes private-sector participation in the states.

2.29 Proposed actions: One operation in pursuit of the strategy is the second stage of apreinvestment loan (US$15 million), one component of which would enhance thepublic investment system. The Bank also would support the restructuring of theMinistry of Finance (US$20 million), a key piece in improving programming andresource use, underpinned by the new Financial Management Act. With respect togovernment services, there are plans for a US$100 million justice system reformoperation to aid in the transition to the model enshrined in the new code of criminal

procedure, which might be approved in 2000, and a loan to improve citizen securityand civic coexistence (US$30 million). A salient consideration here is that a seriesof operations currently under way, as well as future loans, are being restructured ordesigned with major institution-strengthening components for ministries, states,municipalities, and executing units.


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d. Science and technology: Knowledge creation and use

2.30 Issues: It is by now a commonplace that support for science and technology is oneof the most powerful engines of human development and economic progress.Though Venezuela has one of the regions largest human-resources pools in thisfield, Latin America is falling far behind as science and technology advances,leaving it ill-equipped to compete successfully in the global marketplace with high-value-added goods and services. This is a cross-cutting issue that is hinderingefficiency and productivity everywhere in the economy.

2.31 Objectives: To strengthen institutions that create and transfer knowledge andknow-how, gear their operations to effectively tackle development problems, andspur technological innovation by giving the entrepreneurial community access tothe services and financing it needs. A specific target for strengthening would be thenonuniversity technical higher education system, to make that systems institutions

more universally accessible, improve the quality of their offerings, and make theirprogram content more relevant.

2.32 Current actions: The Science and Technology Program has come to a successfulend. A loan has been signed for the programs second phase, which is slated tobegin before the end of 2000. This program aims to strengthen the nationalinnovation system by funding research and development (R&D) and informationprojects and others to strengthen thematic networks, training researchers,supporting R&D and technology service centers, fostering innovation in theproductive sectors, and disseminating and popularizing science and technology.

2.33 Proposed actions: In response to a Venezuelan initiative, the Bank would fund aninformation technology program (US$10 million) under its new innovation loanmodality. The operation would be coordinated with the other four Andean countriesso similar loans can be funded to put together an Andean regional program. In thefield of higher education specifically, financing would be provided to restructurenonuniversity technical education by way of a technology institutes program(US$60 million). The World Bank is expected to approve an operation in this samearea in 2002, so the Bank would coordinate with that agency.


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24/31

18

Table3

Sum

maryoftheBanksoperationalstrategyfocuses

Governmentacti

on

Othermultilateralagencies

TheBanksstrategy

Bankactions

Performanceindicator

Financialmarket

modernizationandenhanced

creditaccessforunderserved

sectors

Promotionofeconomic

instrumentsforenvironmental

protection.Strengtheningthe

Ministry

LakeValenciawaterlevel

regulation

Studies

MeasurementofLake

Valenciawaterregulation

Studiesproduced

Institutional:Improvingperformanceingovernmentoperations

Newcentral-governm

ent

organizationlaw

Newfinancialmanagement

law

NewFIEMlaw

Taxreform

Formationoftechnica

lteamto

supportthereform

WorldBank:

StudyonFiscaladjustm

ent

andsustainable

development

FiscalInformationSystem

(SIGECOF,phaseII)

Improvedgovernment

financialmanagement:bring

inasoundbudgetsystemand

taxcode

Publicsectorreform:anew,

morefunctionalstructure,

withefficientexpenditure

allocationcriteria

Supportinitiativestoimprov

e

justiceadministrationand

publicsafety

Regionalandlocalsupport

PreinvestmentII

RestructuringofMinistryof

Finance

Judicialsystemreform

Publicsafety,civiccoexistence

Studies

Increaseincentral

governmentnonoil

revenues

Approvaloflegislation

reformingpublic

borrowingandbudgeting

Introductionofanew

budgetapprovalsystem

Reductioninsizeofthe

publicsector

Declineinviolentcrimes;

morefrequentpenalization

Scienceandtechnology:Knowledgecreationanduse

Defineasastrategica

reafor

development

WorldBank:

MillenniumScience

initiative

Supportfortherecently

signedprogramandnew

initiatives

Informationtechnology

Technologyinstitutes

Changesinpublicand

privatespendingon

scienceandtechnology


25/31

Annex

Page1of31

3.Coordinationofprivate-sectorinstrume

nts

2.34

TheBanklookstoitsprivate-sectorwindow

(PRI)alongwithresourceso

ftheMultilateralInvestmentFund(MIF)andInter-American

InvestmentCo

rporation(IIC)topromoteprivateinvestmentinVenezuela.ThePRIwindowiscurrentlyexp

loringthepossibilityoffunding

operationstoimprovepipedwaterservice,andisawaitingthatsectorsreorga

nization,associatedwithapossibleBankoperation.TheMIFis

activelyinvolv

edbywayofitsthreewindows.

Itapprovedthreeoperationsin1

999andonein2000;afurthere

ightareexpectedtobeapproved

bytheendof2

001(seeannex).AsfortheIIC,apartfromitstraditionalfinancingfacilitiesitisspecificallyseekingoutprojectswithsmalland

medium-sizedenterprisesinZulia,withlocalfinancialinstitutionsasintermediaries.

4.WorldBankandCAFparticipationind

evelopmentprojectsinVenezuela

2.35

TheCAFisve

ryactiveinVenezuela.Mostofitsfundingisforinfrastructurep

rojects,amongthemLine4ofthesubwaysystem,theEDELCA

transmissionlineand,inthetransportationarea,atechnical-cooperationprogra

mfortheOrinoco-Apurecorrid

or.TheWorldBankisoperating

ordevelopingahealthprogramforCaracas,aM

illenniumScienceinitiativepro

ject,andanenergyrehabilitationprogram.

5.Financial

projectionsandlendingscenarios

2.36

Projectionsrun

frompresentoperationsandthetentativelendingprogram(see

annex)shownegativenetfundsflowsinthe2000-2003period

.

Thelow-lending-scenariosimulationinTable

4positsimplementing-capacity

weaknessesonthegovernmen

tspart.Thebase-casescenario

assumesalend

ingprogramaveragingUS$565millioninapprovalseachyear;inthelowscenariotheaverageis

US$325millionayear.


26/31

Annex

Page2of31

Table4

Financialprojection

s

(millionsofU.S.dollars)

Base-casescenario

Lowscenario

1999

2000

2001

2002

2003

1999

2000

2001

2002

2003

pprovals

100.0

50.0

425.0

670.0

595.0

100.0

50.0

260.0

350.0

360.0

epayments

105.1

120.7

111.8

114.8

183.5

105.1

120.7

111.8

114.8

183.5

ofwhichloansfrom2000onward

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

isbursements

187.7

200.0

188.0

162.0

197.6

187.7

200.0

188.0

138.9

128.0


0.0

7.0

67.0

167.6

0.0

7.0

43.9

98.0

terestandsundrycharges

139.0

149.3

169.0

195.5

212.7

139.0

149.3

169.0

193.1

204.3


0.0

0.7

7.3

21.3

0.0

0.7

4.9

12.8

etflow

82.6

79.3

76.2

47.2

14.0

82.6

79.3

76.2

24.1

-55.5

ashflow

-56.4

-70.0

-92.8

-148.3

-198.7

-56.4

-70.0

-92.8

-169.0

-259.8

ource:Inter-AmericanDevelopmen

tBank

2.37

Animportantconsiderationhereisthat,inanylendingscenario,Venezuelas

exposureratioremainsbelowtheparametersestablishedbythe

Bank.

6.Risks

2.38

Tworisksthat

couldimpedeimplementationoftheBanksoperationalstrategy

are:

a.AninstitutionalriskassociatedwiththerestructuringoftheVenezuelangovernmentapparatus.

b.Thepossibilitythatitmighttakelongerthan

expectedfornewstaffofexecutingagenciestoadapt.

2.39

Thekeytocou

nteringthefirstriskwillbeapolicydialoguewiththegovernme

ntunderscoringtheimportanceofcoordinatingeveryfacetofthe

Banksoperation.Tomitigatethesecondrisk

aseriesofseminarsonprojectexecutionandBankprocedure

swillbeorganized,withactive

participationoftheBanksVenezuelaCountry

Office,fornewexecuting-agencystaff.


27/31

Annex

Page3of31

7.Monitorin

g

2.40

TheBankscorestrategyobjectiveslooktothe

mediumandlongterm.Progresstowardobjectiveswillbeassessedthroughannualprogramming

andportfolioreviewmissions,backedbyspe

cificadministrationmissionsfo

reachprojectandsupportedb

ytheBanksCountryOfficein

Venezuela.Progresswillbemeasuredbyref

erencetogeneralbenchmarkssetoutinthestrategymatrix,andproject-specificbenchmarks

outlinedinthe

respectiveloandocuments.

C.

Agendafora

countrydialogue

2.41

Thecountrydialogueshouldcenterontwointerrelatedissues.Thefirstistheneedtocontinueworkingtowardasolutiontoproblemsthatare

commontoloansinexecution,andthosethatareproject-specific.Thesecon

distheneedtotailorthedialogueonfutureoperationstothe

strategyoutlinedhereinandtoaddress,inthatdialogue,problemsandsolutionsthatcomeoutoftheportfolioreview,sincetheBankhas

approvedloansinvirtuallyeveryoneoftheactionareas.Table5summarizes

keyitemsforadialoguewiththeauthoritiesoverthenextfew

years.


28/31


29/31

Annex

Page5of31

Strategyarea

Discussionpoints

expeditetheprocessofapprovinganddisbursingoperations.

Needformoreefficientpublicspending,streamliningofthegovernmen

tapparatus

andtraining.

AssesstheMinistryofPlanningandDevelopmentsneedforsupportto

strengthenits

multilateralloansofficeand

aninvestmentsystem.

Assistineffortstoimprovethejusticesystemandpublicsafety.TheBa

nkcandraw

onexperiencewithoperationsinothercountries.

Scienceandtechnology

Coordinatemonitoringofth

erecentlyapprovedoperation.

CoordinatewiththeAndean

countriestoprepareinformationtechnolog

yoperations.

Supportstartupofthescienceandtechnologyloanapprovedin1999an

ddrawonthat

experiencetodesignnewac

tivities.


30/31

Annex

Page6of31

D.

Lendingprogram20

00-2003

Year

Social:Povertyreductionandhuman

capitald

evelopment

Economic:B

oostingproductivity

andenhancingcompetitivenessof

non

oilresources

Institutional:Performanceimprovements

ingovernmentoperations

Scienceandtechnology:

Knowledgecreationanduse

Total

US$

million

No.

Title

US$

mill

No.

Title

US$

mill

No.

Title

US$

mill

No.

Title

US$

mill

VE-0120

Programof

supportfor

childrenandyouth

30

VE-0122

Emergencycausedby

torrentialrains,mud-

slides

andflooding

(appro

ved)

20

VE-0057

Justicesystem

reform

100

VE-n/n

Information

technology

program

10

VE-n/n

Socialinvestment

fund

100

VE-0126

Conso

lidationofrural

comm

unities

10

VE-0129

Preinvestment

loan

15

2000-

2001

VE-0114

PROV

ISII.Low-

incom

ehousing

program

120

VE-0125

Foodsecurity,policy,

andte

chnology

management

40

VE-0115

Publicsafetyand

civiccoexistence

30

Subtotal

250

Subtotal

70

Subtotal

145

Subtotal

10

475

VE-0138

Basic

educationII

andpreschool

educationprogram

125

VE-0127

Landtenureregulariza-

tionandregistration

80

VE-0117

Restructuringof

Ministryof

Finance

20

VE-0046

Technology

institutes

project

60

VE-0079

LakeValenciawater

levelregulation

100

VE-0137

Youth

training

program

60

VE-0123

Remedyingoflandslide

damage

125

VE-0131

Reorg

anizationofwater

andsa

nitationsector

25

VE-0132

Solidwastemanagement

50

VE-0133

Nationalroadsprogram

200

VE-0134

Nationalurban

transp

ortationprogram

100

VE-0124

Rehab

ilitationofmid-

sizedirrigationandland

draina

gesystems

100

VE-0135

Multisectorglobalcredit

program

200

2002-

2003

VE-0136

Transportsectorstudy

20

Subtotal

185

Subtotal

1,000

Subtotal

20

Subtotal

60

1,265


31/31

7

Multilateral Investment Fund program 2000-2001

Project title / WindowEstimated approval

date

Amount

(US$)

Integrated services for Zulia entrepreneurs(TC-99-12-00-3) I

December 2000 600,000

Industrial restructuring in Guayana(TC-96-09-44-9) II and III 2001 800,000

Development of industrial incubators in Mrida(TC-98-06-33-4) IIIa

2001 1.1 million

Development of industrial incubators in Aragua(TC-98-09-23-9) IIIa

2001 1.5 million

Venture capital fund for SME support 2001 3.0 million

Operational development of reciprocal-guaranteecompanies

2001 --

Development of new exporter consortia 2001 --

Virtual business city 2001 1.3 million

Inter-American Investment Corporation program 2000-2002

Project title Amount (US$)

Operation in the state of Zulia 10 million

Private-sector window program 2000-2002

Project title Amount (US$)Aguas de Matcora 137 million

List of studies and seminars 2000-2002

Study: Transportation sector analysis

Study: Modernization of irrigation systems

Study: Update of the state of the financial sector

Study: Rural finance schemes

Study: The state of technology institutesStudy: Tourism industry potential

Seminar on Bank procedures

Seminar for state employees

idb - country strategy with venezuela

Documents