Corruption in the times of Chavez

Posted: Friday, February 14, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: Questioned by a reporter, J. V. Rangel said: "Mr. Urdaneta asked me to place his two relatives and a friend in the Consulates of Miami, Cartagena (Colombia) and Barcelona (Spain)"... "And did you agree?"... "Yes,of course"... said Mr. Rangel. "Would not this be corruption?".... "No" said Mr. Rangel... "Corruption is in the asking, not in the giving." Interview with J. V: Rangel, El Universal, February 9, 2000.

Corruption is a systemic disease involving most sectors of society. It becomes a cultural trait. For many years high petroleum income, populist governments and weak Institutions have produced a state of "hypercorruption" in Venezuela.

A recent book by journalist Agustin Beroes, summarizes the incidence and intensity of corruption during the first three years of the Chavez Presidency. Beroes bases his findings on multiple sources, personal interviews and complaints by government or opposition leaders. As is often the case, "revolutionary" corruption is not easy to prove as there rarely exists a "smoking gun."

In general, however, when a society is highly disorganized, when a government has no plans, programs, procedures or controls, when accountability does not exist, corruption is likely to be present in one or more of its multiple forms: fraud, extorsion, bribery, abuse of power, nepotism, traffic of influences, plain stealing.... you name it.

It has been said that where there is a line of waiting people there is corruption. And Venezuela nowadays is a very long line!

Chavez won the elections in 1998 on the strength of his campaign against the corruption of past governments. He was perceived by many as having the political will and the ethical posture which could minimize the problem of corruption in Venezuela.

Four years later things have not worked that way. Already in 2001 a poll conducted by Eugenio Escuela indicated that 64% of the population felt that corruption in times of Chavez was as great or greater than under preceding governments. A poll taken today would most probably show a much higher percentage.

Beroes estimates in his book that corruption during the first three years of Chavez government adds up to some $10 billion wasted or stolen. Although he speaks in bolivar terms, we have done an approximate calculation of what this means in dollars and the amount above mentioned is a very close estimate.

Although Beroes mentions dozens of cases, there are some cases that either because of the amounts of money or the people involved are worth mentioning:

1. MICABU, the name of the printing company owned by Chavez' mentors Luis Miquilena, Manuel Quijada and Tobias Carrero. This company got a contract to print the new 1999 Constitution ... they subcontracted and pocketed the difference.  The money involved was "peanuts" ... some $500000 ... but Miquilena was at the time the number 2 man in government.

2. CAVENDES, a bank owned by Luis Vallenilla, financial supporter of Chavez and member of the Constituent Assembly. This bank incurred in fraud and other illicit dealings in the amount of some $200 million. It was intervened but the government kept depositing its money in the bank, even after the intervention. Vallenilla was indicted but he never went to prison.

3. The Chavez Family in Barinas, the Governor of the State is Chavez' father. The central government, says Beroes, provided him with funds in advance of his needs. The money was deposited earning substantial interests that were never accounted for. Brother Argenis became one of the main contractors for the government in the area.

4. Plan Bolivar 2000, Started in February 1999 in order to recover infrastructure and promote employment. Utilized by some 6,000 soldiers. Chavez was its first "Commander" ... the program received $250 million during the first three months. Its first coordinator, Victor Cruz Weffer, is reported to have obtained blank invoices that later on filled with inflated numbers. The first year the program held 2,300 popular markets, gave 60,000 haircuts and collected 31,000 tons of garbage, among other activities.

During the second year the program went into the construction of housing for poor Venezuelans and spent some $400 million in contracting without bidding taking place. Many of the houses can not be inhabited due to structural defects.

5. The Integrated Social Fund, an organization led by fellow coupster, Commander William Farinas, to construct popular housing and schools. This fund spent some $1.4 billion without any accountability. Results can not be seen. The fund distributed the money among phantom institutions, including $1 million to a group led by the wife of Farinas' driver.

6. SENIAT, the tax collecting agency. The director's son was caught red-handed by the Technical Police during a raid, reportedly trying to extort Valencia businessmen. The young man was never indicted or sent to prison.

7. Gruber Odreman, Governor of Caracas. This man led a second military coup in 1992. Named Governor by Chavez he published 5 books of lamentable poems with government money. The Legislative Chamber of the Metropolitan Council determined that he had wasted or pocketed about $200 million. He claims his fortune has been made writing poems and songs. I can assure our readers he is no Bee Gee. He is free.

8. The Electoral College (CNE) 1999-2000, wasted some $60 million in trying to organize an election in 2000 that had to be cancelled due the chaotic state of the plans. No one was held responsible.

9. Misuse of the Macroeconomic Stabilization Fund. In open violation of the Constitution and the laws governing this fund Chavez diverted $4 billion deposited in the fund to other uses, such as paying christmas bonuses to State employees. The name of this crime in Spanish is "Peculado de Uso."

10. Money received by Chavez from the Bilbao-Vizcaya Bank. Chavez received  $500,000 from this bank for his Presidential campaign and $1 million after he became President. These monies were not reported to the authorities and they were illegal to start with.

These last two items have been reported to the Supreme Tribunal of Justice where they collect dust in the desks of a tribunal which is not independent but an appendix to the Executive Power.

We would need much more space to mention the corruption at the Industrial Bank of Venezuela, the People's Bank, the Women's Bank, at the Institute of Lands supervised by Chavez' brother Adan and at many other government agencies.

This horrendous performance on the issue of corruption has led to the illegitimacy of a regime that started out with full support of the nation. Chavez has squandered his popularity by violating his electoral promises and by excluding large portions of the society from decision mechanisms on topics of collective interest.

This explains why the Venezuelan government is fast becoming an international pariah...

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email ppcvicep@telcel.net.ve