Foreign investment is essential to modernize and expand Venezuela’s mining sector. Investors must navigate a complex legal framework that balances national sovereignty over resources with the need to attract capital, technology, and international expertise.
Main Legal Framework
Constitution of the Bolivarian Republic of Venezuela
– Article 302: Mineral resources are the exclusive property of the State.
– Allows concessions and partnerships under government oversight.
Organic Mining Law (2011)
– Defines contract modalities with foreign investors: concessions, mixed companies, or service agreements.
– Establishes state participation minimums and investor rights and obligations.
Foreign Investment Law (1999)
– Guarantees protection against expropriation without just compensation.
– Provides legal stability and dividend repatriation rights.
Foreign Investment Law Regulations
– Details registration requirements, timelines, and dispute resolution mechanisms.
Opportunities and Modalities
- Mining Concessions
– State grants exploration and extraction rights.
– Requires minimum investment and environmental compliance. - Mixed Companies
– Joint ventures between the State (via PDVSA or CVG) and private investors.
– Combines capital, technology, and know-how. - Service Contracts
– Investors provide technical services: exploration, drilling, processing.
– Compensation in kind (a share of extracted minerals).
Legal Risks and Mitigation
- Regulatory Changes:
– Mitigation: Jurisdictional stability clauses and international arbitration (ICSID). - Expropriation:
– Mitigation: Political risk insurance and compensation guarantees. - International Sanctions:
– Mitigation: Due diligence in financing and contracting.
What protections does the Foreign Investment Law provide?
– Protection against nationalization without compensation and free repatriation of dividends.
How do you structure a mining mixed company?
– Sign a framework agreement with CVG or PDVSA detailing capital contributions and ownership percentages.