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Organic Law of Financial Administration of the Public Sector

Decree No. 2,174 was published in Official Gazette No. 6,210 Extraordinary of December 30, 2015. Through said Decree, the President of the Republic issued the Decree with the Status, Value, and Force of Amendment to the Decree with the Status, Value, and Force of Organic Law of Financial Administration of the Public Sector (the “Decree-Law”). The purpose of the Decree-Law is to regulate the financial administration of the public sector, the internal control system, and the aspects referred to the macroeconomic administration.  

The amendments made are as follows:

  1. The competence of the President of the Republic in the area of public finance includes that the President of the Republic, in Cabinet Council, may decide about the amount, distribution, and disposition of the resources or allowances created through laws or other instruments, with the purpose of reaching superior purposes of the State and attend to the needs of Venezuelan people.

  2.  The President of the Republic, in Cabinet Council, will determine the entity of the Republic of which the National Budget Office (Oficina Nacional de Presupuesto - “ONP”) will be a part. The ONP is a deconcentrated entity that exercises the technical guidance of the Public Budgetary System and is under the responsibility and direction of an Office Head who will be designated by the highest authority of the entity of which the ONP is a part. Said ONP was formerly a part of the Ministry with competence over Finance and the Minister of said Ministry designated the Office Head.

  3. The National Executive, through the ONP, will prepare the guidelines that will govern the budget formulation, with the purpose of delimiting the annual impact of the Pluriannual Frame of the budget. Said competence formerly corresponded specifically to the Ministry with competence over Finance of which the ONP was a part. 

  4. The budget of expenditures of the Republic will include a credit designated as Budget Amendments, the amount of which in the phase of budget formulation will be calculated on the basis of a percentage that may not be lower than 1% nor higher than 2% of the income estimated to be collected in the same economic financial year. In the phase of budget execution, the percentages indicated above will be calculated on the basis of the ordinary income actually collected in said year. The National Executive may use this credit in order to cover unforeseen expenses arising in the course of the year or to increase insufficient budgetary credits. Said percentages were formerly calculated at one time and on the basis of the ordinary income estimated in the budget. Likewise, an authorization of the President of the Republic, in Cabinet Council, was required in order to use said credit and the decision was to be published in the Official Gazette. Also, except for emergency cases, there was an express prohibition against the use of the resources of said credit to create new credits or to cover expenditures the amounts of which had been reduced through the formal mechanisms of budget amendment. 

  5. The following are exempt from the application of the rules contained in the Title referred to the Budgetary System: autonomous or public institutes the principal purpose of which is the financial activity of stock brokerage, for the provision of the services that are necessary to continuously and orderly make transactions with securities issued by the agencies and entities of the Republic, as well as the legal persons of private law. Said institutes will inform the ONP about the transactions made, within the first 5 calendar days of the month following the execution of the same and the budget amendments, for Recording purposes, in the terms established in the Regulations to the Decree-Law.  

  6. The National Executive, after the approval of the Special Law on Annual Borrowing,  may make the public credit transactions prescribed in the same, in the best financial conditions that may be obtained and inform the National Assembly (Asamblea Nacional - “AN”) on a half-yearly basis; except for those involving the execution of contracts of public national, state, or municipal interest with States or foreign official entities or with companies not domiciled in Venezuela, case in which the prior authorization of the AN will be required, together with the opinion of the Venezuelan Central Bank (Banco Central de Venezuela – “BCV”). The AN will be allowed a period of 10 business days for issuing a decision after the date on which the request is informed to the AN at an ordinary session; if after the elapsing of said period of time, no pronouncement has been issued, the request will be deemed to be approved. Formerly, the authorization of the Standing Committee of Finance of the AN was required for each public credit transaction, together with the opinion of the BCV.  

  7. The corporations created or to be created under the Organic Hydrocarbons Law are exempt from the application of the rules contained in the Title referred to the Public Credit System.Formerly, the relevant number referred to the corporations created or to be created under the Organic Law that Reserves to the State the Industry and Commerce of Hydrocarbons. Also, the corporations created or to be created in accordance with article 10 of Decree-Law No. 580 of November 26, 1974, that reserved to the State the industry of exploitation of iron mineral continue to be exempt from said Title.

  8. The Decree-Law includes Temporary Provision First that indicates that up to the time when a Decree of the President of the Republic establishes the agency of which the ONP will be a part, the ONP will continue to be a deconcentrated agency of the Ministry with competence over finance.

  9. The Decree-Law became effective as from the date of its publication in the Official Gazette. 

 

In order to access the Decree-Law, please click here.


  

 

  1. “NOTE: THIS INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE ON ANY SPECIFIC MATTER AND ITS CONTENT ARE INTENDED AS A MANAGEMENT ALERT AS TO CURRENT DEVELOPMENTS IN VENEZUELA, ANY SPECIFIC LEGAL QUESTIONS REGARDING THE POSSIBLE APPLICATION OF NEW OR PROPOSED LEGISLATION TO PARTICULAR SITUATIONS SHOULD BE ADDRESSED TO TRAVIESO EVANS ARRIA RENGEL & PAZ.”