Before the 1970s, over 97% of the total foreign investment in Venezuela was made by firms representing the United States and the United Kingdom. In 1972, total foreign investment in Venezuela was $5.5 billion, of which 85% was in oil. Of the total, 68% came from US sources, 9% from the Netherlands, and 7% from the United Kingdom. Until the mid-1970s, Venezuela imposed few restrictions on foreign investment. Beginning in 1974, however, new foreign investors were required to obtain advance authorization from the Superintendency of Foreign Investment (Superintendencia de Inversiones Extranjeras—SIEX). After the nationalization of petroleum companies on 1 January 1976, the total foreign investment in Venezuela declined sharply; by the end of 1984, registered US direct investment was $1.7 billion, or approximately 55% of all foreign holdings in Venezuela.
The economic reforms started in 1989 stripped away many barriers to trade and investment. The government has been opening up production activities of the petroleum sector to foreign participation on a contract basis. In 1995, Venezuela's oil sector was opened to limited foreign participation in exploration and production, and political support has grown for a limited privatization of PdVSA, the state-owned oil company. Foreigners may now buy shares in national or mixed companies, but repatriation of dividends and their reinvestment of profits is restricted. Beginning in 2000, a 34% tax on dividends was levied on foreign companies that had not sufficiently reinvested in the country.
Foreign direct investment (FDI) inflow totaled approximately $4.5 billion in 1998, down from over $5.5 billion in 1997. The fall in oil prices helped reduce FDI inflow further to $3.3 billion in 1999, and their recovery (led by a Venezuelan decision to cut production) helped FDI increase to $4.46 billion in 2000. However, with increasing political uncertainty in Venezuela and external economic slowdown, FDI inflow fell to $3.4 billion in 2001 and collapsed to $1.2 billion in 2002.
In 2000, official figures show the United States as the biggest source of FDI, with 14.6%, followed closely by the Netherlands, with 14.2%. However, US-based investment was also probably involved in flows from a number of offshore sites, such as the Bermudas (11.4% of inflow and the third-largest source in 2000) and the Cayman Islands (5.9%). Spain (10.3%), Colombia (8.8%), Japan (8.6%), and Switzerland (7.3%) were also significant sources. Total FDI stock as of 2000 was $12.2 billion, of which the United States accounted for 34%; the Cayman Islands, 15.7%; the Netherlands, 7.9%; and Spain, 6%.