I. Foreign Investment Regimen

a. Principles:

i. National Treaty

ii. Universality

iii. Non authorization

iv. Freedom of sending profits and capitals

v. Access to national and international credit

I. Foreign Investment Regimen

b. Types of Foreign Investment

i. Direct Foreign InvestmentForeign currencyCorporeal goods

Trademarks, patents and models Technical assistance

Technical documents and instructions ii. Indirect investment

Acquisition of shares of commercial societies through stock exchange

I. Foreign Investment Regimen

c. Notification of Foreign Investment

i. Before Foreign Investment Authority (SIEX)ii. Before Ministry of Energy and Petroleum

“Qualification of enterprise”

National enterprise: when the foreign participation

is less than 19.9% of the stock capital

Mixed Capital enterprise: when the foreign participation

varies between 19.9% and 49% of the stock capital.

Foreign enterprise: when the foreign participation is

more than 49% of the stock capital.

I. Foreign Investment Regimen

d. Promotion of Investments

i. Trading incentives

- Temporary Admission for Inward Processing (ATPA)

- Drawback

- Replacement of Inventories

- Bonded Warehouses Scheme

ii. Taxation incentives

- Income Tax: maximun rate 34%

- Investments in hydrocarbon production

and related activities: rebate 8%

Foreign Investment Regimen

e. Types of Commercial Societies (More Commons)

i. Corporation (Sociedad Anónima)ii. Branches

iii. Consortium

iv. Joint Venture

Organic Law on Science, Technology and Innovation

The purpose of the law its to estimulate the use of new technologies and innovation in

the country through the funding provided by the companies in the implementation of the

National System of Science Technolgy and Innovation.

Some important aspects of the law:

The law establishes as contributors to the funding of the National System of Science, Technology, and Innovation, any “big company,” which anual gross income is above 1,750,325.58 US$. (100.000 TU. Art. 44). The companies that dedicate to those activities that are included in the Hydrocarbons Organic Law, according to the law must contribute 2% of their anual gross income (art. 35).

Orinoco Project The proyect started with the Law No. 5.200 that changes to Mix

Companies the Agreements of the Orinoco Oil Belt. The existing

associations between Petróleos de Venezuela, S.A. and the private

sector that operates in the Orinoco Oil Belt, and in the denominated

Shared Risk of Exploration and Gains, will have to be fit to the legal

frame that governs the national oil industry, having to transform

itself into mixed companies in the terms established in the

Hydrocarbon Statutory law. Therefore all of the companies that

make commercial activities in the Orinoco Oil Belt, and in all the

productive chain, will be transferred to the new mixed companies.

Projects Proyecto Delta-Caribe: Laws that are oriented towards incorporated Gas in the energetic supply of the country. This proyect prosecutes the Offshore Gas development in the Deltana Platform, on the atlantic coast of the country, in the water areas located to the north of the Sucre State, on the eastern side of the country; and in the inmediations of the Paraguana Peninsula.

Enterprises of Social Production (EPS) Social Responsibility

Units of community production, established under the legal figure its correspond, the

main objective is to generate goods and services that satisfy the essential and basic

needs of the community and their environment, incorporating men and women of the

missions, favoring the values of solidarity, cooperation, complementariety, reciprocity,

equity and sustainability before the profitability and earnings.

In order to make business with PDVSA you have to be:

EPS

Promoter of EPS

I. Statutory Benefits

a. Wages and salaries: Include commissions, extra pay, expenses allowances, statutory and contractual benefits, bonuses, vacation bonuses, holiday pay, overtime or night work, among others. Vacation pay, severance pay and other benefits are calculated on the basis of the worker's monthly wage, which is also the basis for taxes or charges payable to public agencies.

b. Mandatory wage increases. National Executive fix general wage increases Minimum Wage =US$ 285,95 P/M Wages are freely negotiable by both sides, but in no case can they be lower than the minimum wage decreed by the government.

LABOR LEGISLATION

(Cont) I. Statutory Benefits

c. Vacation and vacation bonus: Workers are entitled to 15 days' paid annual vacation, plus

one day for each complete year of service up to a maximum of 15 additional days of paid

vacation; and a vacation bonus of seven days of monthly wage for the first complete year of

service, plus one day for each uninterrupted year of service, up to a maximum of 21 days.

d. Statutory profit sharing (utilidades): Every worker receives within two (2) months of the

end of the company's fiscal year: fifteen (15) days' wages; or a portion of 15% of the employer's

net profits, calculated in proportion to the length of service during the year in comparison with

other employees during the same period. The maximum legal share required for companies is

4 months' wages, with some exceptions .

e. Benefits termination: The Labor Law establish severance payments called ‘seniority’.

This benefit is to be calculated on a monthly basis. Its amount shall be equivalent to five days

of salary per month, and the worker shall be vested with it as of the fourth month of service.

IIII. Conditions of Employment

The Labor Law expressly states that employers and workers may negotiate the terms and conditions of employment, provided the conditions agreed do not fall below the provisions of the Law and the collective agreement..

a. Working hours (Jornada Laboral). The Constitution of Venezuela in its Article 90:”the working day shall not exceed eight hours a day or 44 hours a week. In cases in which the law permits it, the night shift shall not exceed seven hours a day or 35 hours a week. No employer may oblige workers to work overtime...”

b. Overtime . Is paid on a time-and –a-half basis in relation to pay for normal working hours.

III. Termination of Employment

The employment relationship is terminated by resignation, dismissal, mutual agreement, or for reasons outside the control of both parties. Resignation or dismissal is either justified or unjustified.

IV. The Employment Contract

The Labor Law defines the employment contract as that which obliges one person (the worker) to provide services to another (the employer) in subordination to the latter for compensation (wages).

V. Categories of the Employment Contracts

a. Indefinite.

b. Fixed.

i. Term.

ii. Nature of work.

iii. Extensions and continuity of the contract

iv. Specific projects. (Common on the Oil and Gas Industry)

VI. Employment of Foreign Personnel - Expatriate Workers

a. Foreign workers. The Labor Law applies to services rendered in the country, or outside the country

but subject to an agreement made in Venezuela, irrespective of the nationality of the employees. At the termination of the employment relationship in Venezuela, the foreign worker is entitled to receive the benefits established in the Law in such cases.The severance pay of a foreign worker is calculated on the basis of the period during which the employee provided services in Venezuela.

b. Limitations on employment of foreign personnel:

i. Language

ii. Posts reserved for Venezuelans

iii. Maximum number of foreign personnel

iv. Maximum pay for foreign personnel

VII. Social Security

The Social Security Law covers illnesses and accidents, as well as death, maternity, disability, retirement and unemployment benefits. Contributions are made by both employers and workers. Worker contributions are withheld from wages by the employer.

VIII. National Institute of Educational Cooperation (INCE)

This agency provides technical training to workers. Funding is by a compulsory quarterly employer contribution of 2% of payroll in industrial or commercial establishments. Companies with fewer than five employees are exempt. Employees contribute 0.5% of contractual profit sharing, which the employer withholds from the annual profit-sharing payment.

X. Regime of Habitat and Housing

The law sets up a Habitation Mutual Fund formed by the compulsory monthly

contributions of employees and workers, and employers in the public and

private sectors, deposited in accounts opened in financial institutions that

comply with the requirements of the law. The compulsory contribution made by

employees and workers is 1% of their wages, while employer contributions are

2% of wages.

XI. Alimentation for Workers Law

The objective of this law is to regulate the benefit of alimentation to protect and

improve the nutritional shape of the workers, in order to fortify their health to

prevent occupational illness and to prohang to high labor productivity.

The employers from the public and private sector who have 20 or more

workers will give the benefit of a balanced meal during the labor day.

The employer will give the benefit through coupons, tickets or electronic cards

of alimentation and the value could not be less than 0,25 tributary units and not

higher to 0,50 tributary units.

XII. On Prevention , Conditions and Work Environmental Organic Law

To establish the institutions, norms and policies, and the organs and entities

that allow to guarantee to the workers, conditions of security, health and well-

being, in an atmosphere of work suitable and propitious for the integral

exercise of their physical and mental faculties, through the promotion of safe

and healthy work, the prevention of work accidents and occupational

diseases, the integral repair of the suffered damage and the promotion and

incentive to develop programs for recreation, use of the leisure time, rest and

social tourism.

XIII. Law of Regime of Employment

The objective of the law is to guarantee the integral attention to the labor force

due the contingence for the involuntary lost of the employment and

unemployment, through policies, programs and intermediary services,

advisory, information and labor orientation and the support for training for the

insertion and reinsertion into the labor market as well the coordination of

policies and programs of generation of employment with national organs,

regionals and locals of public and private sector.

Borges & LawtonProfessional Consulting

Dr. Carlos E. Borges

carlos.borges@borges-lawton.com

www.borges-lawton.com

Cell Phone: +58 414 630 9994

Office: + 58 261 700 9411