Venezuela is known for being the country with the largest proven oil reserves in the world, but also for being a country that has been unable to manage its large oil wealth in order to achieve sustainable development and better living for all its inhabitants.

The country has been affected by political polarisation over the last few years as demonstrated by the razor thin victory obtained by the president Nicolas Maduro over Henrique Capriles, the candidate of the opposition coalition in April of 2013.

The political figure of Hugo Chavez has become, after his death, the emblematic reference for his party's supporters, while the supporters of the opposition coalition have realised how engrained is the political figure of their main political foe over the last 14 years. In the midst of the political turmoil prompted by the death of Hugo Chavez, the economy has been showing evident signs of chronic malaise.

The current foreign currency exchange control regime in Venezuela in place since 2003 has proven to be more harmful than previous foreign currency control regimes adopted in Venezuela in the twentieth century, while it has shown the same structural faults of the Venezuelan economy.

The foreign currency exchange regime legal framework in force since 2003 has profoundly altered the socio-economic system established by the constitution of 1999, has set aside international treaties signed by the republic, has limited commercial and contractual capacity and promoted a lack of institutionality, which adversely affects the levels of legal uncertainty in the country.

What to do from a legal perspective to promote reasonable public policies tailored to achieving the economic development of Venezuela?

Regardless of the proposals, it is necessary to have a comprehensive vision for achieving exchange rate stability within an executable, efficient and rational context, based on morality and justice in line with terms of institutional and socio-economic development of Venezuela.

The current foreign currency exchange regime has affected extensively different areas of the Venezuelan economy, which in turn have prompted (i) higher level of imports; (ii) lower level of international reserves; (iii) less economic productivity; (iv) increased indebtedness; (v) increased administrative discretion; (vi) less legal certainty; (vii) less access to foreign currency by citizens; (viii) increased economic dependence; (ix) increased economic and social dislocation; (ix) an unprecedented disregard for the socio-economic regime established in the country's constitution; (x) increased financial uncertainty; and last but not least (xi) increased economic isolation.

What to do from a legal perspective to promote stability of the foreign currency exchange in Venezuela?

After pursuing the so called socialism of the 21 century for 14 years – the dream of Hugo Chavez – Venezuela has one of the highest inflation rates in the world, one of the lowest rates of foreign direct investment in the region, one of the highest rates of corruption and lack of transparency in the execution of business, according to transparency international, and misaligned public policies that altogether do not contribute to the sustainable development of the country as a whole.

The foreign currency control regime in place since 2003 is a cornerstone of the economic policies that need to be adjusted promptly to give a jolt to the economy, to revamp private sector investment and to restore much needed order in a country desperate to get its act together in accordance to the potential suggested by its oil wealth. Therefore, a long-term vision is needed to promote sustainable socio-economic development. Such an approach must be adopted taking into consideration that legal provisions should be rational, based on the efficient allocation of goods to maximize benefits for society with reasonable sanctions, which could promote efficiency and institutional and legal certainty.

Since the establishment of a sound foreign currency exchange regime is of the essence to achieve a sustainable economic framework. Both the public and private sector need to work in partnership to bring forward social and economic stability in Venezuela. in particular, the following measures ought to be considered to adjust the current foreign currency control regime, – where the black market price is currently 500% higher than the official currency exchange rate.

Among the measures that ought to be considered are the following:

1. A reorganization of the financial capacity of the oil industry must be implemented;

2. The non-oil economic activities developed by the private sector need to be promoted;

3. A flexible foreign currency exchange regime must be adopted promptly;

4. A most needed promotion of non-oil production should reduce dramatically import levels;

5. The staggering level of public debt must be reduced by adopting different public policies, which should include a debt conversion program to promote investment in strategic sectors of the economy, such as the infrastructure area;

6. The establishment of a culture to promote fiscal and monetary discipline;

7. Progressive reduction of administrative "red tape", especially with regard to currency convertibility and transferability from Venezuela;

8. The implementation of a sound supply and demand price system for the production and sale of goods, duly accompanied by a social welfare system aimed at promoting a strong labour force;

9. Promotion of tax incentives for investment in non-oil sector activities;

10. Independence of the central bank of Venezuela to maintain "price stability and confidence in the currency."

11. Progressive improvement of the balance of the balance of payments.

12. Focus the government goals in activities with high social impact, including health, education and housing.

Conclusions

Neglecting proposed focal points regarding public policies to adjust the foreign currency exchange regime would be detrimental to the country's economic sustainability.

Redirecting the economy should be a priority, the foreign currency exchange regime is a function of the economy, not all the way around... not being aware of such fundamental premise will certainly prevent the existence of a viable economy, amid the lack of institutions and rule of law.

Fiscal, monetary and foreign currency discipline is required, particularly after the implementation of a foreign currency exchange regime ten years ago that has proved pernicious and a constrain to achieve socio-economic development. Venezuelans deserve better!