Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Venezuela Environmental Export Market Plan

Chapter 1

The Market for Environmental Technologies

Market Overview

Venezuela presents significant and improving opportunities for U.S. environmental companies. The
last several years saw a slowing of environmental investments due to the recession and banking crisis
that beset the Venezuelan economy. These pressures slowed implementation of environmental investments and institutional strengthening within both the public and private sectors.

This situation has reversed. Important environmental investments and programs are quickly moving forward spurred by the rebound of the economy in 1997 along with strong forecasts for 1998. The Venezuelan Government is focusing efforts on improving the environmental regulatory and institutional structure that will set the long-term basis for the development of an environmental marketplace. The Ministry of Environment and Renewable Natural Resources (MARNR) is taking steps to decentralize its operational activities and to strengthen the environmental management and institutional capacity at the national, state, and local level.

A key aspect of these reforms is the development of an effective environmental enforcement program. The government is working with the World Bank to finalize funding for this program. Named the Environmental Management Project, it has an estimated price tag of $50 million.

The government has also implemented programs to increase public awareness about the environment through educational programs in schools and communities throughout the country. Consciousness about recycling and preserving resources is increasing as a result of these programs.

Even with the improving economy, difficulties in financing environmental improvements remain an acute short-term problem in Venezuela. Therefore, bilateral agencies such as the Export-Import Bank of the United States, and multilateral agencies, such as the World Bank, Inter-American Development Bank (IDB), and the Corporación Andina de Fomento (CAF), are playing key roles in moving projects forward. An important part of the Venezuelan environmental market is tied to projects supported by these institutions.

Fiscal incentives for the purchase of environmental technologies were established in 1992, but were suspended during the economic crisis. Authorities have considered reinstatement of these incentives;
however, the decision to do so will depend on the new administration to be elected in December
1998, as well as the continued stability of the economy.

Finally, when considering the Venezuelan environmental market, it is critical to keep in mind the importance of the petroleum sector to the economy. Petroleos de Venezuela (PDVSA), the Venezuelan state oil company, is the sixth largest oil company in the world. The petroleum extraction, transportation, and processing sectors are potentially very highly polluting.

General State of Environment

As a result of macroeconomic problems, Venezuela is behind most other Latin American countries in establishing the necessary environmental regulatory and institutional framework, as well as committing
the financial resources to make investments in environmental infrastructure.

While important changes are now occurring in Venezuela's environmental cleanup efforts, the country faces significant challenges in almost all sectors in most populated areas. Wastewater needs are acute as only a small percent of the sewage collected is treated. Existing sewer networks are in disrepair, resulting in leakage that jeopardizes groundwater and public health. Industrial and municipal wastewater discharges into major waterways are threatening drinking water supplies.

Solid waste collection and disposal is inadequate by international standards. Most waste ends up in informal landfills or municipal landfills that are uncovered or unlined. There are no off-site storage and treatment facilities for hazardous waste. Illegal dumping of hazardous wastes and poor on-site storage present health risks. Unrestricted industrial emissions combined with high vehicle emissions are resulting in increased health concerns in Caracas and the major industrial zones.

Total Market and Potential

There is a scarcity of detailed, published estimates for the total environmental technologies market in Venezuela. A report of the U.S. Department of Commerce trade mission to Venezuela in December 1996 projected that the environmental technologies market will far exceed its 1994 value of $300 million. Available data about the environmental technologies market size does not yet reflect the recent market growth resulting from regulatory reforms and improved market conditions. Additionally, Venezuela's oil industry will produce significant sales opportunities for the environmental technology market as it embarks on its multibillion-dollar expansion effort. CG/LA Infrastructure, a specialized infrastructure consulting firm for Latin American projects, estimates that the overall environmental market in Venezuela for 1998 will reach $537 million (table 1).

Water and sanitation projects are expected to represent the largest segment of Venezuela's environmental
market. These projects reflect the acute need to improve existing infrastructure and to clean up many of the country's major waterways, such as the Tuy River, Lake Maracaibo, and Lake Valencia, as well as watershed basins throughout the country. The water and sanitation sector is also a recipient of substantial multilateral aid that serves as an important catalyst for the successful execution of these projects.

Table 1: Environmental Technologies Market Size Estimates, 1998

Sector ($US millions)	Total Investment	Total Investment Equipment	Estimated imports from the U.S.	Avg. Growth: Next 3 years
Water Supply	210	95	59	8-10%
Wastewater Treatment	120	80	45	25-30%
Hazardous Waste	50	39	30	20-25%
Solid Waste	105	58	52	10-15%
Air	35	29	20	12-14%
Services	17	17	5	8-10%
Total	537	318	211	NA

Source: CG/LA Infrastructure.

An important emerging opportunity for U.S. companies is hazardous waste treatment and recycling. The government is finalizing sweeping new regulations that will stimulate investment in this sector. There is a huge unmet demand for hazardous waste treatment and recycling resulting from the many years during which the country had no effective treatment or storage alternatives. Venezuela's needs are particularly great given the large volume of wastes generated through its petroleum, petrochemical, steel, aluminum, and mining industries.

The government is now formulating strategies to combat air pollution problems in Caracas and several other industrial zones. Efforts will focus on better monitoring of air quality, encouraging industrial compliance, and undertaking a long-awaited conversion to unleaded fuel.

Commercial recycling is a well-established business in Venezuela and will continue to provide opportunities for U.S. equipment sales. Efforts to improve solid waste handling and disposal have been left in municipal hands, which for the most part lack the necessary resources.

Overall, U.S. companies are well positioned to take advantage of a revitalized environmental market in Venezuela. According to the U.S. Department of Commerce, the United States supplies 65 percent of Venezuela's environmental imports, a figure, which is seven times larger than Italy's, the United States’ closest import competitor.

American firms should not be complacent about maintaining the loyalty of Venezuelan buyers. European and Japanese companies are increasingly price competitive and usually offer low-cost financing packages for prospective customers.

Market Characteristics and Dynamics

Venezuela is finalizing financing with the World Bank for the $50 million Environmental Management
Project that will include an effort supported by the U.S. Environmental Protection Agency (EPA) to develop strong enforcement of governmental regulations. Currently, Venezuelan regulatory infrastructure and enforcement are not mature. Thus, many nonregulatory factors influence the Venezuelan environmental market. These include:
International Environmental Standards: Companies and even public institutions are increasingly under pressure to meet international environmental standards. Multilateral development banks and other lending institutions making loans to the Venezuelan public and private sectors often insist on compliance with international environmental standards as a condition of lending. Because of this situation and to ensure acceptance internationally of its products, Petrolos de Venezuela (PDVSA) is undertaking a concerted effort to achieve ISO 14000 certification (environmental standards) in 1998. PDVSA’s example places further pressure on other Venezuelan companies seeking to become international players to demonstrate similar levels of environmental compliance.
New Regulation for the Control and Recovery of Hazardous Materials: Venezuela is drafting a new hazardous waste decree that is expected to be enacted in early 1998. The decree will clarify and expand the current hazardous waste regulation, Decree 2211. The new legislation will provide the framework for companies to establish hazardous material recycling and recovery facilities. Reform of the hazardous waste treatment sector should lead to a market boom as the lack of clear regulations has led to many unsafe practices in the management of hazardous wastes that need rectification.
Major Petroleum Investments: Venezuela is reportedly investing up to $7 billion over the next three years alone to expand the capacity of its petroleum sector. A portion of this investment will go to improving environmental performance in existing facilities and ensuring compliance at new facilities. In addition, recent legal changes allow for independent oil exploration and exploitation. Legal changes have spurred partnerships with international petroleum companies, as well as independent work by foreign firms.
Wastewater Treatment Efforts: Multilateral funding bodies, along with bilateral agencies such as the Export-Import Bank of the United States (Ex-Im Bank), are supporting several projects for the improvement of water supply and wastewater treatment. These major projects are designed to protect strategic bodies of water, as well as to upgrade infrastructure in Caracas and other urban areas. A number of these projects are in full swing and offer a wide variety of opportunities for U.S. equipment sales and services. Public Awareness: Environmental consciousness is gradually increasing in Venezuela with the help of such federal environmental education programs as INPARQUES. This program offers workshops for children on location in the country's national parks.

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