Venezuelan gov't blocks the way to repatriate dividends

Foreign operators in Venezuela have run out of options to exchange their bolivars held as cash flow benefits for US dollars and transfer their profits to their parent companies.

The Foreign Exchange Administration Commission (Cadivi) has virtually halted the authorization of foreign exchange for this purpose and bond issues are no longer an option.

So far, multinational companies could buy with Venezuelan bolivars a portion of the US dollar-denominated bonds that were offered throughout the year by state-run oil company Petróleos de Venezuela (Pdvsa) or the Ministry of Finance and repatriate some of the dividends. However, under the terms and conditions set in the last issue of bonds, which is underway, the instruments will be exclusively purchased by the Central Bank of Venezuela (BCV) and state-run banks in order to feed the Transaction System for Foreign-Currency Denominated Securities (Sitme).

According to a report from think-tank Ecoanalítica of March 2012, foreign companies have not been able to repatriate USD 9.44 billion in dividends, at the official exchange rate of VEB 4.30 per US dollar.

Machines or buildings

This restriction has helped the government to make foreign companies reinvest part of their profits. In this way, they request US dollars to buy machinery and equipment. Cadivi has not placed any obstacle to approve foreign exchange on these items. 

As recounted by the BCV, in the fourth quarter of 2011, "the investment item showed a significant increase in the area of reinvested profits." 

The government has made no secret of its desire to make foreign companies reinvest in Venezuela a significant share of their held-back profits.

In June 2011, Venezuela s Vice President Elías Jaua commented that the government was planning to allow multinational companies to "turn their profits into shares to enter into joint ventures with the Venezuelan government" and "increase their production capacity with the government support."

vsalmeron@eluniversal.com