New Law for the President

On November 13 2000 a new Enabling Law was passed. The president may now dictate decrees that will have the same force as those passed by the National Assembly.

Article 1(a-h) of the law contains provisions relating to the financial sector. In particular, it states that the president may dictate measures concerning the following:

• agricultural financing, in order to allow sustainable development of the sector. A mandatory portfolio for financial institutions related to the agricultural sector will be ensured.

• the development of small and medium-sized businesses.

• the creation of a so-called 'second floor bank,' through which credits will be granted to strengthen the activities of small business concerns based on popular initiative. A micro-financing system will also be created, integrating micro-financing operations in urban and rural areas, and permitting their growth in a transparent and efficient manner.

• the regulation and strengthening of the financial industry, to guarantee stability and stimulate competitiveness. The powers of the superintendency of banks and other financial institutions will be restored.

• the running of savings banks and funds. The relevant superintendency will be granted the necessary supervisory powers and will be independent of the Ministry of Finance.

• the regulation of insurance activities, including issues such as accounting supervision, adjustment of minimum capitals, provision of applicable penalties, establishment of liabilities of insurance and reinsurance companies' managers and stockholders, and modification of stipulated guarantees.

A merger regime will be established for insurance companies and a new dimension will be given to the insurance market with the institutional strengthening of the sector.

• the Venezuelan Economic and Social Development Bank, which will act as a financial agent to the government, directing the management of banking assets of the public sector, financing projects oriented towards economic deconcentration, encouraging private investments in deprived areas and supporting regional development projects.

• the future of the External Commercial Bank as a financial development institution, and adviser to the exporters of non-oil domestic goods and services.

The relationship criterion for the determination of related businesses will be widened to include overseas affiliates. Regulations will also be established concerning the operations of commercial banks and inducement measures will be favoured for the strengthening of the banking sector.

By December 2000 the president had not introduced any decrees under the Enabling Law, although he is expected to do so soon.

For further information on this topic please contact Reinaldo Hellmund at Rodriguez & Mendoza by telephone (+58 212 285 4944) or by fax (58 212 285 1379) or by e-mail ([email protected]).