VENEZUELA

According to the Constitution of 1999, the Bolivarian Republic of Venezuela is a decentralised federal state with three spheres of public power: national, state and municipal. According to the constitutional text, the national power structure is divided into the executive, legislative, judicial, civic and electoral powers. The president of the Republic is head of state and head of the executive and is elected by direct universal suffrage in a secret ballot for a six-year term. The National Assembly (Asamblea Nacional) represents the legislative power; its authority is exercised by deputies elected through proportional representation in each federal entity or state, according to a population base of 1.1% of the total population of the country; three deputies per state; and three deputies for the indigenous peoples. When the Senate was abolished in the 1999 Constitution, the unicameral legislative power structure took over from the traditional bicameral system that gave states more participation in the legislative decisions of the country.

The Constitution establishes the autonomy and full legal status of the subnational governments; at the same time, it states that all matters concerning the legislative functions of states and municipalities are regulated by national laws. At state level, the power is distributed between the executive, led by the governor, and the legislative, in the hands of the legislative council. This council is made up of 7-15 members, a number that is determined through the system of proportional representation according to the population of the state and its municipalities. The National Assembly can regulate by law the organisation and functioning of the legislative councils, as well as nominating the state comptrollers. The Constitution stipulates that the municipalities constitute the basic political unit of the country. The functions of government rest with the mayor and those of legislation with the representatives of the municipal council, whose number is proportional to the population of each municipality.

The process of political-administrative decentralisation began in 1989, but the body of legislation governing decentralisation was fragmented between Amendment N 2 of the Constitution of 1961, which established the election of members from the municipal councils, the Law on the Election and Removal of State Governors of 1989, and the Organic Law on Decentralisation, Delimitation and Transfer of Public Powers (LOD or Ley Orgánica de Descentralización, Delimitación y transferencia de Competencias del Poder Público) of 1989. From 1999, the legal framework of decentralisation that had been inherited underwent a series of reforms and changes that reduced its scope, principally with the Organic Law of the Federal Council of Government and the laws of Popular Power (LPP) of 2010: Organic Law of Public and Popular Planning, Law of State Councils for Planning and Coordination of Public Policy, Organic Law of Communal Councils, Organic Law of Popular Power, Organic Law of Communes, Organic Law of Social Accountability, Organic Law of Communal Economic Systems and Organic Law of the Communal Management of Powers, Services and other Responsibilities. The establishment of popular power is defined in Article 2 of the Organic Law of 2010 as “the full exercise of sovereignty by the people in the political, economic, social, cultural, environmental and international spheres and in every area of progress and development in society, through the various and disparate forms of organisation that make up the communal state”. The LPP laws regulate the redistribution of the allocations and subsidies to states and municipalities, of which a part was redirected to the communal organisations from 2008 onwards, according to statistics from the National Budget Office (ONAPRE or Oficina Nacional de Presupuesto). From then on, the allocation of resources from the interterritorial compensation fund to subnational governments has required prior approval of local and state plans, in line with the LPP laws. The communal organisations are represented by the communal councils and the communes. In 2008, these already numbered almost 26 000, according to an article from the Venezuelan Journal of Economics and Social Science. According to “Venezuela en Cifras 2021” [Venezuela in Figures 2021] issued by the Ministry of Popular Power for Planning, the first 12 communes were formed in 2012 and by 2019 that number had risen to 3 230. The same source indicated that more than 40 000 communal councils have since been formed (without specifying the year).

The Constitution, amended in February 2009, permits the indefinite re-election to elected positions. The current political authorities in the country were elected on different dates; those of president of the Republic on 20 May 2018, the parliamentary deputies on 6 December 2020, and the regional offices (governors, members of the legislative state councils, mayors and municipal councillors) on 20 November 2021. These elections were called following a decision by the National Constituent Assembly (ANC-2017 or Asamblea Nacional Constituyente), convened by the president of the Republic in May. Its members were elected in July and installed in August 2017. This Assembly ceased functioning on 18 December 2020.

The city of Caracas, the capital of the Republic, is the seat of the national government. It is located in the capital district (distrito capital), and its government and parliament fall under the head of the government of the capital district and the National Assembly respectively. The current head of government of Caracas, whose appointment and removal are in the hands of the president of the Republic, was appointed on 29 January 2021.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2013)
Municipalities (municipios)		States (estados)
Average municipal size: 84 883 inhabitants (World Bank, 2020)
335		25	360

OVERALL DESCRIPTION: The report of the National Institute of Statistics of 2013 entitled “Political-Territorial Division of the Bolivarian Republic of Venezuela for statistical purposes” states that the Bolivarian Republic of Venezuela is made up of 25 entities at state level. In addition to the 23 states, there is the capital district and the federal dependencies, comprising 235 islands and 71 islets. The state of Vargas changed its name to La Guaira in 2019.

REGIONAL LEVEL: In accordance with the Constitution of the Bolivarian Republic of Venezuela, each state must dictate its own constitution and organise its territory in municipalities through a state law of political-territorial division.

The demographic structure of the states is fairly unequal in Venezuela. The capital district and the states of Aragua, Carabobo and Miranda account for 30% of the total population of the country on just 2.2% of the total national land area. The metropolitan areas of these states hold 20% of the national population in just 0.4% of the country’s territory. In general, this demographic structure is associated with a historic process of localisation of the main economic activities of the country, initially based on a port-based economy and later on an industrialisation model underpinned by the centralisation of oil revenues, which favoured the migration from rural to urban areas. According to the World Bank, the percentage of urban population in Venezuela grew continually from 62% in 1960 to 88% in 2020.

According to a survey on living conditions by ENCOVI 2021 or Encuesta de Condiciones de Vida, the impact of the emigration of Venezuelans in the last five years, estimated at 5 million people, has caused an average population loss of 13% per state, of which 90% form part of the country’s work force.

MUNICIPAL LEVEL: Venezuela has 335 municipalities. The municipal authorities can create new municipalities by means of an approval referendum involving the inhabitants of the municipality concerned. The municipalities can create parishes; entities with no political autonomy in which authority is exercised by a prefect nominated by the mayor.

Venezuela had an average of almost 85 000 inhabitants per municipality in 2020, a figure that is among the highest in all Latin America. The national average of parishes per municipality is 3.5, taking into consideration the 1 128 parishes mentioned in the 2011 census, excluding the capital district and the state of La Guaira which have 22 and 11 parishes respectively.

From a classification of five clusters of living conditions created by ENCOVI 2021, 50% of the municipalities are classed as being in cluster 3, referenced as “poor conditions”; followed in order of importance by 33% of the municipalities in cluster 2 “regular conditions”; and 13% in cluster 4 “very poor conditions”. Only 15 of the 335 municipalities are found in cluster 1 “good living conditions”, and of the 22 parishes of the municipality Libertador of the Distrito Capital, only 7 are classified at the best socio-economic level in cluster 1. Cluster 5 “extremely poor living conditions” includes municipalities in the Amazon and Amacuro Delta regions, which are states with the worst socio-economic indicators.

HORIZONTAL COOPERATION: The Organic Law of Municipal Public Power (LOPPM or Ley Orgánica del Poder Público Municipal) states that the municipalities may group together to form associations or make agreements among themselves or with other territorial public entities to create inter-governmental forms of association with public interest purposes related to matter that fall within their competence. It also allows, by means of an organic law, the creation of metropolitan districts where there are economic, social and physical relations that present the characteristics of a metropolitan area. When the municipalities all fall within the same state, the state comptrollers can create metropolitan areas, while if they belong to different states, the jurisdiction for creating the metropolitan area falls to the National Assembly.

There is no up-to-date information about associations created in the past to provide services related to urban sanitation and urban public transport. The Metropolitan District of Caracas (created by a decision of the National Constituent Assembly in 1999) and the District of Alto Apure (created by transitory dispositions of the Constitution) were abolished on 20 December 2017 in a decision by the ANC-2017.

The Constitution of 1999 led to a degree of re-centralisation of powers compared to the situation in 1989 when the process was formally established. This is due to the fact that the exercise of said powers is subject to national laws such as the Organic Law of Legislative State Councils of 2001, which authorises the states to dictate their own constitution. The same applies to the LOPPM of 2010, which limits municipal autonomy. Almost all the powers of the subnational governments, including those that are defined as exclusive, are subject to national regulations. The reforms to the Organic Law on Decentralisation, Delimitation and Transfer of Public Powers (LOD) of 2009 also reverted to central government some competences that had been exclusive to the states since 1989. For example, powers related to airports were made concurrent according to a decision by the Constitutional Chamber of the State Justice Tribunal (Sentence 565 of 15 April 2008).

The establishment of popular power in 2010 has led to a decline in resources for the subnational governments in favour of the communal organisations and has thus restricted the scope of their powers. In states and municipalities in which the official governing party has lost the elections, the reduction of powers has been further cemented through the creation of bodies affiliated with the national executive with responsibilities that are similar to and overlap with those of the states and municipalities. For example, Corpomiranda and Corpoamazonas were created to implement parallel policies in the states of Miranda and Amazonas, where some opposition parties made gains in the regional polls of 16 December 2012. Administrative responsibilities for the airport, the state police, one radio station and one hotel were withdrawn from the state of Amazonas, and responsibility for waste collection and police was withdrawn from the mayor of the municipality of Cárdenas in the state of Táchira. The state of Zulia, won by the opposition party in the regional elections of 2021, has been stripped of its authority to administer the main airports and road tolls within the state.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Creation, government and organisation of state public services	Cemeteries and funeral services
2. Public order and safety	Civil defence; Organisation of the urban or rural police and allocation of the branches of this service to the municipal authorities	Monitoring and control of municipal assets and activities; Justice of the peace, neighbourhood prevention and protection; National police services; Civil protection
3. Economic affairs / transports	Promotion of industry, crafts and commerce; Construction, maintenance, administration and use of state roads; Management of national roads and highways, ports and commercial airports (shared); Tourism; Public engineering works	Urban road networks, traffic and transport planning for vehicles and people on municipal roads; Urban public transport services; Services of potable water, electricity and domestic gas; Local tourism
4. Environment protection	Public environmental protection works	Environmental protection and cooperation with environmental sanitation; Sewerage, drainage and wastewater disposal; Urban and domestic waste (cleaning, collection and treatment of waste); Parks and gardens, plazas, spas and other recreational sites; Public displays
5. Housing and community amenities	Urban and rural public housing	Territorial and urban planning; Social housing; Civil architecture; Nomenclature
6. Health	Public health and nutrition (shared)	Health; Primary health care
7. Culture & Recreation	Cultural events; Protection and conservation of works, objects and monuments of historical or artistic value; Sports; Leisure and recreation	Public spectacles and commercial advertising; Cultural and sporting activities and installations; Historic heritage
8. Education	Education at the various levels and forms of national education	Pre-school education
9. Social Welfare	Protection for families, children and indigenous communities; Promotion of employment services and human resources training; Consumer protection; Promotion of cooperative systems	Protection services for infants and juniors, adolescents and the elderly; Family integration services for people with disabilities

Scope of fiscal data: States and Municipalities

National Budgetary Office (ONAPRE)

Availability of fiscal data: Low

Quality/reliability of fiscal data: Medium

GENERAL INTRODUCTION: The legal framework of subnational government finances is set out in the 2015 Organic Law of Financial Public Sector Administration (LOAF or Ley Orgánica de la Administración Financiera del Sector Público) which, in essence, orders them to adjust their budgetary processes to suit the technical requirements of the National Budget Office (ONAPRE or Oficina Nacional de Presupuesto). The Constitution establishes the creation of a basic organic law governing the State Public Treasury; however, to date, there has only been one draft bill, which went through its first reading in the National Assembly on 31 May 2016 and is still waiting to be passed or rejected.

The subnational governments are obliged to report their financial results in those instances provided for in the LOAF. However, official reports on the finances of the Venezuelan public sector do not present separate accounts of the state and municipal finances, as is the case for other entities of decentralised public administration. The subnational governments have also not made their financial reports available to their legislative and comptrolling authorities.

The statistics of the revenue and expenditure of the subnational governments used in this report come from the statistics section of the document «Exposición de Motivos del Proyecto de Presupuesto del Ejercicio Fiscal» [or Statement of Motives for the Budget Planning Project], prepared by ONAPRE on an annual basis. The expenditure of states and municipalities is presented neither under the economic nor the functional classification in this publication; as a result, this data has been reordered to obtain an approximate value for these classifications. To compare the 2020 indicators with those of other periods, it was necessary to use the series that runs from 1998 to 2016, during which time the institutions of decentralisation initiated in 1989 were already consolidated. It is important to note that the financial information of subnational governments presented here is the result of estimations and is therefore of a preliminary nature and subject to future correction.

Subnational, state and local government expenditure by economic classification
2020, GG data consolidated	Dollars PPP / inhabitant			% GDP			% general government			% subnational government
-	GSN	State	Local	GSN	State	Local	GSN	State	Local	GSN	State	Local
Total expenditure	98	62	35	1.8%	1.1%	0.6%	9.4%	6.0%	3.4%	100.0%	100.0%	100.0%
Inc. current expenditure	75	51	24	1.4%	0.9%	0.4%	11.7%	7.9%	3.8%	77.0%	81.6%	68.8%
Compensation of employees	21	17	5	0.4%	0.3%	0.1%	10.7%	8.4%	2.4%	21.9%	26.7%	13.3%
Intermediate consumption	25	14	11	0.5%	0.2%	0.2%	22.3%	12.2%	10.2%	25.6%	21.9%	32.3%
Social expenditure	-	-	-	-	-	-	-	-	-	-	-	-
Subsidies and current transfers	26	19	7	0.5%	0.4%	0.1%	20.3%	14.9%	5.5%	26.9%	30.9%	20.0%
Financial charges	1	1	0.3	0.01%	0.01%	0.0%	1.5%	1.0%	0.6%	0.7%	0.7%	0.7%
Others	2	1	1	0.03%	0.01%	0.02%	69.7%	33.2%	36.6%	1.8%	1.3%	2.6%
Incl. capital expenditure	23	11	11	0.4%	0.2%	0.2%	5.7%	2.9%	2.8%	23.1%	18.4%	31.2%
Capital transfers	7	5	2	0.1%	0.1%	0.03%	1.8%	1.3%	0.5%	6.7%	7.7%	5.0%
Direct investment (or GFCF)	16	7	9	0.3%	0.1%	0.2%	71.8%	30.0%	41.8%	16.3%	10.7%	26.2%

EXPENDITURE: The scope of the expenditure of the subnational governments has been limited in Venezuela; after an annual average of 7.1% of GDP registered between 1998 and 2014, it dipped to half that in 2015-16 and that trend continued, reaching barely 1.8% in 2020. This reduction in expenditure follows the fall in oil revenues due to the collapse of oil prices in 2014 and the impact of EU government sanctions on exports of Venezuelan oil; the creation of communal bodies, whose involvement in the decentralisation funds reduces the revenue of states and municipalities; and, finally, the impact of the COVID-19 pandemic on the Venezuelan economy.

The percentage of total expenditure of the subnational governments compared to that of the general government was just 9.4% in 2020, less than half what it reached in 2014, for the afore-mentioned reasons. In the case of operating costs, the proportion amounted to 11.7%, practically double the capital expenditure (5.7%), because the transfers from central government directed to finance the latter reduced more steeply than those destined for the operating costs of subnational governments, especially from 2015 onwards. In the expenditure structure of subnational governments by type of government, the percentage of operating costs dominated in the states (81.6% of total expenditure), while at local government level the operating costs made up 68.8% of their expenditure, with the remaining 31.2% destined for capital expenditure. Subsidies and current transfers (26.9%), intermediate consumption (25.6%) and personnel costs (21.9%), in decreasing order, made up the bulk of the subnational operating expenditure in almost equal parts.

DIRECT INVESTMENT: The direct investment of subnational governments remained close to 2% of GDP per year until 2014, but from that point onwards it showed a progressive decline before reaching a low of 0.4% in 2020. This trend reflects the tightening of financial restrictions in states and municipalities that tend to be addressed by reducing public investment, as happens in many Latin American countries. It also signals a reversal of some of the advances in decentralisation in the country.

The decentralisation process involved the setting up of the intergovernmental fund for decentralisation (FIDES or fondo intergubernamental para la descentralización) in 1993 and the Special Economic Allocations in 1996, both designed to finance exclusively the direct investment expenditure of the subnational governments. This explains why the investment expenditure of the subnational governments increased from an annual average of 0.8% of GDP before 1993 to almost 2% of GDP between 1997 and 2014. The changes in the rules for distributing these funds from 2014 had a negative effect on direct investment in states and municipalities and reduced them to an average level that was even lower than that reported before 1993.

The higher share of municipalities in subnational direct investment relative to state investment and the allocation of 31.2% of municipal expenditures to capital expenditure is the result of capital transfers from states to their local governments.

Subnational, state and local government expenditure by functional classification
2020, GG data consolidated	Dollars PPP / inhabitant			% GDP			% general government			% subnational government
-	GSN	State	Local	GSN	State	Local	GSN	State	Local	GSN	State	Local
Total expenditure by economic function	98	62	35	1.8%	1.1%	0.6%	9.4%	6.0%	3.4%	100.0%	100.0%	100.0%
1. General public services	33	20	13	0.6%	0.4%	0.2%	15.4%	9.4%	6.2%	33.5%	31.6%	36.8%
2. Defence	6	4	2	0.1%	0.1%	0.04%	5.4%	3.4%	2.0%	5.8%	5.8%	6.0%
3. Security and public order	-	-	-	-	-	-	-	-	-	-	-	-
4. Economic affairs/transports	8	6	2	0.1%	0.1%	0.04%	2.4%	1.8%	0.6%	8.3%	9.6%	5.9%
5. Environmental protection	-	-	-	-	-	-	-	-	-	-	-	-
6. Housing and community amenities	24	13	11	0.4%	0.2%	0.2%	46.9%	25.3%	21.6%	24.3%	20.5%	30.8%
7. Health	9	8	1	0.2%	0.1%	0.02%	10.8%	9.5%	1.3%	8.8%	12.2%	2.9%
8. Recreation, culture and religion	2	1	1	0.03%	0.02%	0.01%	20.6%	13.8%	6.8%	2.0%	2.1%	1.8%
9. Education	6	6	1	0.1%	0.1%	0.01%	7.4%	6.5%	0.8%	6.4%	8.8%	2.0%
10. Social protection	11	6	5	0.2%	0.1%	0.1%	6.6%	3.6%	3.0%	11.0%	9.4%	13.9%

The share of subnational governments in general government expenditure, according to the functional spending categories, reflects to some extent the impact of the shocks to fiscal revenue mentioned above. In almost all categories, the subnational expenditure was significantly less in 2020 compared to that registered between 1998 and 2016, with health, housing and community services, defence, economic issues and social protection suffering the most contraction. In this context, in 2020, general public services accounted for 33.5% of the total expenditure followed by housing and community services with 24.3%, social protection with 11.0%, health with 8.8%, economic issues and transport with 8.3%, education with 6.4%. Defence and recreational and cultural activities represent 5.8% and 2.0% respectively of the total expenditure.

Looking at the involvement of states and municipalities in the total expenditure of subnational governments, it is striking that the contribution of the states to the subnational expenditure in housing and community services increased from its annual average of 32.6% in the period 1998-2016 to 54% in 2020, while the reverse was true in the municipal areas. The contribution percentage of the municipalities to the subnational expenditure in this same category dropped from an annual average of 61.5% between 1998 and 2016 to 46% in 2020. This result could be attributed to the responsibilities that the states have assumed for the Gran Misión Vivienda [Grand Housing Mission] Venezuela programme, which was heavily promoted between 2010 and 2014.

Subnational, state and local government revenue by category
2020, GG data consolidated	Dollars PPP / inhabitant			% GDP			% general government			% subnational government
-	GSN	State	Local	GSN	State	Local	GSN	State	Local	GSN	State	Local
Total revenue	98	62	35	1.8%	1.1%	0.6%	10.4%	6.6%	3.8%	100.0%	100.0%	100.0%
Tax revenue	15	0.02	15	0.3%	0.0%	0.3%	1.9%	0.0%	1.9%	15.2%	0.03%	41.9%
Grants and subsidies	81	60	21	1.5%	1.1%	0.4%	-	-	-	82.5%	96.4%	58.2%
Tariffs and fees	1	1	-	0.02%	0.02%	-	-	-	-	1.4%	2.2%	-
Income from assets	1	1	-	0.02%	0.02%	-	-	-	-	0.9%	1.4%	-
Other revenues	-	-	-	-	-	-	-	-	-	-	-	-

OVERALL DESCRIPTION: The legal framework for subnational government revenues is set out in different legal sources: Articles 167 and 179 of the Constitution, the Organic Law on Decentralisation, Delimitation and Transfer of Public Power (LOD) of 2009, the Organic Law of Municipal Public Power (LOPPM) of 2010, the Organic Law of the Federal Government Council (LOCFG or Ley Orgánica del Consejo Federal de Gobierno) of 2010, the Law of Special Economic Allocations Derived from Mining and Hydrocarbons (LAEE or Ley de Asignaciones Económicas Especiales Derivadas de Minas e Hidrocarburos) of 2010 and the LOAF of 2015. The specific revenue powers of central government and municipalities are all laid down within this framework. State revenues are allocated by national law and defined in a generic manner as taxes, fees and special contributions.

As well as fiscal revenues, the sources of revenue for subnational governments include income from assets and property management, fines and penalties within the scope of their powers and transfers from central government for the so-called “situado constitutional” (the share allotted to each state as provided for in the Constitution), transfers for shared powers, the interterritorial compensation fund (FCI or fondo de compensación interterritorial) and other special transfers. The municipalities are also assigned the special levy for capital gains on properties due to change of use or change of intensity of use.

The main component of subnational government revenue in 2020 was made up of grants and subsidies in the form of transfers from central government, of which 73% went to the states and the remaining 27% to the municipalities. The share of this category in the total revenue of subnational governments (82.5%) reflects the greater weighting given to it in the total state revenue (96.4%), given that the revenue of the municipalities remains below 60%.

Tax revenues made up the next largest category of subnational government revenue in 2020, representing 15.2% of the total. In this case, it is the municipalities that receive this source of income: tax income represents 41.9% of the revenue of the municipalities while the states collect virtually no taxes.

Finally, tariffs and fees account for 1.4% of total subnational government income and revenues from assets for barely 0.9%; both of which are only collected by the states.

TAX REVENUE: The tax revenues of the states in Venezuela are made up of taxes on the exploitation of non-metallic minerals. Municipal taxes include levies on the economic activities of industry, commerce, services or similar; urban property; vehicles; public spectacles; gaming and legal gambling; commercial advertising; rural territory and their share in the contribution for improvements and other national or state tax streams, all indirect. The legal framework for these sources of tax income is not standard at either state or municipal level.

The statistics used in this report, from ONAPRE, include all the state and municipal income that falls under the category of own source revenue, which does not make it possible to properly establish the tax revenues of these levels of government. To distinguish the importance of the different items, the structure of tax income for the period 1997-2003 published by the Central Bank of Venezuela was used, which distinguishes between the taxes from mining for the states (which constitute the sole tax item at this level of government) and the items described in the previous paragraph for the municipalities.

Tax revenues of subnational governments of Venezuela have traditionally represented a small share of the total tax revenue of general government (1.9%), reaching barely 0.3% of GDP in 2020. Almost all the subnational tax revenues (which represent 15.2% of their total income) comes from the municipalities, since the contribution of the state mining taxes is insignificant.

In the BCV’s breakdown of municipal taxes for the 1998-2003 period, industrial and commercial taxation dominates with 87.8% of the tax collected, followed by taxes on urban properties, which bring in an average of 8.3%; and the rest of the taxes – vehicle licenses, commercial advertising, public spectacles, legal gambling and other indirect taxes –, which all together contribute the remaining 3.9%. These percentages may have altered in recent years due to changes in the Venezuelan economy; especially with reference to the dollarisation of the transactions that has intensified since 2017 and the implications this has had on the setting of fees and tariffs for public services, by both the central government and the municipalities.

GRANTS AND SUBSIDIES: At present, the transfers from central government to the subnational governments, which make up 82.5% of the subnational income, mainly include the constitutionally allotted share (situado constitucional) and the money received from the interterritorial compensation fund (FCI). Other special transfers are then made to finance concurrent powers shared between the central government and the states, such as health.

The constitutionally allotted share comprises the ordinary income of the central government at a level of 15 to 20%, estimated annually by the National Treasury. In this way, the states and municipalities can access national taxation and oil tax revenues.

Of the estimated amount of the constitutionally allotted share, 80% goes to the states, and this sum is distributed in two portions: one of 30% in equal parts and the remaining 70% in proportion to the population of each entity. The states must direct no less than 50% of this share to capital investment. The municipalities receive no less than 20% of the constitutionally allotted share in addition to other transfers made independently by their respective state. The municipal share is distributed in three portions: 45% in equal parts, 5% in line with the territorial extension of each municipality and 50% in proportion to its population.

The FCI is intended to finance public investment in the state territories. The Constitution states that part of the resources of the states should come from the FCI, and the LOPPM does the same for the municipalities. The resources of the FCI come primarily from contributions from the national government, resources provided by the political-territorial entities, those from its management and others assigned by other laws.

The FCI arose from the creation of the Federal Council of Government in 2010 which coordinates, administers and decides the areas of investment of the FCI and its institutional distribution. The LAEE was reformed in 2010 so that its resources formed part of the FCI; however, the assignation of resources of the FCI in the annual budget laws only shows the contribution of 15% of the VAT estimated for the respective fiscal year.

In 2020, 3/4 of the subsidies directed to subnational governments went to the states and 1/4 to the municipalities. The amount assigned to the states was lower than the annual average of 86.5% during the period 1998-2014, while the opposite was true for the municipalities, which averaged 20.8%. The changes in the legal framework of the subsidies had an impact on the redistribution of the subsidies in favour of the municipalities, despite the reduction that was trialled to favour the organisations of the Popular Power.

OTHER REVENUE: The other revenue of the subnational governments is made up of fees and resources from the sale of goods and services, income from assets, fines and penalties, etc. In terms of state taxes, the main ones are the services of ports and airports, road tolls and stamp tax; while taxes from municipal services include industrial and commercial licenses, vehicle licenses, commercial advertising, public spectacles and legal gambling. Road tolls were suspended in 2008 following a government decision but in 2022 the executive announced they would be re-established. Port and airport services were removed from the exclusive powers of the states to become shared powers, a decision made by the constitutional chamber in judgment 565 of 15 April 2008. Due to these changes, it is unlikely that the structure of tax collection prevalent between 1998 and 2003, as published in the BCV statistics, will have remained intact.

The revenue of the subnational governments estimated for 2020 from fees and income from assets is attributed to the states and represents 0.02% of GDP and 1.4% and 0.9% of the total subnational revenue respectively. The official statistics available on the income of the municipalities only report the revenue from taxes, which makes it impossible to determine how much comes from tariffs and fees for the use of municipal facilities and services, a power which is laid down in article 179 of the Constitution.

ⓘ No detailed data available for this country

FISCAL RULES: According to the LOAF of 2015, the states and municipalities can engage in public credit operations. However, this law prohibits them from contracting external debt or credit in foreign currency or guaranteeing third party obligations.

TERRITORIAL MANAGEMENT OF THE CRISIS: On 13 March 2020, a state of emergency was declared in Venezuela to deal with the health crisis caused by COVID-19. This emergency decree was extended to February 2021, eventually expiring on 23 April that year. Where the authorities of the national, state and municipal areas were concerned, the decree obliged them to comply with the direct orders of the Ministry of Popular Power for Health on all matters to do with the daily updates of the information from public and private health centres dealing with the pandemic, all activities that were permitted or suspended, and the concurrent measures to be taken in case of confirmed or suspected infection. In June 2020, more detailed health regulation was adopted focussing on social responsibility in the face of the COVID-19 pandemic.

Following the declaration of a state of emergency, the Presidential Commission for the Prevention and Control of COVID-19 was set up to coordinate the management of the crisis. The commission comprised 11 ministers and one civil defence representative. In fact, this body became part of the structure for coordinating, monitoring and controlling the pandemic, as described in the “COVID-19 Intersectoral Preparedness and Response Plan for Venezuela”, from the United Nations Office for the Coordination of Humanitarian Affairs. This document refers to various aspects of the situation of the states and municipalities in relation to the pandemic: infection, need for resources and logistical support.

The COVID-19 pandemic highlighted the serious deficiencies in the country’s hospitals in terms of personnel, supplies, equipment and basic services such as water and electricity, as expressed by various organisations such as Médecins Sans Frontières. The very low salaries in the public healthcare sector (no more than 10 dollars a month) had led to the emigration of a significant number of health professionals, which only intensified the deterioration of conditions in the country’s healthcare sector.

The measures implemented by the government of Venezuela to control the COVID-19 epidemic and its economic impact were centralised in the afore-mentioned Presidential Commission, whose guidelines were mandatory for subnational government authorities. The measures directed at containing the pandemic were initially set out as plans for total then partial quarantine, with periods of confinement and relaxing of the rules to allow some non-essential private sector activities to continue. This plan applied until the end of 2021.

The country began the process of vaccination against COVID-19 in June 2021 in the metropolitan area of Caracas. It was then rolled out across the rest of the country.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: Among the stimulus measures adopted by the government to counteract the impact of the measures adopted to control COVID-19 infections, the main ones were: a special salary payment plan for small and medium industry and informal workers, the suspension of rent payments and bank interest for six months, deferrals of national tax payments and the temporary suspension of taxation decisions in states and municipalities, the waiving of fees and duties on basic goods and the provision of special bonus payments to independent workers in exchange for them staying at home during the pandemic.

In general, the states and municipalities had to follow the guidelines laid down by central government to control the COVID-19 infection in their territories. However, in some, such as Nueva Esparta, a major tourist destination that was badly affected by the interruption to tourism activities, a gradual plan for opening up was implemented in 2020 to allow the state to receive tourists with the implementation of protocols to reduce the spread of the disease.

In general, the emergency measures did not impede the sharp contraction of actual GDP in 2020, which reached a low of -30%, the highest negative rate since 2014 (-3.9%).

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: In Venezuela, the impact of the economic cycle on the national fiscal revenues is being passed on proportionally to the finances of the subnational governments. This is having a greater impact on states than on municipalities, due to their greater dependency on the transfers from central government. The municipalities are also experiencing the negative effects of the measure suspending those economic activities deemed non-essential as a way of limiting social contact.

However, it is possible to infer a negative impact on the subsidies of the subnational governments following the real contraction of almost 30% in 2020 and close to 5% in 2021 of the revenues from non-oil related taxes collected by central government. These estimates were obtained from the periodic tax collection reports of the National Integrated Service of Customs and Excise Administration and from the price indices published by the BCV.

The COVID-19 pandemic also affected oil activities in the country, which were already deteriorating badly, especially from 2014 onwards. The reduction in the global demand for crude oil meant an additional reduction in the volume of Venezuela’s exports and a significant fall in the prices, which in 2020 dropped to almost 60% of the prices seen in 2019. The drop in oil tax revenues translated into a reduction in central government subsidies to subnational governments, the amounts of which depend on these revenues.

The municipalities and states were affected by the 90-day suspension of the implementation of any decision related to the establishment of fees or contribution of a tax nature on 7 July 2020 issued by the Constitutional Chamber of the Supreme Justice Tribunal. This decision meant that the subnational governments were not able to levy higher fees for their services during this period.

ECONOMIC AND SOCIAL STIMULUS PLANS: There are no known stimulus plans developed at national level in Venezuela for long-term recovery from the COVID-19 pandemic.