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The
Corrupcion of Democracy in Venezuela
By
Gustavo Coronel
Under
Pres. Hugo Chavez’s regime the
last nine years, corruption has
reached heights undreamed of by even the greediest of despots,
as the
people of Venezuela have been fleeced out of billions of dollars.
HUGO
CHAVEZ was elected president of Venezuela in December 1998
on the strength of three main promises: convening a Constituent
Assembly to write a new constitution and improve the state,
fighting poverty and social exclusion, and eliminating corruption.
Nine years later, it has become evident that the Constituent
Assembly primarily was a vehicle to destroy all existing
political institutions and replace them with a bureaucracy
beholden
to his wishes. Poverty and social exclusion remainas prominent
as before, while the levels of government corruption are higher
than ever.
Today, the nation is locked in an intense struggle between
the defenders of democracy and a president intent on becoming
a dictator bfor life. Chavez’s latest attempt to push
a constitutional reform that would have allowed him unlimited
opportunities for reelection was defeated by a margin that
official figures put at two points, but independent analysts
place at five to 10 points. In negotiating the narrower margin
with
a National Electoral Council largely under his control, Chavez
managed to appear magnanimous in defeat, but he is not a democrat,
and he will keep trying to become president for life in any
way he can.
Venezuela has been characterized by the persistent presence
of political and financial corruption in public administration.
In 1813 and, later, in 1824, national hero Simon Bolivar felt
it necessary to issue
decrees defining corruption as “the violation of the
public interest.” He established the death penalty for “all
public officers guilty of stealing 10 pesos or more,” including “those
judges who disobey these decrees.” In 1875, the finance
minister at that time confessed, “Venezuela
does not know to whom it owes money and how much. Our books
are 20 years behind.” One hundred years later,
the General Comptroller under Pres. Luis Herrera would describe
the state of the country’s
finances in almost identical terms,
as “a system totally out of control.”
In
the early 20th century, the long dictatorship of Juan Vicente
Gomez was plagued by high corruption, but it was limited to
the dictator’s immediate collaborators. A similar situation
prevailed during the military dictatorship of Marcos Perez
Jimenez, from
1948-58. This situation of administrative disarray was replaced
during the 1960s by a period of high transparency in the management
of public wealth at the hands of democratic presidents Rómulo
Betancourt, Raúl Leoni and Rafael Caldera.
During these years, Venezuelan democracy became the political
model to be imitated in Latin America, comparing favorably
with the dictatorships of the left and right that prevailed
in those
years, and becoming a haven for thousands of Latin American
political exiles looking for freedom.
In
the mid 1970s, the management of national assets deteriorated
significantly, as the country experienced a sudden oil windfall
that tripled fiscal income. The ordinary men in charge of
the government were exposed to extraordinary temptations.
Faced with such riches, Pres. Carlos Perez established a program
called “The
Great Venezuela,” a tropical version of Mao Tse-Tung’s “Great
Leap Forward”in
China that ended in financial and social disaster. The government
poured close to $2,000,-000,000 into industrial projects designed
to convert southern Venezuela into another
Ruhr. At one point, the country was home to more than 300 state-owned
companies, none of which was profitable. As a result of the
significant government expenditure and insufficienten forcement
of regulations, corruption spun out of control. Up until then,
graft had been restrictedto the ruling elites, but now many
Venezuelans started to participate in the abuse and misuse
of public funds.
By 1980, the country had fallen into debt
to the
internationalbanks, victim of the so-called “Dutch disease” that
affects Third World petrostates that depend almost solely on
hydrocarbon exports for national income.
From
1980 onwards, Venezuelan corruption has remained high. Particularly
grave was the administration of Pres. Jaime Lusinchi from1984-94,
which saw
some $36,000,000,000 pilfered or stolen mainly through a corrupt
exchange control program, according to an estimate by Venezuelan
sociologist
Ruth Capriles at the Caracas Andres Bello Catholic University.
Soaring corruption during the Lusinchi period resulted from
several
factors, including weak political institutions, lack of administrative
controls, too much money circulating in the financial system
of the government, and, above all, populist leaders promoting
a welfare state in which hard work and social discipline were
not encouraged. In 1997, the Caracasbased nongovernment organization
Pro Calidad
de Vida estimated that some $100,000,-000,000 in oil income
had
been wasted or stolen during the last 25 years.
As
the 20th century came to an end, Venezuela was ripe for significant
political change. The main contenders in the 1998 presidential
election—paratrooper
Hugo Chavez and former Governor of the State of Carabobo, Henrique
Salas—promised
radical political change. Venezuelans perceived Chavez as someon
ewho looked and spoke like them and could, therefore, represent
them better. His electoral promises were crucial in winning
the votes of the majority.
In
his inaugural speech, in January 1999,Chavez called for a “political
revolution” before tackling social or economic issues.
Taking advantage of the popular euphoria following his victory—and
in violation of the existing constitution—he
convoked a Constituent Assembly possessing absolute power to
write anew constitution and to “redefine
the state.” This Assembly, made up of his followers,went
on to dissolve the democratically elected Congress and dismiss
all the members of the Supreme Court, as well as the Attorney
General, the General Comptroller, and most of the judges in
the country, only to replace them with bureaucrats loyal to
the president. In a letter to the Supreme Court, Chavez stated
that “
the president had exclusive authority on the management of state
affairs,” thus appearing to place himself above the law.
In November 1999, the new Minister of Foreign Affairs, Jose
Vicente Rangel, gave a
speech in which he put forward the position of the government
regarding corruption. He said that, from then on, public office
would follow ethical norms, that corruption had already cost
Venezuela too much in economic, social, and spiritual terms,
and that
the new judicial system and the new Civic Power, incorporated
in the new constitution, would combine to combat corruption.
That is not what has occurred, however.
In
the nine years since Chavez came to power, an estimated $300,000,000,000
of oil income has entered the national treasury. The exact
number
is uncertain due to the poor transparency of the government
accounts, and because the national petroleum company no longer
presents financial results to the U.S. Securities Exchange
Commission or to the Venezuelan people. In parallel, during
Chavez’s tenure, national debt has increased from $22,-
000,000,000 to about $70,000,000,000. Together with income
tax revenues, the total income of Venezuela during Chavez’s
presidency has been approximately $700,000,000,000. This formidable
amount of money is nowhere to be seen in terms of public works
or effective health and education programs.
Three parallel budgets existed—totaling more than $80,000,000,000—in
2007: the formal one, for some $55,000,000,000 (including additional
amounts), approved without discussion by the submissive National
Assembly; a second one, amounting to $10,000,000,000, derived
from the international monetary reserves taken from the Venezuelan
Central Bank, in violation of the laws of the country; and
a third, in the amount of $15,000,000,000, built from the funds
siphoned out of Petroleos de Venezuela,
monies which were required for investment and maintenance of
the petroleum industry. None of these budgets are discussed publicly
or subject to accountability.
Irregularities abound in the management of public funds: more
than $22,500,000,000 in dollar transfers have been made to
foreign accounts, maintains the Venezuelan Central Bank, and
at least half of that money remains unaccounted for.
Jose Guerra, a former Central Bank executive, indicates that
some of this money has been used by Chavez “to buy political
loyalties in the region . . . and some has been donated to
Cuba and Bolivia,
among other countries.”
According to a Jan. 31, 2006, story in the Financial Times,
a select group of Venezuelan bankers, including those at Banco
Occidental de Descuento and Fondo Comun, has profited from
the acquisition of Argentinean bonds by the Venezuelan government,
at the expense of the national treasury. The bonds are bought
at the official rate
of exchange and sold at black market rates, at considerable profit.
Venezuelan journalist Carlos Ball estimates that bankers loyal
to the government could have profited by up to $600,000,000
as a result of the differential between the official and the
black market rates. Former Chavez Minister of Finance Jose Rojas
has predicted that “the loss of autonomy of the Venezuelan
Central Bank and the disorder in the management of the financial
resources on the part of the government will lead to a significant
financial crisis.”
The nine years of Chavez’s presidency have led to the highest
levels of government corruption ever experienced in Venezuela.
The main reasons have been: the record oil income obtained by
the nation, money going directly into Chavez’s pockets;
a mediocre management team working without transparency or accountability;
the ideological predilections of Chavez, which have led him to
try to play a
messianic role in Latin America, and even world affairs; and
the policies of handouts put in place by Chavez to keep the Venezuelan
masses politically loyal.
Corruption,
Inc.
Corruption
perceptions index 2006
Corruption perceptions index 2007
Transparency
International / www.transparency.org
Three major areas of corruption have emerged during the
Chavez presidency: grand corruption, derived from major
policy decisions made by Pres. Chavez; bureaucratic corruption,
at the level of the government
bureaucracy; and systemic corruption, taking place at the
interface between the government and the private sector.
Examples of grand corruption include: The acceptance by Chavez
of foreign
contributions for his presidential campaign and even after his
election. In 1998 and 1999, the Spanish bank BBVA
(Banco Bilbao Vizcaya Argentaria) allegedly contributed substantial
amounts of money to Chavez’s
presidential campaign and, later, after he already had been inaugurated
as president. The former president of the bank, Emilio Ibarra,
admitted authorizing two deposits, one for $525,000 in 1998 and
another for $1,000,000 in 1999, to finance Chavez’s
political activities. In 2006, the government of Spain tried
Ibarra for
these and other irregularities.
Expenditures and promises made to political leaders and
countries of the Western Hemisphere, in order to buy their political
loyalties. The Chavez
government has disbursed or promised an estimated $70,000,000,-
000 to foreign leaders and their countries.
These expenditures include some $2,000,- 000,000 per year in
oil subsidies to Cuba; about $4,000,000,000 in the acquisition
of Argentinean commercial papers; an estimated $300,000,000
in cash donations to Evo
Morales in Bolivia; the promise of building up to $20,000,000,000
worth
of refineries in Jamaica, Paraguay, Nicaragua, Brazil,
Ecuador, and nine other countries and a $25,000,000,000 gas
duct from
Venezuela
to Argentina; and acquisitions of about $6,000,000,000
worth of sophisticated weaponry from Russia, China, Belarus,
and other countries. Many of the promises never will be
fulfilled, but the fact remains that these expenditures and
promises have
been made directly
by Chavez, without consulting the people of Venezuela or
following normal administrative procedures.
Social programs run by the military in 2000-02.
Soon after becoming president,
Chavez established programs called Bolivar 2000 and Central
Social Fund run by the armed forces and designed to do social
work. Journalist Agustin Beroes reports, however, that the
execution of this program
left much to be desired. It became a vehicle for the personal
benefit
of its managers—officers such as Victor Cruz Weffer
and William Farinas.Some $700,000,000 was put into these
programs and, at least half of it remains unaccounted for.
The Central
Social Fund, for instance,
gave a $500,000 grant to an organization run by the wife
of Horacio Perez, Commander Farina’s personal
driver.
Acquisition of the $65,000,000 presidential airplane.
After visiting the Middle East and traveling in an Airbus owned
by the royal
family of Qatar, Chavez decided he wanted one just like it.
In violation of article 314 of the Venezuelan constitution
and the
laws regulating government expenditures, he bought an A319-133X without
budgetary provisions to acquire it and after saying in numerous
public speeches that he would get rid of all government aircraft
because there already were too many of them.
Corruption at the State of Barinas Sugar Mill. This
Chavez pet project is run by the military and Cuban advisors.
A group of
about 17 officers and their advisors have been chargedwith
pilfering or pocketing some $1,300,000
from the accounts of this project. Worse, the 62nd Army Engineers
Unit has been charged with squandering $1,500,000,000 of
the $2,600,000,000 appropriated for the project. The Minister
of
Agriculture admitted
to malfeasance for not revealing these facts
when he became aware of them. His explanation?“ We
were in the midst of parliamentary elections and did not
want to create a scandal damaging to our government.”
Bureaucratic corruption has the government involved in bribery,
extortion, stealing of public funds, abuse of political power,
nepotism, and other varieties of illegal or unethical use of
public assets. Examples
include:
Government
contracting is done mostly without bidding. Although the
law stipulates that all
government contracting should follow bidding procedures,
except in cases of national emergency properly defined as
such, the
Venezuelan chapter of Transparency International estimates
that 95% of all known public contracts during the last
decade have
been awarded without bidding. This is a major source of personal
enrichment for corrupt government officers. An example of
this is what has taken place in the State of Carabobo, where
Gov.
Acosta Carlez publicly has stated that he has given some
800 no-bid contracts involving tens of millions of dollars.
His
argument? “We
are always in an emergency here.”
Corruption
at the Supreme Tribunal of Justice. In early 2006,
a major scandal erupted when
the Minister of the Interior accused one of the magistrates,
Luis Velazquez Àlvaray, of stealing public funds
in the acquisition of a building for the Court. Àlvaray
counterattacked and accused Vice Pres. Rangel, as well
as Interior Minister Jesse Chacón and National Assembly
Pres. Nicolas Maduro, of running a gang of corrupt judges
called “The
Dwarves,” specialized in protecting drug traffickers.
All of these allegations came to naught. Àlvaray
left the country, and the bureaucrats he accused remained
in their
jobs.
Corruption at the National Electoral Council. The performance
of the NEC under the political control of Chavez has
led to widespread distrust among Venezuelans. The decisions
of this
body always have been biased in favor
of the government, even during the recent referendum
which
the government lost by a margin of more than six points.
Negotiations by Chavez with the president of the NEC
led to official figures
that showed a much narrower margin. Reports by international
observers from the Organization of American States (OAS),
European Union (EU), and Spanish Parliament during
the electoral events of 2004 and 2005 state that the
Council lacks transparency and that its members should
be selected
properly for impartiality.
Particularly grave is the situation of the electoral
registry. It has grown by more than 2,000,000 voters
in the last
three years, a statistically improbable figure. Still
worse, these
voters have no proper addresses or reliable identities,
making them “virtual” voters that could be
used by the government to swing any election unless there
is very rigid
monitoring by the opposition. Uruguayan analyst Adolfo
Fabregat found 39,000 voters that were shown to be older
than 100 years of age, and
one was
listed as being 175. A man called Jose Gregorio Gonzalez
Rodriguez,
born Aug. 4, 1962, is listed 62 times under different
identity card numbers, and therefore is able to vote
that many
times. Examples like this number in the thousands and
have been documented properly and presented to the OAS
for analysis,
so far without result.
High
levels of mismanagement at the state-owned petroleum company,
Petroleos de Venezuela. Corruption
here takes many shapes. It includes the naming of
six presidents and boards in seven years, in an effort
to control the
company politically. This finally was accomplished
by naming the
Minister of Energy and Petroleum president of the
company, in violation
of good management practice, since he now supervises
himself. As a result, oil production has declined
by some 800,000
barrels per day during the last decade. In a recent
public hearing,
Luis Vierma, the firm’s Vice President for
Exploration and Production, admitted giving an oil
well drilling
contract for some $20,000,000 to a company with only
three employees and no rigs.
Systemic corruption, meanwhile, takes place when
government bureaucrats and the private sector interact
in a permissive
environment where money flows abundantly and without
controls. Examples include:
The emergence of a new,
rich, “revolutionary
bourgeoisie” that
drives Hummers, sports Cartier and Rolex watches,
and wears Ermenegildo Zegna suits. They
buy luxury apartments in the U.S. and Europe, fly
in
private jets, and, salesmen say, always pay in cash.
Wilmer Rupert was a minor associate of an international
company a few
years ago; today, he is quite rich, thanks to obtaining
a
large share
of contracts from the state-owned oil company. Rupert
has bought a television station and, as a present
to the government, recently spent $1,600,000 to acquire
two pistols that belonged to Simon Bolivar at auction
at Christie’s.
Private corporations that deal with the government
are owned by government
officers. Government officers own companies
that do business with the government, but conceal
this fact by working
through
private
intermediaries. Kenneth Rijock, a financial analyst,
notes that these types of corporations have sprouted
under Chavez.
He
mentions major agribusiness organizations such as
ProArepa, the main supplier of food for government handout
programs. Rijock
also points to a large grain transport group “rumored
to be owned by Chavez’s brother, Adan.” Officers
of record of ProArepa include Ricardo Fernandez Berruecos,
whose private jet recently was detained by the U.S.
government at a Florida airport for not having the
proper documentation
of ownership. Journalist Patricia Poleo mentions
the case of the brother of Chacón, who made
a $10,000,000 offer to buy INDULAC, a large milk
producer, without
the source
of the funds being known.
Drug trafficking. Venezuela has become a
haven for Colombian guerrillas who move drugs across the country
with impunity due to the
absence of border controls. A report by Andy Webb-Vidal
for
Jane’s
Intelligence Review in May 2006 reveals that
cocaine operations are shifting to Venezuela;
he notes that drug volumes going through the country
have skyrocketed during the last 10 years. Prominent
drug traffickers
of Colombian
origin live without fear of prosecution in Venezuela.
Chavez obviously
has failed to live up to his electoral promises to
end corruption. The record is clear. The Corruption
Perception
Index, published
by Transparency International, has shown a progressive
deterioration of the ranking of Venezuela, both in
Latin America and the
world. The latest index shows Venezuela in position
138 among 163
countries.
This is the worst ranking of all Latin American nations
with the exception of Haiti. Vice Pres. Jorge Rodríguez,
expressing the official position of the government,
claims that Transparency International “was
a discredited institution since it charges a tariff
for positioning 138 among 163 countries.
This is the worst ranking of all Latin American nations
with the exception of Haiti. Vice Pres. Jorge Rodríguez,
expressing the official position of the government,
claims that Transparency International “was
a discredited institution since it charges a tariff
for positioning countries favorably
in the rankings.” Transparency International
is headquartered in Berlin, Germany, and has chapters
in more than 100 countries,
including Venezuela. It is a highly respected organization
and its corruption rankings are accepted by the internationalcommunity
as the best
source of
information on this global problem.
Meanwhile,
the Venezuelan ranking in the Economic Freedom of the World
Index is 126 out of 130 nations, above only the Republic
of Congo, Zimbabwe,
and the Democratic Republic of Congo. This ranking has been
declining steadily since Chavez came to power. It has been
established that countries with little economic freedom,
characterized
by exchange controls, military influence in government, and
predominance of state-owned enterprises display the highest
levels of corruption. Moreover, the Human Development Index
produced yearly by the United Nations also charts Venezuela
in free-fall. The country has lost 30 places in this index
in the last six years.
Promises vs. reality
Chavez’s
record shows a significant gap between his promises to end
corruption and the current reality. Immense amounts of money
belonging to the Venezuelan people have been misused in furthering
an anti-U.S. alliance in the Western Hemisphere and beyond.
Five countries of the region—Mexico, Peru, Argentina,
Paraguay, and Chile—have expelled Chavez’s ambassadors
for interfering in the internal political processes of their
countries. Chavez’s policies have promoted corruption
rather than combating it. The concentration of power in his
hands and the lack of institutional checks and balances have
led to a total absence of accountability and transparency
in the government. Although corrupt bureaucrats have been
identified, none have been punished. Not one single
person is in prison in Venezuela for corruption. At most,
some have lost their jobs, while retaining their bounties.
It
seems clear that no meaningful victory against corruption
can be won in Venezuela while the Chavez government is
in power. Only a democratic government, fully
accountable to the people, and fully transparent, will be
able to minimize this malady. This
is why the Venezuelan lovers of freedom and democracy are
in for the fight of their lives and, thankfully, seem to
be making
real progress. Chavez’s pretensions of becoming dictator
for life came to an end on Dec. 2, 2007, when a constitutional
reform that would have made him president for life was defeated.
He still is president, but is starting to look more and more
like a paper tiger.
Gustavo Coronel,
as president of Agrupacion Pro Calidad de Vida, was the Venezuelan
representative to Transparency International
from 1996-2000. He was a member of the board of directors
of Petroleos de Venezuela from 1976- 79. This article is
adapted
from a policy paper written for the Cato Institute, Washington,
D.C.. Petroleumworld
does not necessarily share these views.
Editor's
Note:This commentary was originally published by USA TODAY,
March 2008. Petroleumworld reprint this article in the
interest of our readers.
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Petroleumworld
03/09/08
Copyright ©2006
Gustavo Coronel. All Rights Reserved
