Foreign Market Entry Strategies

Venezuela

 Jagdish Wani (IP03)

1  Rohit Biyani(PH02)
 Bhushan Lunawat(PT07)
 Rohit Deshmukh(IP02)
 Soham Joshi(QA)
 INTRODUCTION
2

Venezuela is a country located at the most northern point of South America, with
coasts on the Caribbean Sea and the Atlantic Ocean.
3
Background Of Venezuela
 Exchange Control (Affect business efficiency)

 182 World rank

 Foreign exchange allocation

 According to ECLAC, FDI decreased by 80% from 2,680 million dollar to 320
million dollar.

 According to the data submitted by the Venezuelan National Bank Venezuelan

economic growth, 8% and 10% in 2005 and 2007, while a sharp drop occurred in
2010, 2014 and 2015, with levels around -4%.
 Country's official name : Venezuela

4 Capital: Caracas

Population 3.16 crores

Area: 912,050 km²

Type of Climate :Zone 4A 65% RH . The climate is tropical, hot and humid. On the heights,
temperatures are more moderate. They vary between 18
and 35 degrees.

Summer Time Period : There is no summer. The dry season is the hottest and
goes from November to April.

Official Language: Spanish.

Other Languages Spoken: English, French, German and Portuguese are also
spoken by some sections of the population.

Business Language(s): Spanish (Mandatory).

Currency The official currency is the Bolívar

5
6 Pharmaceutical market in Venezuela
 Highly dependence of its pharmaceutical sector on imports of raw
material, intermediate goods and finished products.

 The current estimated value of the Venezuelan pharmaceutical market is

11.7 US billion dollars.

 Venezuelan pharmaceutical market has an increasing demand, due to

political, social and economic factors.

 Current considerations indicate that the pharmaceutical sector of

Venezuela has the capacity to produce 70% of needed drugs in order to
meet the domestic market demand.
7
Total Supply of Medicine

Import Domestic

45%

55%
 3%
8 6%
5%
3% 2%
35%
Brazil
Mexico
Venezuela
11%
Argentina
Colombia
Centro America
Chile

12%
Ecuador
23%
Peru

Mexico, Brazil, Venezuela, Argentina and Colombia have the biggest

pharmaceutical markets in Latin America, representing 3,778 million of units
related to 446 million of people.
9 Venezuelan Market Trends

 Focusing on branded and generic products.

 Chronic therapies like cardio-metabolic, gastrointestinal and

respiratory diseases.

 Annual compound growth of 32% in bolivars, while in units trend

remains upward with an annual compound growth of 7%.

 New products show the highest growth rate followed by renewed.

 In a scenario of control prices, market growth around 23-24%

annually.
10 Venezuelan pharmaceutical market conjuncture

 Alarming shortage of medicines, reagents and supplies.

 Deterioration of essential programs and services.

 Poor medical assistance for population in remote areas.

 High dependence on imports

11 National government strategy in 2016

 “pharmaceutical engine”

 To satisfy the needs of the population.

 The aim of that “pharmaceutical engine” is to boost the

pharmaceutical sector in the country, through strategic
partnerships to increase local production of medicines,
implementing a plan of investment for the sector, ranging from the
strengthening of national production to the criteria for additional
purchases.
12 National government strategy in 2016

 Currently, National Government is working on the initial stage,

consisting of the registration of a drug stores net (public and
private), in order to determine productive capacity and which are
those medicines that can be manufactured in the country.

 One of the alliances being established by the Government with Dr.

Reddy’s, an Indian company, which is providing drugs, but having
in mind the real goal to produce from and in the country.
 Opportunities for Indian companies in Pharmacy Industry of Venezuela

13 Possible areas of investment for India

 List of categories of pharmaceutical products of largest demand in Venezuela in order of

importance

Non-steroidal anti rheumatics , Non-narcotic analgesics and antipyretics,

Antiulcer Broad spectrum penicillins , Antihistamines Other Antiemetic
including folic acid, Contraceptive systemic hormones, Contraceptive systemic
hormones ,Corticosteroids alone, Infant food, Platelet aggregation inhibitors,
Calcium antagonists alone, Angiotensin II Antagonist alone, Expectorants
influenza/ anti-inflammatories, Micro relaxants, Expectorants, Vitamin B1 and
Associations, Topical Nasal preparations, Angiotensin II Antagonists combined
Products for Erectile Dysfunction, ACE inhibitors alone etc.
14 Factors Affecting Market Entry in Venezuela
 Political & Economical Environment
 Customs Regulations & Standards
 Trade & Project Finance
 Leading Sectors for Export & Investment
 Foreign Direct Investment (FDI)
 Exporting
 Licensing
 Management Contract
 Joint Venture
 Manufacturing Assembly Operations
 Turnkey Operations
 Acquisition
 Strategic Alliances
 Analysis of Entry Strategies
 Free Trade Zones (FTZs)
 VENEZUELA – MARKET
ENTRY PROTOCOL

DEMOGRAPHY ECONOMY
AUTHORITY STANDARDS IPR
15
 Population Index
16

Total Population: 31,568,179

Natural Increase: 1.3%
Urban Population: 89.0%
Density: 36 Inhabitants/km²
Medium Age: 25.0 Years
Life Expectancy in Years : Men: 70.6 And Women: 78.8 (Source: 
World Bank, last available data., )

Labour Force 14,490,000 (Source: CIA – The World

Factbook, 2015)

Rate of Activity : 64.7% (Source: ILO, Laborstat - Yearly

Statistics, 2017)

Literacy Rate: 93.0%

 HEALTH OF ECONOMY

National Currency: Venezuelan Bolivar (VEF)

17 Type of Economy: Upper-middle-income economy 
Economy highly dependent on fluctuating oil
prices.
GDP 207.79 (Source: IMF – World Economic
(billions USD) : Outlook Database, 2018)
GDP -6.0 (Source: IMF – World Economic Outlook
(Constant Prices, Annual % Change) : Database, 2018)
GDP per Capita 6,528 (Source: IMF – World Economic Outlook
(USD) : Database, 2018)
General Government Gross Debt 19.7 (Source: IMF – World Economic Outlook
(in % of GDP) : Database, 2018)
Unemployment Rate 29.8 (Source: IMF – World Economic Outlook
(% of the Labour Force) : Database, 2018)
Inflation Rate 2,349.3 (Source: IMF – World Economic
(%) : Outlook Database, 2018)
Employment By Sector Agriculture (10.2), Industry (23.3), Services
(in % of Total Employment) : (66.5) (Source: World Bank, Latest available
data.)
Value Added Agriculture (5.6), Industry (41.8), Services
(in % of GDP) : (52.6) (Source: World Bank, Latest available
data.)
 POLITICAL

 Venezeula had 17 different ministers of health in the past 20 years due to the political turnmoil and
underperformance to improve health indicators.
 Venezeula government is recently alleged for corruption and inflation.
 Public healthcare spending has been decreased instead of increasing from 9.1 % to 5.8%.
 Regulation of medical practices has loopholes and still the medical service is charged in USD instead of
Venezeulean dollar.
 Have Good relations with Cuba, China and India for healthcare services in terms of crude oil at lower cost .
 Multiple countries and UN Funds are been allocated for the humanitarian crisis due to deficit and affordability
of essential medical services.
 US has a dominance in terms of economic and trade relations ,and its political diplomacy over venezeula.
 60 % Universal health Coverage ensures medical care to Venezuelans but struggling in terms of socio-
economic crisis influencing the govt efforts.
 Political repression is increasing and many are leaving because of threats or fear of reprisal for expressing their
opinions.
 SOCIAL ISSUES

 90 % People below poverty line .

 Malnutrition due to shortage and affordability of essential food products.
 Highest Crime rate in the world and discriminations between ordinary and royal venezeulans.
 Income of person on an average is $3 and thus worst socio-economic crisis.
 Under the advent of hyperinflation , Political instability there is absence of a community
institution and NGOs.
 Facing the worst humanitarian crisis of all time where an hair cut cost $860 and one time
meal is not affordable and sufficient for an entire family.
 Absence of socialism.
 LEGAL

 Legal system is not able to enforce stability in political system and militia dominance.
 Supreme court at present is a pro-government in nature.
 Quality violations and smuggling is not controlled in rising black market.
 Corruption is highest and rising continuously without any legal control.
 Negative distorts are been enforced and practiced among the people.
 Financial rules and regulations are violated by the professionals as well as govt employees
 Protest against govt is turning out to be more embarrassing for people thus democracy is
endangered.
 VPM AND INVESTMENT DESTINATION
21
Foreign Trade Total Value

Market Value (Billion) VPM 22.2

GROWTH RATE (CAGR) 12 %

Exports of Pharma Products from India  (million 146

USD)

  Venezuela Latin America & Caribbean

Index of Transaction 3.0 4.0
Transparency*

Index of Manager’s 2.0 5.0

Responsibility**

Index of Shareholders’ 4.0 6.0

Power***

Index of Investor 3.2 4.8

Protection****
 TAX AND INTERESTS
22 Value-added tax (VAT) Standard rate 12 %

Company Tax : The value of a tax unit is VEB 850.

From 0 to 2,000 tax units:: 15%
From 2,001 to 3,000 tax units:: 22%
Beyond 3,000 tax units.: 34%

Corporate tax on banking, finance, insurance

and reinsurance activities: 40%

Withholding Taxes : Dividends: 0/34%, Interest: 4.95/15-34%

Social Security Contributions Paid By
Employers :
Other Domestic Resources
(applies to 95% of interests, the remaining
amount is exempt), Royalties: 34% (applies to
90% of royalties paid).
Between 9% and 11% of wages for the
compulsory social security scheme.
Consult Doing Business Website, to obtain a
summary of the taxes and mandatory
contributions.
23 CUSTOMS
 Medicines, food products and cosmetics need to be registered with the ministry of health.
 Customs duties and taxes on imports 12%
 The manifest of importation and declaration of value (bill of landing) must be in
quadruplicate. Docs in spanish.
 Exporters should quote landing cost and free on board (fob) prices for Venezuela.   
 To simplify the import process for a large amount of cargo for one project, there should be a
single declaration for all items, and each item then listed separately with its respective tariff
number.
 Samples are exempted from the custom duty.
 Quality standard certificate of authority. Subsided by certificate of origin .
 TENDERS AND TRADE EASE
24
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Venezuela
Globaltenders, Tenders & Projects from
Venezuela
Inter-American Development Bank, Tenders in
South America
DgMarket, Tenders Worldwide

Setting Up a Company Consult Doing Business Website, to know about

procedures to start a Business in Venezuela.
Trade Register

Useful Resources Venezuelan Council for Investment Promotion

World Bank report, 2018
 TRADE BODIES
25

Venezuela is part of the WTO, the World Bank

CEPALC: Economic Commission for Latin America and
the Caribbean
ALADI: Latin American Integration Association
MCCA (CACM): Central American Common Market.
Promotion and Protection of Investment Agreement of
1993, and is a partner of MERCOSUR
26 IPR

 Venezuela is a member of the Paris Convention (for industrial

property) and of the Berne Convention (authors copyrights). It is
however very difficult to implement control in this country, to protect
patents, trademarks, designs etc.. It is therefore preferable to register
these goods and services within the country.
 STANDARDS ORGANIZATION
National Standards Organisations
27
Integration in the International Standards Network FONDONORMA (Funds for Normalization and
Some importers have met some difficulties: no
foreign standard has been recognized and hence
Venezuela makes it compulsory to obtain a
certificate.
FONDONORMA, Funds for Normalization and
Quality Certification
SENCAMER, National Autonomous Service for
Standardization, Quality, Metrology and Technical
Regulations
COVENIN, Venezuelan Industrial Norms
Committee
Quality Certification).
 ISO (International Organization of
Standardization),
COPANT (Pan-American Standards Commission)
 IQ Net (International Certification Network).
Classification of Standards
28
 Registration requirement
29 Registration LATAM
requirement
Site registration Yes
Plant GMP approval Major countries (Brazil, Mexico, Colombia)
Stability zone Zone II and Zone IV
Stability Brazil: 20 0C 75%± 5% RH
requirements
No. of submission 3 pilot scale
batches
Stability data 6-12 months
Stability guidelines ANVISA and ICH
reference
BE study (for Reference drug in any CRO approved by INHRR is accepted
generic) Reference drug in any CRO approved by ANVISA is accepted
Major holdup CPP, legalization, GMP audits, Local requirements, Time delay
Dossier format Country specific
Registration time 120 days in Venezuela
30 Regulatory Barriers

There are key regulatory barriers affecting the drug lag witnessed in the
emerging countries.
 Western approval
 CPP
 GMP
 Pricing approval
 Document authentication.
 Key challenges
31

 Lack of harmonization in regulatory requirements

 Lack of quality manufacturing capacity and differences in Labelling.
 They require local patients in clinical trials/ B.E study to participate
Patient may/may not participate in Phase I
 Long review timelines for registration hence more uncertainty.
 More detailed documentation, SOPs, validation requests.
32
Strategy for Success

 Proper Time management as the registration and company success

depends upon the time taken by product to reach the market first
 Know and be compliant with national requirements
 Health authority relationships critical, local talent important
 Training programmes and incentives for agency staff
 Frequent and early communication with Health Authorities
 Be the first with a product for an unmet medical indication.
Venezuela

 JOINT VENTURING
 CONTRACT MANUFACTURING
 MERGERS & ACQUASITIONS
 TURNKEY CONTRACTS
 JOINT VENTURE:-
The following types of JVs are allowed in Venezuela

1. Consortium:- This is a business collaboration agreement by which

several legal persons are associated for the purpose of carrying out a
common economic activity.
2. Contractual:- Contractual JVs are created by a collaboration
agreement between entities.
3. Corporate:- This is a collaboration agreement by which a new legal
person is incorporated.
 MERGERS AND ACQUISITIONS

 (M&A) are transactions in which the ownership of companies, other business

organizations, or their operating units are transferred or consolidated with other
entities.
 TURNKEY CONTRACTS :-

 Turnkey contracts are common in international business in the supply, erection &
commissioning of plants, as in the case oil refineries, steel mills, cement & fertilizer
plants etc.. Construction projects & franchising agreements..
 CONTRACT MANUFACTURING :-

 A company doing international marketing contracts with firms in foreign

countries to manufacture or assemble the products while retaining the responsibility of
marketing the product.
 Import & Documents
38

An import is a good brought into a jurisdiction, especially across a national border, from an external
source
The party bringing in the good is called an importer
The various documents related to Import Clearance Activity are:
 Packing List
 Bill of Lading/Airway Bill
 Insurance Certificate
 Import License
 Commercial Invoice
 COA
 COO/GSP
 LC
 Sales Contract
 Export & Documents
39

The term export means sending of goods or services produced in one country to another country
The seller of such goods and services is referred to as an exporter; the foreign buyer is referred to as an importer

The Export Documentation :-

 Custom Invoice
 Commercial Invoice
 COA
 Bill of Lading/Airway Bill
 Insurance Certificate
 Packing List
 Export License
 LC Letter of credit
 Application for Inspection
 Export Materials to Venezuela
40

Export

API Formulatio
n
Intermediate

In Export Activity material Exported are of 3 types :- Planning

 API
 Intermediate
 Formulation Branded Generic

Formulation is further divided into 2 parts :-

 Branded
 Generic

The Promotional Goods or Product given as Promoting Items or Gift Samples are also part of Export Activity & are Exported with Formulation , API & Intermediate by Marketing
Team for capturing New Market & New Customers

The Export Procedure Is same for all the 3 types , only Planning Team is involved in Formulation Export
 41
Exporting & Forms of Exporting

 Advantages
- simple
- low risk Indirect Direct
 Disadvantages
- low profit
exporting exporting
- trade barriers
- difficult when home currency is strong
Intra-corporate
transfer
Entry Parameters for Venezuela
42

 Trade barriers
 Labeling & Marking Requirements for Imported Goods
 Temporary Entry
 Prohibited/Restricted Import
 Standards for Trade
 Trade Agreement
 Method of Payment
 Banking System
 Foreign Currency Management
Import & Export Data For Venezuela
43

VENEZUELA : FOREIGN TRADE

Imports of Goods 
(million USD) :
13,550 (Source: WTO – World Trade Organisation, 2016)
Exports of Goods 
(million USD) :
24,630 (Source: WTO – World Trade Organisation, 2016)
Imports of Services 
(million USD) :
18,529 (Source: WTO – World Trade Organisation, 2016)
Exports of Services 
(million USD) :
1,456 (Source: WTO – World Trade Organisation, 2015)
Trade Balance (million USD) :
11,061 (Source: World Bank, 2016)
Foreign Trade 
(in % of GDP) :
48.1 (Source: World Bank, 2014)
Import & Export Data For Venezuela
44

 Main Partner Countries

Main Customers Main Suppliers
2013 2013
(% of Exports) (% of Imports)
United States 0.6% United States 23.3%
China 0.3% China 17.0%
Colombia 0.3% Brazil 10.0%
Netherlands 0.2% Colombia 5.0%
Brazil 0.2% Mexico 5.0%
Belgium 0.1% Argentina 4.3%
Trinidad and Tobago 0.1% Germany 2.9%
Chile 0.1% Italy 2.5%
South Korea 0.1% Spain 2.3%
Mexico 0.0% Ecuador 2.2%
45 Import & Export Data For Venezuela

45.0 bn USD of products imported in 2013

 Main Products
88.0 bn USD of products exported in 2013 Medicaments consisting of mixed or unmixed... 5.7%

Petroleum oils and oils obtain 85.1% Tubes, pipes and hollow profiles, seamless, of... 2.0%
ed from bituminous...
Petroleum oils and oils obtain 12.5% Meat of bovine animals, frozen 1.9%
ed from bituminous...
Acyclic alcohols and their hal 0.7% Maize or corn 1.8%
ogenated,...
Iron ores and concentrates, in 0.3% Structures and parts of structures e.g., bridges... 1.7%
cl. roasted iron...
Ferrous products obtained by 0.2%
direct reduction of... Oil-cake and other solid residues, whether or not... 1.7%
Mineral or chemical nitrogeno 0.2%
us fertilizers (excl.... Milk and cream, concentrated or containing added 1.6%
...
Transmission apparatus for radio-telephony,... 1.6%

Pumps for liquids, whether or not fitted with a... 1.5%

Moving, grading, levelling, scraping, excavating,.. 1.4%

.
Import & Export Data For Venezuela
46

 Main Services

10.9 bn USD of services imported in 2016

1.7 bn USD of services exported in 2016 Travel 33.16%
Travel 56.51% Transportation 24.46%
Transportation 35.13% Cultural and recreational s 19.74%
Other business services 5.32% ervices
Other business services 14.12%
Government services 2.57%
Government services 3.70%
Cultural and recreational s 0.36%
ervices Insurance services 2.46%
Insurance services 0.12%
Royalties and license fees 2.36%
47
Sales Contract

 The party involved in SCM Activities sign a contract as per their flexibility &
understanding
 The Contract is called as Sales Contract
 The various Sales Contract are :-
 INCOTERMS [International commercial terms]
 Payment Terms
48
INCOTERMS
 Free Trade Zone
49
 A free-trade zone (FTZ) is a specific class of special economic zone. It is a geographic area where goods may be landed,
stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not
subject to customs duty. Free trade zones are generally organized around major seaports, international airports, and
national frontiers—areas with many geographic advantages for trade.
 The World Bank defines free trade zones as "in, duty-free areas, offering warehousing, storage, and distribution facilities
for trade, transshipment, and re-export operations "Free-trade zones can also be defined as labor-intensive manufacturing
 centers that involve the import of raw materials or components and the export of factory products, but this is a dated
definition as more and more free zones focus on service industries such as software, back-office operations, research, and
financial services
 Free-trade zones are referred to as "foreign-trade zones" in the United States (Foreign Trade Zones Act of 1934). In the
United States, FTZs provide Customs-related advantages as well as exemptions from state and local inventory taxes. In
other countries, they have been called "duty free export processing zones," "export free zones," "export processing zones,"
"free export zones," "free zones," "industrial free zones," "investment promotion zones," "maquiladoras," and "special
economic zones. "Some were previously called "free ports". Free zones range from specific-purpose manufacturing
facilities to areas where legal systems and economic regulation vary from the normal provisions of the country concerned.
Free zones may reduce taxes, customs duties, and regulatory requirements for registration of business. Zones around the
world often provide special exemptions from normal immigration procedures and foreign investment restrictions as well
as other features. Free zones are intended to foster economic activity and employment that could occur elsewhere.
 Learnings

The learning for us from the topic are :-

 The tariff & taxation system of Venezuela
 The custom requirements for exporting to Venezuela
 The govt policies regulation & standard requirement for the trading of different types of
products.
 We get to know about major Exporter & Importer countries for Venezuela Market
 Venezuela Imports Products worth 45 billion $
 Venezuela Exporter Products worth 88 billion $
 The dossier language for the Venezuela is Spanish
 The document for required for import & export to & from Venezuela
 The method of payment & Sales contract
 Recommendation

The recommendation from the topics are :-

 The Indian Companies should study & focus on entering the Venezuela market
 The Indian pharma companies should improve & increase export to Venezuela
 The govt should improve the regulation & promote companies for increasing the
export to the global market (Venezuela)
 The govt should improve relationship with the foreign countries
 The terms & relationships with different nations helps to increase the in flow of the
Foreign currency within the country
 The policies of handling of foreign currency
 Focus on increase the FDI in the country
 The Company should focus on Joint venture / Contract Manufacturing & Establishing
the plant in the Venezuela Market
52
References

 https://import-export.societegenerale.fr/en/country/venezuela/presentation-trade#classificat
ion_by_country

 https://www.export.gov/article?id=Venezuela-Customs-Regulations
 https://en.wikipedia.org/wiki/Free-trade_zone
53

Thank You