STH Prospect 2014 08.pdf

8/11/2019 STH Prospect 2014 08.pdf

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Disclaimer

ADN Turismo | ADN Lder publishes this document for informational and guidance purposes. Thismaterial is not intended to provide definitive answers and as such is only intended to be used as aguide. We recommend that the reader always seek independent expert advice relating directly to anyspecic situation. ADN Turismo | ADN Lder accepts no responsibility for anyone placing solereliance on this guidance.

Copyright

Copyright 2 !" #$% Turismo & #$% '(der) C.#. *+, - /!201 0 . anta #na de Coro) 3stado,alcon) 4ene5uela.

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Contents+ntroduction............................................................................................................................................ !The 4ene5uelan 6usiness ,ramework.................................................................................................../

,oreign +nvestment................................................................................................................... ........ /*isks and 7pportunities.................................................................................................................... 8The Tourism 9arket...........................................................................................................................1:ublic afety......................................................................................................................... .......... !/7wning :roperty vs 7wning a 6usiness *ights and 7bligations...................................................!8'abor 'aws and *egulations........................................................................................................... !;6anking and 7ther ,inancial ervices............................................................................. ............ ... !0*eal 3state 9arket 7verview.......................................................................................................... 2


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Introduction+t is worth noting that the economic situation in 4ene5uela for the past !2 !8 months) with highinflation rates) scarce offer of ? $) shortage of many raw materials and finished products) includingconsumer products) industrial and commercial vehicles) e>uipment and machinery) and high li>uidityin 43,) has created a lag in real estate prices when compared against the huge 43, devaluations.This provides very profitable arbitrage for ? $ holders to invest in 43, in premium real estate)specially in secondary cities. But for how long? This is difficult to tell) but :resident 9aduro and the 4:of 3conomy) *amire5) appear on the news almost every week indicating that the exchange controlsystem) as well as other macro economical measures @new bank debit tax) increase of value addedtax) increase in gasoline prices) and unification of the current >uadruple rate currency exchangesystemA are under review.

9y personal view as author of this report) is that most economic discrepancies) including the lag of real estate in 43, vs. ? $ prices) will remain until the government starts acting on some of theconstantly announced potential changes. # few months after such actions are taken) the economicturmoil will start to settle) hopefully so if appropriate measures are taken. 6ut such settling will alsoimpact the real estate market) so + would recommend that any investment decision be made) either before the government starts to act on such changes and leverage on the current ? $ vs *eal 3statein 43, arbitrage) or some months after the government enactments to spare some time to watch thenew trends.

+n any case) in my experience buying selling renting real estate in 4ene5uela for the past / years or so) + have always made profits) and have never seen anyone losing bets in this market when doingsound transactions. This is mainly due to the fact that demand has been constantly exceeding offers)

basically because of underinvestment in the sector) while 4ene5uelans purchasing power hasincreased constantly. +n addition to this) coupling the real estate investment to a tourism business in aregion that is flourishing with all the resources and attractions needed to make ,alcon a world classtourism destination leads to one conclusionB Falcon is a sound location for investing in tourism!

9ost of the figures and metrics shown in the report are for the country as a whole) unless statedotherwise. This is due to scarce information divided by regions and or cities. When possible) we havemade our own estimates for the ,alcon state.

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The Venezuelan Business Framework +n this section we will outline key facts to help readers understand the 4ene5uela business frameworkfor foreign investors.

We address details about foreign investment) especially from China) which is highly regarded in4ene5uela) and explain some of the main influencers for foreign direct investments in the country. Wealso describe some key risks and opportunities) as seen by foreign stakeholders) and complete thesection with information about the tourism market) public safety) legal aspects of ownership and labor)availability of financial services) and overviews of the real estate market and the gambling business.

Foreign Investment

Foreign Currency Exchange (a.k.a. F !E" or F"#

+n 9arch 2 !" the government launched a new free floating foreign exchange system thatoffers ? $ for eight times the official price @43, ;./A in a move the government says will tamethe grey market but is seen as a massive devaluation.

The central bank said the price for dollars on the inaugural day of the +C#$ 2 system was43, 8!.1 @currently 43, "D.DA. :rivate bank operators who take part say demand is high butoffer is thin.

The new platform added a third state sanctioned exchange rate to the !! year old currencycontrols) with dollars selling at 43, ;./ for preferential goods and around !! bolivars @also afloating rate known as +C#$ !A for other items.

7n the grey market) ? $ sell at 0 01. That price has fallen from 18 bolivars as of ,ebruary2 !" on expectations of greater dollar flows via +C#$ 2. Though overseen by the centralbank) +C#$ 2 works on supply and demand) where individuals and companies participatefreely in daily trading.

Heres a simplified outline of the countrys foreign-exchange system. A dollar will cost you 6.3bol !ares if you are the go!ernment" or if you can persuade #encoex $the go!ernments foreign-trade body% that you intend to import !ital goods such as food or medicine. &hen theres the 'icad ( rate" currently )ust o!er *+ bol !ares to the dollar" but contingent on irregular" ,auctions $which arenothing of the sort%. &he new 'icad (( process" which is as close to a free mar et as thego!ernment will allow" opened at a whopping /+ bol !ares to the dollar. But e!en that is a bargaincompared with the unofficial exchange rate" which at the time of writing stands at almost 60

bol !ares .*

Incentives and $rotection to Foreign Investors

The uperintendency of ,oreign +nvestment is the body responsible for establishing favorableconditions through incentives or benefits for those who invest in certain sectors or regions) or to create attractive conditions for investments) which are in line with the specific domestic

! httpB www.economist.com blogs americasview 2 !" " vene5uelas by5antine exchange rate system

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development ob=ectives.

#uthorities give due consideration to how the investment contributes to achieving developmentgoals) especially in the formation of human capital) productive development and insertion of 4ene5uela in the global economy.

China % Venezuela Trade & Investment 'greements

*elations were almost nonexistent since 4ene5uela recogni5ed the :eopleEs *epublic of Chinain !D0") although unofficial relations have been preserved through a Taipei 3conomic andCultural *epresentative 7ffice in Caracas.

When Fugo ChGve5 came to power) trade with China began to grow from less than ? $ 2million to over ? $ ! billion. Chinese officials say that 4ene5uela has now become thebiggest recipient of its investments in 'atin #merica. 4ene5uela has also embarked on an

extensive program of political) economical) military) cultural and scientific exchange with China.$rotection

4ene5uela has signed 20 agreements for the promotion and protection of foreign investmentHhowever) the 'aw for the :romotion and :rotection of +nvestments in #rticle 8 providesinternational standards of investment protection treaties) or to enable that agreements signedin 4ene5uela contain provisions for broader protections than those in domestic laws.

The laws provide the following warrantsB

%o re>uirements for prior authori5ation to invest) except in cases where the lawexpressly re>uires this to be done.

%o discrimination in the treatment to investments and to foreign investors) due to thecountry of origin of their capital.

%o confiscations ordered and carried out except in the cases provided for in theConstitution and international laws.

Legal Stability Contracts

The legal framework provides that the *epublic may enter legal stability contracts to ensureinvestment stability in some circumstances. +n particular) such contracts may ensure investorsone or more of the following rightsB

:referred tax regime upon conclusion of the contract.

tability of export promotion schemes. tability of one or more specific incentives or benefits received by the investor) as

provided in law at the time the investments are made.

:arties to the 'egal tability Contracts are natural or legal persons) trust funds) or 4ene5uelanor foreign business groups) who have full capacity to act and prove their economic) financial)technical and professional standing.

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Incentives

,oreign investments do not re>uire prior authori5ation but do re>uire later registration) whichmust be re>uested within sixty @; A calendar days following the date of the act that gave rise torespective foreign investment.

$ividends or profits obtained by foreign investors) after complying with the provisions of C3%C73I on foreign currency purchases) may be remitted abroad without any limitation andentirely exempt from income tax.

There are various incentives in the tourism sector for tourism service providers duly registeredin the domestic Tourism *egistry and that meet current regulations. uch incentives areprimarily established in the Tourism 'aw) which give the :resident of the *epublic in theCouncil of 9inisters) together with the opinion of the domestic +ntegrated Customs and Tax

#dministration @ ervicio %acional +ntegrado de #dministraciJn Tributaria 3%+#TA) powers for

granting the following incentivesB +ncome tax rebate calculated up to seventy five percent @08KA of the amount incurred

in new investments for the construction of hotels) lodges and innsH for tourism andrecreation in rural or suburban areas) in farms) agricultural developments and campsHand for the provision of training to workers. The same benefit may be obtained wheninvesting for expansions) improvements) e>uipments or retrofittings of buildings or existing tourism services) pre >ualified by the 9inistry of Tourism.

Tax exemptions provided by law for the import of ships) aircraft and land vehicles for tourism) taking into account the agreements and international trade policy) ratified by4ene5uela.

:referential rates for fuel) intended to encourage ships and aircraft exclusively for tourism purposes.

pecial rates for the provision of public services by the state for tourist accommodationestablishments whose peak shopping periods occur at certain times of the year.

To >ualify for these incentives) interested parties must register with the domestic Tourism*egistry) obtain solvency with the domestic +nstitute of Tourism :romotion and Training) andobtain a Tourism Certificate from the 9inistry of Tourism.

4ene5uela and China have a $ouble Tax Treaty in place) as do most countries active in globaltrade.

!isks and ortunities4ene5uela ranks sixth worldwide in terms of light oil reserves in the world and first in reservesof heavy oil and bitumen) proven reserves are estimated at 2D;)8 barrels of oil e>uivalent@673A. :roven natural gas reserves are estimated at !18.2 trillion cubic feet) where a venturelead by *3: 7') the spanish energy conglomerate) holds a concession to exploit an off shoregas field north west of ,alcon state) which is said to be the third largest natural gas reserve in

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the world. ,or such reasons) traditionally) the most attractive sectors for foreign capital havebeen related to natural resources) especially hydrocarbons. Fowever) non oil businesses havevast potential for development) as investments weigh about 2K of the


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$ue to its triple identity #ndean) #ma5onian and Caribbean) 4ene5uela is a Mmulti destinationNtourism product. +ts vast offer includesB

!)0 km2 of sandy beaches and coral reefs.

02 islands) islets and cays with enviable tourist resources.

4ast mountain ranges) including the under developed an 'uis range in ,alcon.

"/ ) km2 of forest) full of uni>ue species of flora and fauna and large rivers. #mongthe national attractions are the 7rinoco *iver and #ngel ,alls) the highest water fall inthe world.

/ ) km2 of plains crossed by many rivers and filled with a rich fauna. +n this landyou can find endangered species) such as manatees) otters) alligators) turtles and

=aguars.

/D domestic parks and "! natural monuments with a total area of !") );D8 hectares@!;. "K of the countryA.

The main segments of tourism development are geared towards beach activities) nature and

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business. The latter attracts the highest number of visitors who come to the most importantcities in the country as well as those related to oil) gas and petrochemical) and other industrialareas.

9a=or international hotel chains are represented in 4ene5uelaB Filton) 9arriott) *adisson)Fesperia) +ntercontinental) ol 9eliG) 3mbassy and 6est Western) among others. #dditionally)the nation has one of the most comprehensive transport infrastructure in 'atin #mericaB goodsupply of highways) roads and airports @!! international one in ,alcon) 8 domestic two in,alcon) and more than !8 privateA) private and public transportation) and seaports andmarinas in all its coastal extension.

#ware of this potential) the uate marketing) and sometimes conflicting or negatively biased publicity.

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#s it will be uncovered next) the domestic tourism market is key in terms of its volume) thussegmenting marketing ob=ectives) strategies and tactics for domestic and for international guests isnecessary to grow a healthy business in the long term.

#nother reason for such segmentation is because the domestic market is a source of a constant flow of low margin re!enues in 43,) but the international market is a less stable source of high marginre!enues in ? $) maybe for the first two or three years of operations while the #$% brand makesroots in the international tourism market.

The following estimates taken from the 2 !/ World 3conomic ,orum Travel O TourismCompetitiveness *eport show 4ene5uelaPs recent tourism volumesB

The following graph shows the low weight of tourism in the local economyB

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*omestic Tourism

The following graph shows the estimated annual number of persons in the domestic tourismmarket.

#nnual domestic tourism expenditures increased from ? $ 2.0 billion in 2 8 to ? $ 0./billion in 2 D) based on information available from the domestic +nstitute of tatistics.

ince 2 1) ,alcon state has been the first in volume of domestic tourism) receiving anaverage of DK of the total volume of persons) and steadily increasing its share year after year.This DK share is almost double the share of other select local destinationsB ".;K for theCaracas beaches) 8K for the 9erida region) and "K for 9argarita +sland.

International Tourism

The following graph shows the estimated annual number of international visitors arriving to4ene5uela. This is the volume of the international tourism market.

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#nnual international tourism expenditures have remained flat from ? $ 88 million in 2 8 to? $ 881 million in 2 D) based on information available from the %ational +nstitute of

tatistics.

+nternational arrivals of tourists are registered in each of the countryPs nine internationalairports taking commercial flights @,alcon state has oneA) and six maritime ports receivingcruise ships @,alcon state has oneA.

Currently) ,alcon state is the only state in the country with two main airports and two maritimeports) and all four are fully operational. $espite having such infrastructure) in 2 !2 ,alcon onlyreceived "K of the Q! million arrivals) and reports show that more than D K of internationaltourists arrive in flights at the 9ai>uetia airport near Caracas.

!oom ccu ation !ates

#verage 7ccupation *ates @#7*A in the country range between 0 1 K) and underinvestmentin new rooms are pressing strong by increasing #7*s.The #7* in ,alcon tate is higher thanthe country average) ranging between 1 D K. +t is worth noting that the local association of

pri!ate hotels reports #7*s ranging between 88 ; K between 2 ! and 2 !2.

!evenue er 'vaila+le !oom (!ev$'!#

*evenue per #vailable *oom @ Rev AR A is an index used for benchmarking in the hospitalitybusiness.

*ev:#* R Total revenue from rooms %umber of rooms available for guests

*ev:#* is the most common benchmark in the hospitality business) but) as the following

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indicators show) lodging is not the main source of revenues.

!evenues ,rom !ooms

6etween 2 1 2 ! ) international tourists stayed an average of 2 nights spending anaverage of ? $ !)2// per stay) generating an average of ? $ 8"" million in annual revenues.+n a similar period) domestic tourists stayed an average of 8 nights spending an average of ? $ /1" per stay) generating an average of ? $ 0.2 billion in annual revenues.

,or international tourists) total revenues from rooms represented / K of the total spent) that is? $ !;/ million. ,or domestic tourists) total revenues from rooms represented DK of the totalspent) that is ? $ ;"1 million. 7verall) the total revenues from rooms) for both internationaland domestic tourists) was ? $ 1!! million.

-um+er o, !ooms 'vaila+le

#s of 2 !2) number of rooms available for lodging in the country was /2)/1!) as shown in thefollowing table. This has not changed significantly) despite the strong support from thegovernment and plenty of financing available for tourism pro=ects.

!ev$'! and )ain ources o, !evenue

With total revenues from rooms of ? $ 1!! million between 2 1 2 ! ) and /2)/1! roomsavailable for lodging) the annual *ev:#* is estimated in ? $ 28) 82.

6ut ? $ 1!! million is less than !!K of the total annual revenues of more than ? $ 0.0 billion.'odging is not the main source of revenue) and this is explained because tourism expendituresare distributed as followsB

#ny successful tourism business must consider the facts that ,ood O 6everage) and hoppingand local transportation) are the most relevant revenue sources.

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Com etitive Environment

,alcon state is 4ene5uelaPs top domestic tourism destination with more than 2 million guests in2 1) and increasing aggressively. #s an example) on -uly each year and for the last ! yearsor so) Coro hosts a " day event for high power motorbike owners. This is a flagship event insuch category for the northwest of 'atin #merica) attracting people from everywhere) including6ra5il and Colombia. +n 2 !/ this event brought to Coro around 2)8 motorbikes and ")guests) in 2 !" it brought around /) motorbikes and 8) guests.

,alcon is leader in domestic tourism) but is far from so in international tourism) attractingmerely "8) annual arrivals. This is surely influenced by the strong competition faced fromour neighbors in #ruba. #pproximately !." million tourists visit #ruba annually) accumulatingdirectly and indirectly up to approximately 0 K of its


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The next graph further shows that ,alcon state is one of the safest in 4ene5uela. The states in darkcolor are consistently the most unsafe regions) sadly including Caracas) the capital city) that iswrongfully taken as a reference of the level of safety in the whole countryB

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wning $ro erty vs wning a Business % !ights and +ligations #ny foreigner can buy a property in 4ene5uela with =ust a valid passport) a tourist visa and a *egistrode +nformacion ,iscal @*+,A. The *+, is a tax identification for all persons) and can be obtained for freeby re>uest at any Tax #dministration office @ ervicio %acional +ntegrado de #dministracion Tributaria

3%+#TA or through a proxy. This means) you can own the property as an individual and run anMinformalN tourism operation) keeping legal formalities to a minimum. We refer to this option asMwning :roperty N.

,oreigners may also buy indirectly) through local or foreign companies. 9aking the investment througha foreign company is the best way to run a fully registered tourism operation. This enables investmenttax credits) as well as greater flexibility for tax and liabilities management. We refer to this option asMwning a Business N.

Whether buying a property or buying shares in a company to own a business) once the buyer andseller agree terms) if all the re>uired documentation is in good order) the standard process can take aslittle as two to five business days.

The following table shows some of the main differences "B

Rights and "ligations #ning roperty #ning a $usiness

7wnership #n individual or group of individuals. # local or foreign company.

:urchase taxes 'egal ,ees @!.8 KA) 'egal *egistry@ ."8KA) #dvance on +ncome Tax@ .8 KABTotal %&'() * +&,()

'egal ,ees @!.8 KA) 'egal *egistry@ ."8KA) #dvance on +ncome Tax@ .8 KABTotal %&'() * +&,()

+ncome tax Flat rate of -,) on net income. #ddB @!A business income whether generated in 4ene5uela or abroad)@2A capital gains) @/A investmentincome) and @"A other income.$eductB #dministrative expenses)repairs and maintenance)insurance) real estate tax andmunicipal tax. Cost of purchasedepreciation @capital allowanceA isnot deductible.

Flat rate of -,) on net income. #ddB @!A business income whether generated in 4ene5uela or abroad)@2A capital gains) @/A investmentincome) and @"A other income.$eductB #dministrative expenses)repairs and maintenance)insurance) real estate tax andmunicipal tax. Cost of purchasedepreciation @capital allowanceA isdeductible.

*eal 3state tax K !K) fully deductible from income tax

Tourism ,und tax K !K on gross sales4alue #dded tax !2K on invoiced sales !2K on invoiced sales

" This guide is not exhaustive. There is always the risk that the situation changes) so this guide should bemonitored closely.

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:roperty ale @3xitA tax Flat rate of -,) of gross sale price)minus costsB ac>uisition costs)improvement costs and registrationduties) plus customary *eal 3state

#gentPs ,ee / 8K.

Flat rate of -,) of gross sale price)minus costsB ac>uisition costs)improvement costs and registrationduties) plus customary *eal 3state

#gentPs ,ee / 8K.

+nvestment tax credits %one) unless fully registered astourism operation.

ee +ncentives section

#ccess to ? $ +C#$ ++ and


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0ork,orce kills and Education

$ue to the stringent economic conditions) it is not unusual to be able to hire a universitygraduate with ! / years of experience paying the #99W of 43, !!)0 @? $ 2/1.01 at

+C#$ ++ ratesA. killed workforce is plenty because education is public up to the universitydegree levels. 3ducation standards of private and public universities in Coro is one of thehighest in the country) and medical specialties are considered of the best in outh #merica)attracting many students from other cities in 4ene5uela) as well as from the Caribbean andCentral #merica) where 4ene5uela has led some social and economic development initiatives@#'6# and :etrocaribeA.

pecially in secondary tier cities like Coro) =ob offers are mostly created by small retail storesand governmental entities.


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/ocal and international +anks

There are // banks) 1 are state owned and 28 are private. There are no mixed @public privateAinstitutions.

The largest bank is the 6anco de 4ene5uela) which was a private bank owned by the spanishmultinational group antander until the state nationali5ed it by purchasing all its stocks aboutfive years ago. The second largest bank is 6anesco) a 4ene5uelan bank renown both locallyand internationally.

9ost banks have offshore branches in CuraUao) #ruba) :anama) the ? and 3urope)providing excellent support to international trade.

The only international bank formally operating as a local bank @in accordance with localregulationsA is the ? based Citibank. ome foreign banks have representative offices inCaracas) but as such) do not carry out any banking business) limiting their activities topaperwork and business relations.

+n Coro) all the ma=or local banks have fully operational offices.

/oans to ,oreign investors

$ue to their maturity and high international standards) the ma=or local banks are capable tostructure and support international finance programs. +t is not uncommon for large privatepro=ect financing to have local banks partnering with ma=or foreign banks) such as -: 9organChase) 6arclays) Commer5bank) etc.

'ocal loans do re>uire mortgages on local fixed assets or guarantees through securities) andthe lending process is highly regulated.

#lthough many transactions are negotiated in ? $) legally) all documentation for localtransactions must be expressed in 43,.

Interest rates and other ,inancial costs

6anking interest rates and fees are highly regulated by the Central 6ank and lending portfoliosare determined by government regulations following the strategic development plans of thegovernment. #s an example) the following table shows the average lending interest rates for years 2 !2 and 2 !/ by economic sectorB

Annual Lending Rates "y:conomic 4ector 0)5

+9%+ +9%-

,arming !2 !2

+ndustry !8 !"

Commerce !1 !0

ervices !1 !1

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Annual Lending Rates "y:conomic 4ector 0)5

+9%+ +9%-

9ortgages D 1

Transportation 2! 22

Tourism %% %+

4ehicles purchase 2! 2!

7ther private sectors !; !D

9ining and >uarries !" !"

Water and electricity 2! 2!

Credit cards 21 21

Considering prevalent inflation rates) it makes good business sense to obtain loans for investing in 43, at these lending rates) but lending contracts are usually agreed at variableinterest rates) so interest rates and ,I arbitrage must be monitored fre>uently. *ecent annualinflation rates were) for year 2 !!B 21K) for 2 !2B 2 K) for 2 !/B 8;K) and aggregated for -anuary 9ay 2 !"B 2/K. The following table shows annual inflation rates since !D11B

The following table shows annual average interest rates for six ma=or banks since !D11B

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!eal Estate )arket verview,or the past three decades) real estate has been a financial shelter for most 4ene5uelans who either have the cash to invest or have access to mortgages. This is because interest rates on deposits haveremained unattractive due to the high inflation rates) financial securities are unavailable for most of thepopulation) and only a few have access to savings in foreign currencies.

4ene5uela is an open market to foreigners. #ny foreigner can buy property in 4ene5uela with =ust avalid passport) a tourist visa and a *egistro de +nformaciJn ,iscal *+, @Tax *egistry +nformationA.

The market is very li>uid) but virtually there are no formal statistics available.

7n international web sites) you can find residential properties with 8Q rooms) mostly in Caracas)ranging from ? $ ! to !8 million. 8

2am+ling Business verview7n -uly 2/) !DD0) the 4ene5uelan :arliament passed MThe *egulation of Casinos) 6ingo and lot9achine 'aw)N which permitted casinos in five star hotels with a minimum of 2 rooms. 6ingo hallswith slot machines would be permitted in three ) four and five star hotels as well as other facilitiesauthori5ed by a newly established gaming control board.

The wording of the 4ene5uelan !DD0 gaming law statesB

,#asinos and bingo halls and slot machine parlors must be located in geographic 2ones whichha!e been pre!iously declared tourist 2ones ... >or the authori2ation of such establishments the

8 httpB realestate.ws=.com for sale veVfacets bedroomsX XR8K/68

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domestic xecuti!e will re


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2eogra hical Coordinates

1 [ 8E/1 \and !2 [ !!E";\ north latitude ;0 [ "8E"! \and 0! [ !1E2!\ west longitude

Territorial $olitical rganization

8 Cities

0! 9unicipalities

2!0 parishes

The pattern of occupation is characteri5ed by a concentration in urban centers towards thecenter and north of the region) associated with the commercial and industrial dynamics and

roads structure) with strong integration between the east west and the south.The population is predominantly young) similar to the countryPs profile shown in the followinggraphB

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$hysical and natural as ects

The WC* en=oys seven types of landscapes) with predominating mountains and hills located inthe center and north of the region and covering 88K of its surfaceB These constitute importantresources for fresh drinking water) recreation and refuge for a wide biodiversity.

6oth inland and coastal plains are the second most important landscapes with 2DK of the total.+nland plains are located south of the region with cool temperatures and mountain forests) andcoastal plains on the north have drier weather and beaches. The valleys) despite representingonly !!.0K of the regional territory) are the areas more intensively utili5ed for agriculturalpurposes. %ext to the plains) are the urban areas with the main productive activities andlargest concentrations of population that make significant contributions to national foodproduction. The plains of Co=edes and :ortuguesa states are considered Mthe breadbasket of 4ene5uelaN.

The continental shelf represents a strategic area for the region. +t consists of marine and fluvialsediments and comprises about / ) km2 with a high potential in marine and submarinesresources) such as fisheries and hydrocarbons.

The region is an exponent of a variety of ecosystems that have deserved special protection. #bout 82K of its area is protected by special environmental laws.

The 0C! Economy

The economic dynamics of WC* mainly revolves around trade and services) given the goodroad transit connecting with the whole country and the existence of a large market. uchrelated activities are the main labor sector) representing /8K of the working population. #nimportant financial services network provides leverage to productive sectors. The north of the

,alcon tate also has a duty free trade area for the development of tourist and commercialservices) and an industrial) commercial and services 5one) with great impact in the westcentral economy of the country.

The WC* contributes significantly to the countryEs food security given the production of strategic items such as vegetables @onion) tomato) paprikaA) fruits @papaya) pineapple) orangeA)cereals @rice) corn) sorghumA) sugarcane and coffee. The region also highlights the dualpurpose livestock with significant associated agro industrial facilities. #griculture represents thethird source of regional employmentB !;K of the working population. WC* is the first and onlyproducer of sisal nationwide and the second 5one of the country in sea products and artisanfishing) providing fresh products of good >uality and a high variety of species of highcommercial value.

mall and medium industries are concentrated in urban areas of the ma=or metropolitancenters) where metalworks sector is a leader. The industry is the fourth source of regionalemployment with DK of the working population. The agro industrial sector is well developed)with !! of the !8 sugar mills in the country) and other industries that add value to agriculturalproduction and processing of corn) cassava) rice) fruit pulp) grains and oilseeds) andconcentrated animal food.

9eanwhile) the oil industry is the main economic activity in the state of ,alcon) where the

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:araguana refining center) the largest in the world) comprises three ma=or refineriesB #muay)Cardon and 6a=o


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The Business )odel+n this section we narrow the focus on the tourism pro=ect in ,alcon) describing our perspectives ongovernance) value proposition) value chain structure) revenue streams and cost structure. Theinformation in this section can be revised or detailed further as considered appropriate by theuests.

'm+iance

$esigns) furnitures and decoration that provide warm spaces and comfort with as much luxuryas reasonably practical.

$rices

#ctive management of revenue streams) cost structure and service delivery specifications toprovide our guests with the best experience possible while remaining competitive.

)ission

To deliver our customers experiences that increase productivity and >uality of life) provide our contributors and employees comprehensive welfare and growing professional and personaldevelopment) and secure the owners and investors unparalleled >uality and return giving highpriority to accountability) reliability and security.

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Vision

+ntegrate the local ecosystem @including peopleA with cutting edge training) fun and nutritionalactivities) environmental conservation) telecommunications) energy management of effluentsand solid wastes) and socio economic sustainability) through a symbiotic relationship betweenhuman beings and the environment) to achieve an experience where ultra modern technologymerges with nature) empowering people to generate wealth to everyone who wants it) creatingmultiple opportunities for every guest to en=oy by learning) learning while en=oying) and to growin knowledge that is useful for your personal and professional life.

Values

Figh >ualityB +nfrastructure with all amenities and services delivered safely) timely andpleasantly at competitive prices.

+ntegrationB ?se of products and services in approximately ! kilometers radius) integratingand developing related regional services.

ustainabilityB Clear sense of social inclusion by incorporating people from neighboringcommunities from all social strata and disabled people as collaborators for our services) inaccordance with their capacities and training.

3co ,riendlyB +ntegrated ecosystem using cutting edge technology for environmentalconservation) telecommunications) energy generation) management of effluents and solidwastes.

)arketing trategyThe following proposal may be extended to other markets segments as defined in the formalbusiness plan established by the


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Focus

Corporate $epartments and Consultants related to Fuman Capital 9anagement.

Fead hunters) Consulting firms) Corporate facilitators.

3ntities with formal human talent development processes in house.

egmentation

*omestic

This is the main focus of competitors. 6ut there is a luxury market that may be accessed with aproper strategy to deliver experiences up to their expectations at very competitive prices.

+n ,alcon) domestic holiday seasons influence the #7*s throughout the year with very highsof QD K in #ugust @vacations begin at the end of -uly for all educational institutionsA) highs of Q1 K in -anuary to 9arch @Christmas season ends) Carnival season and Foly WeekA) andQ1 K eptember %ovember @extension of vacations in all educational institutionsA) and lo#s inQ0 K in the other months of the year. This shows >uite a consistent demand along the year)which despite a lack of a focused marketing strategy) makes #7* throughout the year anaverage of Q1 K.

Domestic Target

Corporations doing business in 4ene5uela fre>uently hold meetings) incentives) conferencesand events for internal and external stakeholders for many purposes like training) businessentertainment and team dynamics. # well focused marketing plan can reap great benefits of

this market where seasonality could counter the lows between domestic holiday seasons. Figh>uality service and fair pricing are key to attract these customers. #$% has good prospects inthis market which demands a lot of attention) but is very profitable.

,amily or friends groupsB #ll inclusive guided tours for groups of ! or more persons are anaffordable way to offer Medu teinmentN plans for this group. Figh >uality service and low pricingwould attract these customers. #$% has identified wealthy groups and designed a value chainthat can support this sub segment while adding a revenue source with great potential to grow.This sub segment may follow the domestic holiday seasons) but #$% has designed two and ahalf day plans to attract groups to come out of season.

International or !ece tive

The only proactive marketing to attract international travelers is made by the governmentaldestination management companies) both at a national and at a state level. The privatetourism association of ,alcon resumed activities early in 2 !" after being inactive for morethan nine years. This provides a potential platform to develop a strong destination marketingplan involving both public and private entities and players @the ,alcon state tourism authorityalso owns and operates three hotelsA.

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nternational Target

Corporations fre>uently hold meetings) incentives) conferences and events for internal andexternal stakeholders for many purposes like training) business entertainment and teamdynamics. # well focused marketing plan can reap great benefits of this market whererevenues would be generated in ? $. Figh >uality service and fair pricing are key to attractthese customers. #$% has good prospects in this market which demands a lot of attention) butis very profitable.

,oreign family or friends groupsB #ll inclusive guided tours for groups of !8 or more personsare an affordable way to offer Medu teinmentN plans for this group. Figh >uality service and lowpricing would attract these customers. #$% can access wealthy groups in near by countriesthrough McollaboratorsN) and develop another revenue source in ? $ with great potential togrow.

Value Chain tructureTo deliver the best possible experience to guests) while keeping our cost structure as low as possible)we combine proprietary and sub contracted services.

#ccessibility to any of the proposed locations is available by road @6us) #utomobile) 9otorcycleA) andair @commercial) charter and private flightsA. 6each side locations can also be accessed by private andcharter motor sail boats. 9ain roads are paved) four channels in inner city highways) and twochannels in inner cities and interstate roads.

#ll utilities are availableB $rinking water) 3lectricity) 9obile :hones) $igital T4. 'aw enforcementagencies provide routine public safetyB :olice) domestic uality lingerie) wifi internet) digital T4) air conditioning)hot and cold water) drinkable tap water and public telephone. # concierge is available 2" 0 onsite to handle any daytime re>uests or night time emergencies from our guests.

#s our own capacity is limited) we incorporate other hotels and hostels to our preferredsuppliers) expanding the offer to our prospects while generating some extra revenues through

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a fee per referralB keeping customers happy is paramount) no matter how many persons makeup the groups we host.

Food & Beverage

7n site we focus on breakfast and snacks) as well as assorted non alcoholic drinks ; . The intentis to deliver a good >uality but simple menu) which is achieved with the support of one or twostaff) who besides these tasks) can perform other house keeping activities. *estaurants of different specialties @chinese) italian) creole) =apanese) spanish) etc.A) as well as coffee houses)are incorporated to our preferred suppliers) expanding the offer to our guests while generatingsome extra revenues through a fee per referral) and keeping our related costs low.

ho ing and /ocal Trans ortation

Shopping

,urniture is supplied by local artisans following selected designs and materials. 'ingerie andelectronic appliances) such as T4s) air conditioners) refrigerators) free5ers) portable stereos)etc.) is purchased from local suppliers from the $uty ,ree Yone) taking advantage of bulkpurchases and available duty free purchase >uotas.

=hy do we mention this here? 6ecause all furniture) lingerie and electronic appliances areavailable for sale) whether the ones already in use at a discounted price) or new ones atdiscounted prices agreed with our suppliers from the $uty ,ree Yone.

We can also arrange shopping tours to the $uty ,ree Yone) expanding the offer to our guests.

Transportation ! Local and Abroad

:referred) reliable and trustworthy taxi drivers are incorporated to our preferred suppliers)ensuring safe and comfortable road trips at preferred rates for our guests. We can also arrangeintercity coach trips) chartered yachts for trips in the ,alcon coast) or to #ruba) 6onaire andCuraUao) as well as chartered flights.

ther


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Characteristics o, -atural 'ttractions

%atural attractions are used freely) most a no cost) in an eco friendly and sustainableway.

?nderutili5ed source of thermal waters less than 28 kilometers from Coro.

#rea of high biodiversity.

#ll main attractions have good access roads.

Tourist and recreational potential of the fresh water reservoir The +siro @:rogram mustinclude environmental care and sustainability program due to the fragile biodiversity of the areaA.

ther 'ttractions

Cultural #ttractions) including the historical district of anta #na de Coro.

9useums) ightseeing Tour) Churches) :opular 9arkets.

Walking) Cycling) Trekking) Fiking) 6iking) or Forse riding.

Taima Taima #rchaeological :ark is less than !; km. by road.

:araguana $uty ,ree Yone located at less than ! km.

Events

#nnual events) fairs and festivities are held in the city of Coro and surrounding towns andvillagesB 'a 4ela de Coro) 'a %egrita) 'a Chapa) Curimagua) Cabure) etc. #lthough most aredesigned to gather and entertain local people) guided tours are arranged at safe hours for our guests) as they will serve an excellent opportunity to connect with the local culture) which in,alcon) is historically rich and diverse.

erations

a,ety

:ersonal safety is a concern) both for local and international guests.

afety is ensured at two levelsB

# basic level) in coordination with local law enforcement agencies @police) domesticguard) public hospitals) etc.A.

# customi5ed level) based on specific re>uirements from our customers for privatesecurity services.

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"asic Level

This level of safety is standard for all our operations and delivered to all our guests. Thisincludes permanent safety systems and staff trained according to international standards)ensuring a minimum safety standard for all our guests. Trained staff is assigned for transfers inprivate vehicle from to port or airport) and third party tours) if deemed appropriate.

#ll third party services are previously >ualified considering ade>uate safety and securitystandards.

Customized Level

uch services may range from trained staff only for transfers) up to permanent trained staff 2" 0 upon arrival to the port airport in 4ene5uela. pecific programs can be set up for +nternational Clients or 4+:) based on the customers re>uirements and upon mutual agreementof scope and costs.

3uman Ca ital

The Travel O Tourism Competitiveness *eport 2 !/ by the World 3conomic ,orum @W3,A 0

scores and ranks tourism human resources worldwide. ,or 4ene5uela) the overall humanresources score is "./ @in a scale from ! Worst to 0 6estA) and ranks the country in theposition ! 0 out of !" .

+t is worth noting that many figures in this report were obtained by W3, through an executiveopinion survey.

The said report further delivers the following country profile for tourism human resourcesB

0 World 3conomic ,orum Travel O Tourism CompetitivenessB httpB reports.weforum.org travel and tourismcompetitiveness report 2 !/

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Com etitive trategy

The Conce t 6

# multipurpose flagship site where development) nutrition and amusement are combined tomake you richer in each one of your visits. #ctivities combine entertainment and development)both personal and professional) to enrich each guest on each visit.

The offer features modular services to facilitate access to different levels of services accordingto the desires and budget of each customer. This service offering will range from Mpay for serviceN to Mall inclusiveN) according to the wishes of the clientB

'ocal and *egional Transportation @'and) Water) #irA

'odging

,ood and drinks) with special menus according to the activity @:hysical) +ntellectual)'eisureA

:rivate Chef) :rivate Waiter@sA

?se of ,acilities @Theme :ark) Walk ways) :ublic areas) wimming pools) etc.A

,acility services @ pa) 9assage Therapy) alons) imulation) etc.A

Tours and excursions @'ocal and surrounding areas such as a huge list of 6eaches and%atural #ttractions) $uty ,ree Yone) #ruba) 6onaire) Curacao) etc.A

ervices n ite

Transportation

Theme park and convertible facilities

'odging) *estaurant) 9assage Therapy) pa) Travel


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4ene5uela. #ll inclusive prices >uoted are guaranteed for a short period @/ days or lessA.

We can also prepare Mfee for serviceN proposals) if a customer @corporation or groupA so desires. +nthese proposals) we will only guarantee prices for a short period @/ days or lessA for lodging)breakfasts) snacks and assorted non alcoholic drinks delivered on site or by our preferred suppliers.

'etPs recall the facts that ,ood O 6everage) and hopping and local transportation) are the mostrelevant revenue sources in the national marketB

/odging !evenues

'odging revenues are generated by each room available) and most of such revenues) if not all)are pre paid through reservations. While international tourists pay in ? $) domestic touristspay in 43,.

We seek to increase ? $ revenues for the highest possible #7*s.

!evenues ,rom $re,erred /odging u liers

While we will incorporate other hotels and hostels to our preferred suppliers) expanding theoffer to our prospects and generate extra revenues through a fee per referral) currently suchrevenue stream is considered negligible because our initial marketing efforts will focus onselling our rooms) not those of others.

Food & Beverage !evenues

To keep costs down and controlled) our food O beverage daily offer on site is simpleB

Continental) american) creole breakfast between 0am and ! am @or customi5ed prior agreementA.

nacks) such as assorted sweet and salty breads biscuits) cheese) fruits andvegetables) between "pm and ;pm.

#ssorted non alcoholic drinks such as mineral water) fruit =uices) coffee and tea arekept fresh in the living area throughout the day. Canned or bottled sodas) plain andflavored waters are available for a reasonable price.

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Inhouse

7ur offers will include ,O6 in the room rate @all inclusiveA. 6ut it the facilityPs areas allow it),O6 can become an important revenue source with offers) both to guests and outside visitors.

!evenues ,rom $re,erred Food & Beverage u liers

The incorporation as preferred suppliers of other restaurants of different specialties @chinese)italian) creole) =apanese) spanish) etc.A) as well as coffee houses) besides expanding the offer to our guests) generate extra revenues through a fee per referral.

!evenues ,rom 2uests ho ing in Inhouse Bouti5ue

This is a very recent trend in many international hotels. uality at very competitive prices.

!evenues ,rom Trans ortation % /ocal and '+road

+ntercity coach trips) chartered yachts for trips in the ,alcon coast) or to #ruba) 6onaire andCuraUao) as well as chartered flights) all generate extra revenues through a fee per referral.

Taxi services are incorporated as preferred suppliers) to ensure safe and comfortable trips atpreferred rates for our guests) but no revenues are expected from this service.

!evenues ,rom ther ervices

:ricing of services in this category vary a lot) depending on scope and sophistication) whichwill depend on very specific re>uests from our customers. The services mentioned next arepart of our standard offers) and can be expanded to other activities upon customersP specificre>uests.

Inhouse

,or many guided tours) we can provide the complete service. ,or exampleB

Walks around historical city sites. #ctivities in the desert dunes. 7ne day activities in the mountain range @trekking) biking) horse riding) etc.A. 7ne day activities in the beaches) nearby water cascades) rivers) and fresh or thermal

water ponds reservoirs.

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$re,erred u liers

:referred tour operators) private doctors and health clinics will be incorporated as preferredsuppliers and generate extra revenues through a fee per referral. 7ur short term @first !2monthsA plan is to select two or three suppliers for specific activities) i.e. canyoning and caveexplorations in the mountain range) one day round yacht trips to nearby cays and smallislands) fishing trips) executive medical exams) etc.

Cost tructureThe following are the main cost items in a tourism business in 4ene5uelaB

,ood and 6everages upplies

:referred and 7ther uppliers @9aterials) freight and laborA.

*epairs 9aintenance @9aterials) freight and laborA.

alaries O 6enefits @7wners and employeesA.

9arketing and 6usiness Travel.

:rofessional ,ees @+CTs) 'egal) Tax and #ccounting) etc.A.

$epreciation.

+nterest expense.

7ther @7ffice upplies) +CTs) +nsurance) 6ank Charges) :roperty Taxes) ?tilities andContingenciesA.

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The $ro osalsThis section presents specific information about one property currently for sale @ ee :roposal # A) andan option to partner via pro=ect e>uity to invest in a pro=ect led by me @ ee :roposal 6A .

# second property for sale that also met our specifications for conversion into a hostel was sold aweek ago @ ee :roperty old A) but some information is included as an example of what can be foundin the range of investments proposed herein. This information is very relevant) because this property isonly a mile away from the property considered in :roposal 6 as pro=ect e>uity.

#s of this moment) we havenPt found another suitable property for sale @we also searched for beachside locationsA) but we are willing to comb the market if investors confirm their commitment topurchase.

$ro osal ' % Investor wnershi

*escri tion

# hostel with 1 rooms) each with private bathrooms. %o hot water nor air conditioning. %icedistribution with central patio in the rooms area emulating local historic houses. # separatearea has the kitchen space) one office with bathroom) laundry area) deposit room) service areawith bathroom) and an open space @currently small parking space for three medium si5edvehicles and gardenA which is ade>uate for conversion into a medium si5e meeting room withcapacity for 2 persons) or a swimming pool) but not enough space for both. Considering thatseveral facilities at walking distance offer rental of meeting rooms) we would give priority to the

swimming pool.

/ocation

$owntown Coro) only two blocks away from the historic district) but far enough for not beingsub=ect to the historic districtPs strict building and architecture rules.

ize

'andB ";0)88 m2

ConstructionB / m2

/egal tatus

:rivate 'and with Title.

$ermits and Certi,ications

#lready operating as a hostel.

/0


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$ictures and Further *etails

CoroB httpB www.wcbienesraices.com verSinmueble.phpVinmuR!/"

Business Considerations eci,ic to This $ro osal

The limited space restricts the offer of meals to outside visitors and provide privacy to our guests at the same time) so for this proposal we disregard additional revenues from ,ood and6everages.

' verage !oom $rice

Considering location) ambiance) and levels of comfort and privacy delivered to guests) we canachieve ? $ 2 .2 @payable in 43,A for domestic tourists) and 8 . ? $ for internationaltourists. Fostels room rates in the area range from ? $ !2 ; ) only lodging) do not offer a

similar luxury) and charge prices for breakfast) snacks and beverages similar to other restaurants in the city of Coro.

u+contracted ta,, and Business )anagement ervice

To achieve a proper level of service delivery) forecasts include salaries and legal benefits)training twice a year) personal accident insurance) and allowances for pri5es to specialachievers and for special assistance to four persons supplied by the local taff and 6usiness9anagement companyB one manager) one cook and day shift concierge) one night shiftconcierge and one day shift assistant.

Initial Investment

:urchase of the property entitles the investor to ! K ownership of the assets.

Total initial investmentB ? $ 1;)"0D.

:urchase including transaction costsB ? $ 8 )2!8

,unds to upgrade existing facilities) re furnish eight rooms) as well as social andservice areas) and build the swimming poolB ? $ D)2/!

,unds for ; months working capitalB ? $ 20) //

/1
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Forecast % Income tatement

Break%even 'nalysis

)inimum Total ' ! with $lanned 'verage !oom $rice

6reak even is reached with the following minimum #verage 7ccupation *ates @#7*AB

Zear !B ; K

Zears 2 O /B "2Kuch rates are below the countryPs #7* of between 0 1 K) and substantially lower than

,alcon tatePs #7* between 1 D K.

/D


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)inimum 'verage !oom $rice with Ex ected Total ' !

6reak even is reached with the following minimum #verage *oom :rices in ? $B

Zear !B $omestic !1.D) +nternational ";.0

Zears 2 O /B $omestic ! .0) +nternational 2;."

Within a !2 kilometers radius) only three hotels provide a similar service and ambiance at

almost double our proposed average prices @? $ 2 .2 for domestic tourists) 8 . ? $ for international touristsA) while there are no hostels with a similar luxury offering. Fostels roomrates in the area range from ? $ !2 ; ) and usually) these only include lodging. 7n the,alcon state east coast) in the 9orrocoy %ational :ark some Q!" kilometers from Coro) thereare a few hostels providing similar service and ambiance at more than double these prices.

There is good space to increase benefits beyond the forecast) through active revenuemanagement leveraging on the differentials in room prices against the competition.

$ro osal B % $ro9ect E5uity

*escri tion

+nitially a family country house) has been expanded into three buildingsB

!. The main house with 1" m2 and ; m2 terrace) is a three bedroom) two bathroomresidence to be converted into a six bedroom chalet with a social area.

2. # ! m2 warehouse with a private room and two bathrooms to be converted into thereception lobby and concierge office.

/. #n incomplete 1 m2 building @lacking roof and wallsA to be converted into another sixbedroom chalet.

There is no hot water nor air conditioning. 3xtensive spaces provide freedom for creativeexpansion) and is easily landscaped to create beautiful walkways. The initial investment pro=ectincludes a kitchen space with restaurant) a meeting room with capacity for / persons) alaundry area) landscaping) and a swimming pool. There is plenty of space for parking vehiclesof any si5e and future expansion.

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/ocation

#t the northwest of 4ene5uela) less than / minutes driving from Coro airport @CY3A and Dminutes from 'as :iedras airport @' :A in the ,alcon $uty ,ree Yone. +t is close to beaches)rivers) lakes and desert sand dunes) in the warm pristine environment of the ,alcon mountainrange.

ize

'andB Q! ) m2

ConstructionB 6uilt 2" m2) :ending roof and walls 1 m2


The following link will take you to a :$, file with the vision for the whole mart Tourism Fub@ TFA pro=ect. :lease note that the initial investment proposal presented below is for placing inoperation a small portion of the TF pro=ect) as further described next in the +nitial +nvestmentsection.

iburuaB TF pro=ect description

/egal tatus

9unicipal 'and :rotected Yone located in the city of Coro @Y: 1A sub unit C!) with perpetuallease) registration of ownership in the %ational *egistry) and registration in the %ational 'and+nstitute @+nstituto %acional de Tierras +%T+A.


Certification of ?se by the 9inistry of 3nvironment @9inisterio del #mbiente 9+%#96A

Business Considerations eci,ic to This $ro osal

The kitchen and restaurant areas enable the offer of meals) both for guests and outsidevisitors) and the uni>ue ambiance) with landscaping) walkways and swimming pool) provide acomfortable and attractive venue for many types of events) both for corporate and familygroups. We have included estimates of additional revenues from ,ood and 6everages andtheir associated costs in the forecasts for this proposal) but have not included estimates for events.

' verage !oom $rice

Considering the location) uni>ue ambiance) and levels of comfort and privacy delivered toguests and visitors) we can achieve ? $ 2;.// @payable in 43,A for domestic tourists) and; . ? $ for international tourists.

Fostels room rates in the area range from ? $ ! " ) only lodging. Their ambiance is verysimple @mainly rural type offeringsA) where >uality of service lags. They also charge prices for

"!
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breakfast) snacks and beverages similar to prices of restaurants in the city of Coro) given their high demand) specially during weekends and public holidays.

u+contracted ta,, and Business )anagement ervice

To achieve a proper level of service delivery) forecasts include salaries and legal benefits)training twice a year) personal accident insurance) and allowances for pri5es to specialachievers and for special assistance to ! persons supplied by the local taff and 6usiness9anagement companyB one manager and day shift concierge) one day shift assistant) onecook) ! waiter) 2 security day shift) ! maintenance day shift) one night shift concierge) 2security night shift.

Initial Investment

+nvestment in the form of pro=ect e>uity entitles the investor to 8 K ownership of the pro=ect.

Total investorsP e>uity investmentB ? $ ! 2)220.

,unds to upgrade existing facilities) conversion of buildings and rooms into a !2 roomhostel divided in two chalets) build the independent kitchen space with restaurant)separate meeting room with capacity for / persons) separate laundry area) externallandscaping and a swimming pool) furnishB ? $ 81)";2.

,unds for ; months working capitalB ? $ "/)0;;.

"2


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Break%even 'nalysis

)inimum Total ' ! with $lanned 'verage !oom $rice

6reak even is reached with the following minimum #verage 7ccupation *ates @#7*AB

Zear !B 8/K Zears 2 O /B /0K

uch rates substantially lower than the countryPs #7* of between 0 1 K) and ,alcon tatePs #7* between 1 D K.

"/


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)inimum 'verage !oom $rice with Ex ected Total ' !

6reak even is reached with the following minimum #verage *oom :rices in ? $B

Zear !B $omestic 22.2) +nternational 8 .;

Zears 2 O /B $omestic !!.1) +nternational 2;.D

Within a !" kilometers radius) only three hotels provide a similar service and ambiance at

almost double the average prices @? $ 2;.// for domestic tourists) ; . ? $ for international touristsA) while there are no hostels with a similar luxury offering. Fostels roomrates in the area range from ? $ ! " ) and usually) these only include lodging. 7n the,alcon state east coast) in the 9orrocoy %ational :ark some Q!; kilometers from the location)there are a few hostels providing similar service and ambiance at more than double theseprices.

There is good space to increase benefits beyond the forecast) through active revenuemanagement leveraging on the differentials in room prices against the competition.

$ro erty old

*escri tion

# family country house) three bedroom) two bathrooms) could be converted into a six bedroomchalet) including the reception lobby and concierge office. #n empty two stories building couldbe converted into another six bedroom chalet. %o hot water but air conditioning in the house.

#mple spaces provide freedom for expansion) and could be easily landscaped to createwalkways) merging these into the riverside in the backyard. The swimming pool is operational.The initial pro=ect would have included a kitchen space with restaurant) a medium si5e meetingroom with capacity for 2 persons) a laundry area and landscaping. The land provides enoughspace for parking vehicles.

/ocation

#t the northwest of 4ene5uela) less than / minutes driving from Coro airport @CY3A and Dminutes from 'as :iedras airport @' :A in the ,alcon $uty ,ree Yone) close to beaches) rivers)lakes and desert sand dunes) in the warm pristine environment of the ,alcon mountain range.This property is a mile away from the property considered in :roposal 6 @pro=ect e>uityA.

""


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ize

'andB !)! m2

ConstructionB !D1 m2


iburuaB httpB www.wcbienesraices.com verSinmueble.phpVinmuR!2;

Initial Investment

:urchase of the property would entitle investor to ! K ownership of the assets.

The listed sale value) including transaction costs) was ? $ 2") ) but a co owner advisedthat a mini bidding took place among a few prospect buyers) pushing the final sale value to? $ 20) . We estimated that an additional investment of ? $ "8) 8 ) wouldupgrade this property) including conversion of buildings rooms and refurnish) i.e. a totalinvestment of ? $ ;D) 00) could have placed in operation a fancy ! room hostel inthis property within " 8 months.

/egal tatus

9unicipal 'and :rotected Yone located in the city of Coro @Y: 1A sub unit C!) with perpetuallease and registration of ownership in the %ational *egistry.


*esidential) convertible to commercial tourism facility.


% #

Forecast % Cash Flow tatement

% #

Break%even 'nalysis

% #

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Com aring $ro osal ' vs $ro osal B

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Financial *etailsFinancial !isk )anagementTo provide a world class level of confidence to investors) for these and future pro=ects) we are capableand recommend managing the most relevant risks associated with misappropriation) fund allocationand ,I. This structure also assists in creating precise audit trails for internal control purposes.

Investment Trust to )anage )isa ro riation !isks

# trust may be set up in an international bank selected by investors) whether as individuals or as corporations) and the trustee bank would then fund pro=ects following specific instructionsfrom investors. $epending on the domicile of the bank selected) this could represent a cost of

. !K .!K of the total investment.

0ater,all 'ccounts to )anage Fund 'llocation !isks

This financial structure may be configured with three accountsB

!. #n offshore investment account for receivables and payables in ? $) includingrevenues) e>uity investment calls and funds for further distribution to ownersP individualaccounts.

2. #n operating account in ? $ that receives transfers from the investment account prior agreement and instructions delivered to the managing bank) usually the trustee.

/. #n operating account in 43, in a local bank to fund investments and working capital)usually funded to cover up to three months of operations.

F" )anagement to )anage F" !isks

Consists in integrating a specific process into the overall business processes to managecurrency conversions) ensuring constant monitoring of ? $ 43, rates and conversion costs)increasing arbitration gains by planning ahead each foreign exchange operation. 'oss or gainsare created by the timing of any ,I transaction.

$remises and Ex lanations 4nderlying the Forecasts

easonality) the demand variations during a year) is the most acute issue because of the fact thattourism products cannot be stored available rooms perish each day they are not sold) and with them)related services also perish. ,urthermore) since the fixed cost element of any tourism operation doesnot change between seasons) the concerns of a successful tourism entrepreneur are managing thismin max dualityB

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9inimi5e costs without harming the value delivered to guests.

9aximi5e the demand outside the peak seasons.

,orecasts are provided for annual periods in a three year time hori5on. These forecasts are further detailed and extended in time for the full blown business plan.

7ur short term @first !2 monthsA plan should seek at least 2 K of the #7* generate revenues in ? $)while 1 K of #7* or less generate revenues in 43,. This considers the fact that at the initial stage itis easier and less expensive to attract domestic tourists.

9id term onwards @! / years and beyondA) we should seek to increase ? $ revenues for the highestpossible #7*s. While it is unrealistic to expect ? $ revenues to reach ! K of #7*) " K would be areasonable average in the mid term) and ;8K would be a reasonable average in the long term. Thistakes into account that domestic tourists are very active during seven months @since the end of -uly toearly %ovember four months) and -anuary to 9arch three monthsA) and there are few windows of time whithin these periods when we are able to deliver experiences for international guests withoutthem having to conmingle with a lot of domestic tourists.

$remises

Conversions from ? $ to 43, are calculated as followsB

43, ;8 x ? $ for initial investments. Trusted traders currently advice exchange ismade at 43, 0 0" x ? $.

43, "D x ? $) for distributions to owners) we donPt envisage other outflows in ? $.,or fully registered tourism operations) a rate of 43, !! x ? $ could be possible..

#s mentioned) in the 3xecutive ummary) *ecommendation) circumstances may impactrapidly on ,I rates) and subse>uently) on the forecasts.

The following premises give due consideration to seasonality and the marketing effortsre>uired to maximi5e occupancy during the low seasons.

Total #7*B ;8K for year !) 1 K for years 2Q

$omestic #7*B 1 K for year !) 8 K for years 2Q

+nternational #7*B 2 K for year !) 8 K for years 2Q

#verage room price allows 2 guests in the room) and includesB ,ood O 6everage) i.e. breakfast) snacks and non alcoholic drinks.

Transportation to from local airport or bus terminal.

# discount for single occupancy) i.e. for one person in the room) could be in the rangeof ! !8K.

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,ood and 6everages upplies consider each guest consumes ! K of rations per person.

*evenues from :referred 'odging uppliersB K for year !) 2 K commission for years2Q

+nhouse bouti>ue revenues are net of costs of goods sold) i.e. net margin from sales.uch net margin is fixed at 2 K for calculations) in fact it is variable) but 2 K is very

feasible.

#t this moment we will not attempt to provide an estimate of revenues) neither for Transportation nor 7ther ervices.

43, inflation is deemed to be the same as the rate of devaluation of 43, vs ? $) with5ero impact on ? $ forecasts. ? $ inflation is not considered) as we donPt envisageany expenditures in ? $.

*epairs 9aintenance include materials) freight and labor.

alaries O 6enefits are exchanged for a fee payable to the local staff and businessmanagement company. The fee is computed as total incurred costs Q 2 K. $etails areprovided regarding position and number of staff in each proposal) as well as salariesand benefits @total incurred costsA.

9arketing and 6usiness Travel include an estimate of basic marketing costsconsidering direct marketing @presentations) e mails) 9 A) and proprietary web pageincluding links to the hostel pages in 'inked+n) ,acebook and a 6log for 4isitors

@4isitorsP 'og 6ookA. :rofessional ,ees include monthly retainers for +CTs) 'egal) Tax and #ccounting

support.

7therB 7ffice upplies) +CTs) +nsurance) 6ank Charges) :roperty Taxes) ?tilities arebundled in monthly payments.

# reserve for Contingencies is fixed at 8K of cash disbursements.

$epreciation may change depending on maintenance) investments on refurbishments)tax management) and the application of local versus international accounting [email protected].) 43%


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Exit trategy (*ivestiture#elling the $ro erty or elling the Business

The customary process for selling a property is as simple as buyingB once the negotiation is completedthe buyer pays the agreed price and usually) the same realtor acts as the legal advisor of thetransaction to transfer the property title) thus reducing substantially the closing costs to about /K 8Kof the sale value. The legal advisors prepare the documentation in the form re>uired by the nationalregistry) where the transaction is registered and the transfer of title of the property is legally fulfilled.

When selling a property) income tax is calculated and paid on the excess between the sale value andthe original purchase price plus ac>uisition costs) improvement costs and registration duties. Carefulplanning is re>uired to initiate the sale process and avoid unforeseen expenditures.

elling the business usually takes the form of the sale of shares in the K of e>uity that they represent.+t is customary not having to declare the sale of shares to the tax authorities) and its legally bindingonly to sign the transfer of shares in the companyPs shareholders registry managed by the companyPslawyers.

+n both cases) whether selling the property) or selling the business) after negotiation is completed) apartial payment is made by the buyer) an agreement is signed by the parties) and a date is agreed toclose the transaction and for the buyer to make the final payment.

7nce the buyer and seller agree terms) if all the re>uired documentation is in good order) the standardprocess can take as little as two to five business days.

+t is not uncommon to close sales payable in ? $) but buyers with ? $ tend to seek that the seller accept the highest possible 43, rate.

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u orting In,ormationThe onsorsThe sponsors are three 4ene5uelan individuals leading a team of professionals in relevant business areas@tourism) energy) business management) marketing) corporate and pro=ect finance) human capitalmanagement) +CTs) academics) etc.A

Internet /inks to 'dditional Images and Videos +mages of ,alcon tate @4ideo from Zoutube) !D minutesA

ources and /inks to 'dditional In,ormation9uch of the information in this report has been gathered and prepared by the authorB ADN L6D:R ADNT3R64. . %ext are external sources of most relevant and additional informationB

World 3conomic ,orum Travel O Tourism CompetitivenessB httpB reports.weforum.org travel andtourism competitiveness report 2 !/

:rivate agency for foreign investmentsB www.conapri.org

Central bankB www.bcv.gob.ve

'ocal e newsB www.vtv.gob.ve ) www.ultimasnoticias.com.ve ) www.eluniversal.com)

www.globovision.com ) www.el nacional.com 4ene5uela ,7*3IB httpB www.reuters.com article 2 !" / 2" vene5uela currency

id? '!% 9' ^62 !" /2" ) httpB time.com 2!"0 vene5uelas currency controls propels those withconnections )httpB online.ws=.com news articles 6! !"2" 820 2/ /D"D0 "80D"80";22!;01/;"; )httpB www.eluniversal.com economia !" "28 colgate palmolive profits down after vene5uelas forexreform

China 4ene5uela relationsB httpB ve.chineseembassy.org chn ) httpB www.fmprc.gov.cn mfaSeng w=bS;;// " 55=gS;;//" ldm5sS;;"D82 g=lbS;;"D8; /8/1S;;8!81 )

:ublic afetyB httpsB www.gov.uk foreign travel advice vene5uela safety and security )httpB www.smartraveller.gov.au 5w cgi view #dvice 4ene5uela

4ene5uela overall informationB httpB www.al=a5eera.com indepth opinion 2 !" 2 vene5uela no fly5one 2 !"2!8!!/!"001""!;.html ) httpsB www.cia.gov library publications the worldfactbook geos ve.html ) httpB www.worldbank.org en country vene5uela overview

7wning a propertyB httpB www.globalpropertyguide.com 'atin #merica 4ene5uela 6uying


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' endixIn5uiries ,rom :uly ;;?

!EFE!E-CE* T $'2E I- T3E !E$ !T

Economics

!. What are the policies of 4ene5uela for foreign investmentV $oes it provide a open and friendlyenvironment for foreign investmentV ee ,oreign +nvestment

,or example) does it allow the free flow and movement of ? $ in and outV ee ,oreign Currency3xchange @a.k.a. ,7*3I or ,IA

Fow about its public securityV +s it a safe countryV ee :ublic afety

Can 4ene5uela provide any preferential policies and incentives for foreign investorsV ee +ncentivesand :rotection to ,oreign +nvestors

2. WhatPs the policy of property right in 4ene5uelaV + will own this hostel for life long or under a certainyears periodV +f itPs the latter one) how many years of the property right do + have under the4ene5uelaPs lawV What are the procedures for the property right transition @from the previous owner tomeAV #nd how long does it takeV Fow much will it cost for the transition processV ee 7wning:roperty vs 7wning a 6usiness

/. What are taxes and insurances that do + need to face in this caseV This is a big >uestion that havemany sub >uestions. ,irst) after purchasing) do + need to pay a certain K of taxes on annual baseV 7r

=ust pay one time for all T#I3 during the transitionV :lease show a full list of all taxes + need to faceand their rates respectively. econd) what are the insurances and other fees charges for completingthe property right transition under 4ene5uelaPs lawV :lease show a full list also. ee 7wning :ropertyvs 7wning a 6usiness ) and 6anking and 7ther ,inancial ervices

". What are the labor policy regulation in 4ene5uelaV This is very important. #s you know) after purchasing) the running team will be mainly made up of local people) like servants) securities) guide)cookers) drivers ect. + want to know what responsibilities and duties as a owner need to bear under 4ene5uelaPs labor lawV ,or example) do + have the right to hire and fire local people on my ownwillingV Fow much the minimum wageV What the welfares do + need to provide for all the employeeslike holidays) medical insurance coverage) bonus sharing etcV ee 'abor 'aws and *egulations

8. WhatPs the policy for foreign currency ? $ movementV Can + transfer the money out of 4ene5uelafreely and without annual amount limitV ee ,oreign Currency 3xchange @a.k.a. ,7*3I or ,IA

;. $oes 4ene5uela allow to open a casino in the hostelV +s the gambling legal in 4ene5uelaV eeuit) what are the 4ene5uela lawsand regulations for withdrawalV +n the withdrawal process) are any taxes fees charges occurredV ee3xit trategy @$ivestitureA

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1. ,or any foreign investment) is it mandatory for hiring a local lawyer to represent the owner toconduct all the legal activitiesV Fow about the lawyers access in 4ene5uela and what are their chargesV ee ,oreign +nvestment

Business Framework

!. $oes the foreign investor have access with the financing from the local or +nternational banks in4ene5uelaV ,or example) pay the purchasing by installmentsV $oes it accept the international creditcards like 4isaV What are banks loan policies for foreign investorsV What are their interest ratesV ee6anking and 7ther ,inancial ervices

2. Fow about the investment and profit ratio in this businessV +s it a good business for investing ahostel in 4ene5uelaV everal sub >uestions arise like) !. Fow much the price that + can charge for staying one night per roomV 2. Fow much the rate of rooms occupied constantlyV ; K) 0 K or it canreach the perfect ! KV /. Fow long does the period of slack season last in a yearV ". Fow long does

it take to regain the investmentV ee The Tourism 9arket and The :roposals

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'*- /I*E! ur )ission

+ntegrate the process of creating and developing effective leaders in public and private entities.

7ur uni>ue $%# systemB $evelopment) %utrition) #musement) combines professional developmentwith the comprehensive development of each person.

'*- T4!I )

ur )ission$eliver eco and agro tourism services and packages that are safe) timely and pleasant) at competitiveprices) in destinations of the West Central 4ene5uela axis and neighbors in the Caribbean eaB #ruba)6onaire and Curacao) integrating and developing regional networks of related services.

Values afety

Timeliness and punctuality

:leasure and fun for the whole family

Customi5ed program designed by the customer

'egality and confidence

Fuman resources trained and fit for their duties

/e" B www.adnlider.com

ffice B 9onday through ,riday ! B am a ;B pm @Caracas timeA

#ddressB #v. -osefa Came=o) v(a #eropuerto -os_ 'eonardo Chirino @CY3A) entre calles $uvisi

y -ansen) 3dificio $#%+ !) :6) Coro) 3do. ,alcJn) 43%3Y?3'#.TelephonesB Q81 2;1 1 1";!0
http://www.adnlider.com/http://www.adnlider.com/

STH Prospect 2014 08.pdf

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Transcript of STH Prospect 2014 08.pdf