Gas

Market Size

According to the Ministry of Energy and Oil, Venezuela has proven natural gas reserves of about 4,8 trillion m3 (2009). This makes it the 8th biggest country with gas reserves in the world. National production and consumption are balanced and estimated at 0,03 trillion m3 per year[5]. This leaves vast reserves for exportation,

Market Development

Until recently, natural gas production has been neglected, but investments are under way to exploit vast offshore gas reserves. Projects, such as the ‘Plan Delta Caribe’ includes investments in natural gas extraction, (liquefied) gas transport, and gas exportation.

Imports / Origin of Imports

Specific information on foreign imports and their origins are not freely available, but are available in the quarterly Oil & Gas Report by Business Monitor International.

Investments and Government Programs

As part of the ‘Plan Siembra Petrolera’, Venezuela seeks to diversify its energy industry. To be less dependent on oil exports, the gas sector has an important role to play. Plans are to triple gas production from 102 million m3 per day to 325 million m3 per day before 2012. The goal is to become self-sufficient in terms of gas production and consumption and to export the remainders to other Caribbean and South American countries. PDVSA plans to invest US$ 17 billion in different project to reach these goals.

Projects

Liquefied Natural Gas. In September 2008, Venezuela signed agreements to create three joint venture companies to pursue LNG projects along the northern coast of the country. This is the Proyecto Delta Caribe. Each subproject will consist of a separate liquefaction train to Centro Industrial Gran Mariscal de Ayacucho (CIGMA) natural gas complex in La Güiria, in the northeast of Venezuela.

The first project would source gas from the ‘Plataforma Deltana’ project, with exports estimated at 4,7 million tons per year (t/y). The second train would transport natural gas from the Mariscal Sucre project, also producing an estimated 4,7 million t/y (primarily for the internal market). The third train would transport natural gas from the Blanquilla-Tortuga fields. According to PDVSA, the total investment in he three projects could approach 20 billion USD, with first exports by 2013[6].

Enterprises

PDVSA

The largest state-owned natural gas producer. ( www.pdvsa.com)

Repsol-YPF

The largest private natural gas producer. ( www.repsol.com)

Other enterprises that are major players in this sector are Galp, Total, Petrobras, Pluspetrol, Chevron, ENARSA, Gazprom and Mitsui.

Intermediary Oganizations

ENAGAS (Ente Nacional del Gas)

National Entity for the promotion and supervision of the development of activities of transport, stock, distribution and trade of methane gas. ( www.enagas.gov.ve)

Ministerio del Poder Popular para la Energía y Petróleo

The Ministry of Energy and Oil regulates and administrates the exploitation of energy and oil and guarantees the necessary contribution to economic and social development in Venezuela. ( http://www.menpet.gob.ve/)

AVPG (Asociación Venezolana de Procesadores de Gas)

Promotes research and the interchange of information about the safe industrial utilization of the natural gas and its products, and to support sound business opportunities in all matters pertaining to the natural gas industry in Venezuela. They represent 77 businesses and organizations related to the Venezuelan gas sector. ( http://www.venezuelagas.net)

Cámara Petrolera de Venezuela

Studies, promotes and defends private activities linked to hydrocarbon sector. ( http://www.camarapetrolera.org/)

Miscellaneous

Advantages

• The government plans concerning the exploitation of natural gas offer interesting opportunities for enterprises involved in the gas sector. The scale and diversity of the different projects makes this sector interesting for companies specialized in the extraction of gas as well as liquefaction and gas transport infrastructure.
• Furthermore, gas production is key to the Venezuelan economy. Large amounts of gas are needed extract oil, which is Venezuela’s most important export commodity. With the oil projects in the Orinoco belt the demand for gas will increase substantially.

Risks

• As in the oil sector, the countries gas reserves are considered to be of national interest, therefore owned by Venezuela and companies active in the sector can therefore be nationalised.
• Again, although private parties are theoretically entitled to compensation and have the option of arbitration, practice shows that the government is lagging behind in paying these compensations and some doubts have been cast about the degree of independence of the national courts from the executive branch.

Food

Market Size

The agricultural sector has huge growth potential, because of the abundance of unexploited arable lands and water resources. Because of the government’s focus on the oil sector, agricultural development has largely been neglected the past decades. Agriculture accounts for a mere 4.8% of Venezuela’s GDP[7]. Venezuela is therefore very dependent on food imports, totalling around US$ 7 billion (or 12,5% of all imports) in 2008. The government has prioritized food (and medical) imports over other goods, making it easier to obtain funds and permissions to import foodstuffs through CADIVI[8]. The current government however, wants to be less dependent on food imports in the future and seeks to promote self-sufficiency in the agricultural sector, which is stated explicitly in the ‘Plan Soberanía Agroalimentaria’.

Market Development

Official statistics claim that the total harvested area (expressed in thousands of hectares) has grown about 15% since 2005. Economist Intelligence Unit forecasts predict 1,5% growth of agricultural production in 2009 and 2010. Business Monitor International expects a 72.9% growth in per capita food and drinks consumption from 2007-2012, due tot skyrocketing inflation and spending oil revenue on the poorest sectors of society. According to the same report, the food industry moves in different directions: meat production has dropped 25% over the past ten years, from over 400,000 tons to 300,000 tons per year. But dairy industry has grown 3,5% the last ten years (from 1,400,000 tons in 1998 to 1,460.000 tons in 2008), to name just a few examples.

Imports

Food sector imports have risen sharply. In 2006 the food sector imports totalled US$ 2,1 billion, making up 12% of all imports. In 2008 food sector imports were US$ 4,519 million, taking a 17% of all imports. This means foodstuffs imports haven grown 116,3% over the last three years, where as total imports have grown at an average rate of 37%[9].

The Origins of Import

Most food imports originate from neighbouring country Colombia, consisting of high value processed products. Argentina has been exporting meat to Venezuela  in exchange for cheap oil, while Chile is mainly exporting fruits. Another major supplier for the Venezuelan food market is the US, with imports averaging at about US$ 700 million a year (US$ 1,6 billion in 2008). Imports from the US however, are more orientated at products for the food processing sector and wheat and grain for the livestock industry[10].

Investments

Currently no free data on the food sector is readily available. Detailed reports on investments are available for purchase[11]

Government Programs / Projects

MERCAL (Red de Mercados de Alimentos)

MERCAL is a government distribution network for cheap, subsidized foodstuffs. The average price of MERCAL products is 20 to 40% lower compared to market prices for similar goods. Set up in 2003 to diminish dependency on the privately owned food production and distribution companies. Both national and foreign companies supply the chain. Product choice however, is limited to the ‘cesta básica’, which consists of basic foodstuffs such as pasta, powder milk, flour etcetera. Recent MERCAL statistics are hard to come by, but 2005 figures show that MERCAL has up to 14500 establishments, and ‘feeds’ up to 13 million Venezuelans (nearly 50% of the population). It has become the most popular type of food store for Venezuelans with lower incomes, even surpassing popularity of the privately owned supermarket chains, according to Datanalisis. ( www.mercal.gob.ve)

PDVAL (Producción y Distribución Venezolana de Alimentos)

PDVAL is a more recent government initiative by the government in corporation with ‘consejos comunales’ (grassroots democratic organisations, usually consisting of about 200 – 400 families) and PDVSA to provide food at the regulated – government – prices. Although prices tend to be higher, product offer is more varied than in MERCAL. Up to 40% of adult Venezuelans buy products in PDVAL establishments. ( http://www.pdvsa.com/index.php?tpl=interface.sp/design/readsearch.tpl.html&newsid_obj_id=7564&newsid_temas=0)

Enterprises

La CASA (Corporación de Abastecimiento y Servicios Agrícolas)

La Casa is a state owned company that produces, processes, packages and distributes foodstuffs, mainly oriented at supplying the MERCAL chain of cesta básica products. ( www.corporacioncasa.com.ve)

Empresas Polaris the biggest privately owned national food stuffs producer, processor and distributor of Venezuela, championing brands such as Pepsi, Cerveza Polar and Harina de Pan, which is the main ingredient for the national ‘Arepa’ dish. ( www.empresas-polar.com)

Cargill de Venezuela is another big privately owned food producer, mainly producing pasta (related) products, but is also market leader in foodstuffs for domestic animals. It has close ties with the agricultural and food sector, trading internationally in wheats and grains, and supplying local food producers with key ingredients for their products. The company has about 1400 employees and provides about 30000 indirect jobs. ( http://www.cargill.com.ve)

Archer Daniel Midland (ADM Worldwide)

ADM is mainly active in the food processing industry, transforming crops such as corn, oilseeds, wheat and cocoa into food ingredients, animal feeds, and agriculturally derived fuels and chemicals. ( http://www.adm.com/)  

Agroisleña is one of the biggest suppliers for (bio) chemical products for the agricultural market, such as fertilizers, herbicides and pesticides. Besides that, they’re one of the biggest brands in agricultural machinery. ( www.agroislena.com).

Alfonzo Rivas & Cía

This company is known best for trading in premium brands foodstuffs.

( http://www.alfonzorivas.com)

In the retail sub sector, the market is dominated by different supermarket chains, such as

• Excelsior Gama ( www.excelsiorgama.com)
• Automercados Plaza’s ( www.excelsiorgama.com)
• Supermercados Unicasa ( www.unicasa.com.ve)
• Central Madeirense ( www.centralmadeirense.com.ve)
• Hipermercados Éxito ( www.hipermercadoexito.com.ve)
• Supermercados Makro/Mikro (no website currently available) 

A more comprehensive list of enterprises active in the Venezuelan food sector can be found in the aforementioned quarterly reports by Business Monitor International.

Intermediary Organizations

CVA (Corporación Venezolana Agraria) ( www.cva.gob.ve)     

Promotes the agricultural productive system, coordinates and supervises entrepreneurial activities by the state to further the development of the agricultural sector of Venezuela. Several Dutch agricultural projects in Venezuela are carried out in corporation with CVA. Such as the 4,4 ha greenhouse project with Dutch company Dalsem ( http://www.dalsem.nl/).

Ministerio del Poder Popular para la Agricultura y Tieras 

Ministry of Agriculture and Land. ( www.mat.gob.ve)

Ministerio del Poder Popular para la Alimentación

Ministry of Nourishment. ( www.minal.gob.ve)

Instituto Nacional de Desarrollo Rural

National Institute for Rural Development. ( www.inder.gob.ve)

FONDAFA (Fondo de Desarollo Agropecuario, Pesquero, Forestal y Afines). 

Development fund for Agricultural, Forestry and fishery that aims to provide small and medium-sized producers with the financial resources to improve productivity. ( http://www.fondafa.gov.ve/)

BAV (Banco Agrícola de Venezuela)

The Venezuelan Agricultural bank creates, furthers and consolidates a production system of goods and services to contribute to agricultural development with financial assistance in line with government policy and active participation of the consejales to reach levels of sustainable growth that will lead to self-sufficiency and food security. ( http://www.bav.com.ve)

INIA (Instituto Nacional de Investigaciones Agrícolas)

Executive organ of the Ministry of Agriculture and Land which is specialized in scientific research, technological development, assessment and provision of specialist service in the agricultural sector. ( http://www.inia.gov.ve)

Miscellaneous

Advantages

• Recently a Dutch agricultural mission took place in Venezuela, as a follow up to mutual missions in 2006 and 2008 to consolidate Venezuelan-Dutch relations in the agricultural sector . There’s great interest in Dutch agricultural technology to improve both quantity and quality of agricultural food production in Venezuela. Special interest was shown in production technology (such as greenhouses), seeds, seed potatoes and means of production such as: fertilizers, pesticides and herbicides. The interest in (Dutch) agro technology stems from the government’s desire to become self-sufficient in terms of food production.
• Another big advantage is the availability of special investment loans for the agricultural sector. Banks are obliged by the government to offer a discount on these type of loans (currently they cannot exceed the 14% annual interest rate). Apart from this discount, banks are also obliged to have a certain percentage of outstanding loans in this sector, which is an incentive to provide these loans to interested investors.

Risks             

• A few years ago the government introduced fixed end consumer prices for some basic foodstuffs.
• Also, the government introduced fixed prices for the production of certain basic foodstuffs. These prices do not reflect real production costs. To maintain profitability, producers diversified their product offer and focused more on ‘luxurious’ foodstuffs.

Therefore, the government recently approved new laws which state that companies active in the foodstuffs sector are obliged to destine a certain percentage of their production capacity for the production of the basic foodstuffs. All this, according to the government, to prevent price speculation and the export of foodstuffs, while the local market demands hasn’t been satisfied yet. The authority for consumer protection (INDEPABIS –  www.indepabis.gob.ve) has been attributed rights to inspect and act upon (non)compliance of these laws. In recent months, companies that didn’t comply with regulation have been seized temporarily or expropriated.

• To supply MERCAL and PDVAL, the government seeks to buy at the lowest cost possible, even bypassing local producers when necessary. These developments have influenced food production, in many areas food production levels are falling, resulting in even greater dependence on food imports.

Healthcare

Market size

There are three parallel healthcare systems in Venezuela. There is a private sector offering medical services, a national health care , and the different ‘misiones’. The government spends about 4.4% of the GDP on health, while private sector expenditures are estimated at 2.0% of GDP (2005, 2008 PAHO Report).

Because of the (relatively) high cost of private health care, the vast majority of Venezuelans rely on national health care or the ‘misiones’. In the public sector, there are many restrictions in terms of medical supplies & equipment. Many health centres and hospitals are obsolete and, overall, services are of low quality. Many patients need to go to private facilities lab tests or x-ray or scans. Basic items such as syringes, alcohol and gloves are also in short supply[12].

The market for pharmaceuticals is estimated at US$ 3,5 billion according to Business Monitor[13] and is heavily reliant on imports, which account for more than two-thirds of market value. Prescription medicines account for around three-quarters of the market. Low cost generics account for the majority of consumption in volume terms. Venezuela’s market for medical devices, estimated at US$ 372 million in 2009 is almost entirely supplied through imports, the us being the main supplier.

Market Development

The government considers the health sector to be a strategic sector and therefore wants to improve the national healthcare system, offering quality healthcare to all Venezuelans. Public sector employees however, have private sector medical insurance. The government is planning to transfer these employees to the public healthcare system. The government has formulated a number of health projects and plans, although implementation remains a serious concern.

At the same time the government has threatened to nationalise private hospitals and clinics if they do not comply with strict new regulations that are being discussed by a congressional panel. According to Chávez, many private hospitals an clinics are guilty of extortionate prices.

Imports / Origin of Imports

The medical devices & equipment market is heavily reliant on imported products; there is little domestic production and none at all of high-end apparatus. In 2007, imports were valued at US$ 410 million.

At regional levels, Venezuela is the third leading importer of medical equipment and supplies. Hospital modernisation in the public and private sector has brought imports to record levels, particularly via the implementation of  ‘Misión Barrio Adentro’ in the public sector[14].

Expenditure is heavily concentrated in Caracas and other major urban areas.

In may 2009, a first in a series of pharmaceutical plants was opened, producing ‘generic’ legal drugs. Early this year, the government has prioritized the imports of medical equipment and medication, which – at least in theory – makes it easier to export these goods to Venezuela.

Investments

Exact figures on investments in public healthcare are hard to come by. According to Venezuelanalysis (2009) the government plans to spend US$ 790 million on projects related to the ‘Misión Barrio Adentro’.

Government Programs / Projects

Misión Barrio Adentro ( www.barrioadentro.gov.ve/)

Over the past few years the government has tried to provide free health care for the lowest income sectors of the population, under the name of the ‘Barrio Adentro’ missions.

• Barrio Adentro I provides basic health care such as first aid, diagnosis. About 13000 doctors provide basic health care in 3100 basic consultation centres. different service points for about 17 million Venezuelans.
• Barrio Adentro II seeks to provide more advanced healthcare.
• Barrio Adentro III consists of renovating all public hospitals, emphasizing on importing the most modern medical equipment available, spending US$ 913 million just to import 30000 items of medical equipment[15]. 250 public hospitals should have been fully renovated by now, but there have been delays.
• Barrio Adentro IV aims to build 15 new hospitals in rural areas, in a lapse of 3 years[16].

Enterprises

Pfizer

US-based Pfizer is the leading company in the country. Its Venezuelan subsidiary is involved in here business segments: global pharmaceuticals, animal health and consumer healthcare. ( www.pfizernegocios.com.ve)

Sanofi-Aventis

This reknowned French drug major markets patented innovative drugs in Venezuela.  It as praised by the government for offering medicines and vaccines at low cost in developing markets ( www.aventis.com.ve)

GlaxoSmithKline

GSK is a major pharmaceuticals manufacturer. It offers about 70 products in Venezuela, a number of them patented. GSK is in important manufacturer of HIV/AIDS drugs, a disease of which the incidence is increasing rapidly in Venezuela. ( www.gsk.com) 

Philips Medical Systems

( www.medical.philips.com),

Siemens Medical Solutions

( http://www.siemens.com.co/medical)

DSM Nutritional Products

DSM produces vitamin premixes and products for animal nutrition. ( www.dsm.com)

AGA Gas

This national company is the leading producer of industrial and medicinal gases in Venezuela. It has two manufacturing plants in the state of Zulia and employs about 160 people. ( www.aga.com.ve)

Bligsen Electronics

Bligsen is a small domestic manufacturing company, based in Maracay, which produces medical electronic equipment and specializes in electrosurgical equipment. ( http://www.bligsen.com)

Intermediary Organizations

Ministerio del Poder Popular para la Salud y Protección Social ( www.mpps.gov.ve) 

Ministry for Health and Social Protection

Instituto Venezolano de los Seguros Sociales ( http://www.ivss.gov.ve/)

Venezuelan Institute for Social Security

AVEDEM (Asociación Venezolana de Distribuidores de Equipos Médicos, Odontológicos, de Laboratorios y Afines)

Venezuelan  association of medical distributors, which has over 100 members, mainly importers, distributors and agents of multinational producers. ( www.avedem.com.ve)

Organización Panamericana de la Salud ( www.paho.org/home_spa.htm)

Pan-American Health Organisation, regional office of the World Health Organisation.

Advantages

• With the current government commitment to improving the public health sector, focusing on upgrading existing facilities and building new hospitals, the demand for modern medical devices will probably rise. Because of the scale of the different projects, the export of these kind of devices for the Venezuelan market could prove to be very lucrative[17].
• Also, the new list of priority goods, which feature health care related products such as legal drugs should make it easier to export more basic medical goods to Venezuela.
• The influx of a few million public sector employees will probably mean a growth in demand for healthcare (in all aspects) in the public sector, which means more investments will be necessary. The best opportunities are in the advanced private sector and the Barrio Adentro-related private sector.

Risks

• Because there are important healthcare reforms pending, it remains unclear what consequences these reforms will have on the different healthcare related markets in Venezuela.  
• Furthermore, Venezuela has the riskiest regulatory environment in the region on account of its weak intellectual property protections and strict policy on pharmaceutical pricing[18]. Therefore, at the moment, playing a role on the medical market is probably less risky in the form of an import/export company, than actually investing in local production.

[1]See attachment.

[2] Sources: Banco Central de Venezuela, Banco Mercantil.

[3] Oil & Gas Quarterly Report Venezuela ( http://www.bharatbook.com/Market-Research-Reports/Oil-Gas-Report-Venezuela-.html)    

[4] Statistics on the Faja Orinico Carabobo fields are extracted from different sources: El Universal, BN Americas and the Oil & Gas Journal

[5] Oil and Gas Journal

[6] Sources: PDVSA Website, Ministry of Energy and Oil, El Universal, Energy Information Administration

[7] Economist Intelligence Unit

[8] See Final Remarks

[9] Presentation by economist Migel Angel Santos.

[10] Venezuela Food and Drink Report Q2 2009 (Business Monitor International),  http://www.marketresearch.com/map/prod/2223150.html

[11] idem

[12] The Medical Device Market: Venezuela (Espicom Business Intelligence: http://www.researchandmarkets.com/reports/43045

[13] Venezuela Pharmaceuticals and Healthcare Report Q1 2009 (Business Monitor International:  http://www.piribo.com/publications/country/venezuela_pharmaceuticals_healthcare_report_q3_2008.html)

[14]  Idem.

[15] The Medical Device Market: Venezuela (Espicom Business Intelligence: http://www.researchandmarkets.com/reports/43045

[16] Ministerio del Poder Popular para La Salud ( http://www.mpps.gob.ve/ms/modules.php?name=Content&pa=showpage&pid=513) 

[17] The Medical Device Market: Venezuela (Espicom Business Intelligence: http://www.researchandmarkets.com/reports/43045

[18] Venezuela Pharmaceuticals and Healthcare Report Q3 2008 (Business Monitor International:  http://www.piribo.com/publications/country/venezuela_pharmaceuticals_healthcare_report_q3_2008.html)