Archive for November 2009
President Hugo Chavez says that he ordered the intervention of Ricardo Fernandez Barrueco’s banks on 20 November because Fernandez Barrueco broke the law repeatedly and could not justify the sources of the funds he used to purchase Bancos Banpro, Bolivar, Confederado and Canarias.
Chavez also threatened that any bank owners who break the law will lose their banks and could be jailed. Will Fernandez Barruecos (and his onetime banking colleague Eligio Cedeno) soon have more cellmates at Disip’s Helicoide headquarters?
If President Chavez is serious about cracking down on crooked bankers, a bunch of Bolibourgeois bankers could land behind bars soon. The banks most likely to be seized by the regime for insolvency and lawbreaking are all Bolibourgeois-owned banks.
But how many banks are potentially at risk of government takeover based strictly on technical and legal merits? For informed and sophisticated insights on financial skullduggery in Venezuela, we read Devil’s Excrement and Venepiramides.
Venepiramides says there are only seven “refuge” (i.e. solid) banks in Venezuela, solvent and professionally managed by real bankers: 1-Banco Venezolano de Crédito, 2-Banco Exterior, 3-Citibank, 4-Banco Provincial BBVA, 5-Banco del Caribe, 6-Banco Mercantil, and 7-Banco Plaza.
A second category of seven banks which Venepiramides describes as “NiNi” (would that translate into English as “iffy”?) includes: 1-Banesco, 2-CorpBanca, 3-Banco Fondo Comun, 4-100% Banco, 5-Banco Nacional de Credito, 6-Banco Caroni, and 7-Banco de Venezuela.
But “iffy” appears to be a bit of an understatement.
Four of these banks – Banesco, Corpbanca, Caroni and Nacional de Credito – are being investigated by US Treasury’s OFAC or the DEA, apparently with good cause. Where there’s smoke, there’s sure to be a fire with these banks.
A third category that Venepiramides calls “zombie” banks – i.e. walking dead – groups the rest of Venezuela’s banking system.
These are the garbage banks, whose owners survive mainly on government deposits and bonds – meaning corruption, because to do “negocios” with the regime one always has to “bajarse de la mula.” There are absolutely NO exceptions to this criminal/corrupt revolution’s “pay to play” rules.
All of the banks and brokerage firms owned by Bolibourgeois impresarios like Arne Chacon Escamilla, Pedro Torres Ciliberto, Gonzalo Tirado, etc. are “zombie” banks. There also are numerous “zombie” banks owned by old Fourth Republic wizards of financial scams who reinvented themselves as Bolivarian entrepreneurs. How insolvent are the zombie banks?
Hard to say, but Fernandez Barrueco’s banks reportedly are among the worst.
The four banks seized by the regime on 20 November 2009 have a combined negative equity of over BsF 909 million; that’s over $423.1 million at the official rate and $168.5 million at the current swap rate. The “rights” which Fernandez barrueco’s banks acquired from Inverfactoring and Activos Corporativos AG wiped out the equity of the intervened banks.
Where did all this money go?
Caracas Gringo found what appears to be an Internet link between Inverfactoring and Inverunion, which reportedly was purchased from Ignacio Salvatierra by regime bagman Gonzalo Tirado.
But a reader says that Inverfactoring is owned by Bolivar Banco’s president, which suggests the chief scammer was Fernandez Barrueco. And if the reader’s comment is accurate, it could help to explain why the banks were intervened: Fernandez Barrueco may have stolen (or lost through bad investments) hundreds of millions of dollars that belonged to his corrupt Bolivarian associates.
There’s also a persistent buzz that the intervention of the four banks is the public symptom of a bitter power struggle within the regime between “Socialist” and “Capitalist” chavistas, in which the more revolutionary faction (the Socialists) has strong military support. But the capitalist chavistas also have a very substantial militarist component.
Caracas Gringo suspects that apparent internal power struggles which the intervention of Fernandez Barrueco’s banks may reflect are not about ideological differences, but instead about political competition for economic power between organized crime groups within the regime.
It’s impossible to predict how the financial/political corruption scandal which is just starting to erupt in the Bolivarian revolution will play out over the coming weeks and months. But President Chavez has a potentially strong election campaign issue in hand. Venezuela has a long history of corrupt bankers who enriched themselves by hustling the State and looting the savings of depositors – and who got away with their crimes.
Imagine if Chavez seizes more banks, and jails more bankers who are condemned publicly by the regime as organized gangsters. The regime’s propaganda machine ties the failed Bolibourgeois banks and jailed bankers to the corruption of the old Fourth Republic “escualidos.” And Chavez uses the regime’s control of 80% of Venezuela’s media outlets to market the bank seizures and jailed bankers politically as part of his Bolivarian revolution’s successful anti-corruption offensive.
Would this win Chavez political points with at least some voters ahead of the National Assembly elections in September 2010?
President Chavez can easily dispose of the Fernandez Barruecos and other Bolibourgeois impresarios of his corrupt Bolivarian revolution. The Bolibourgeois elites at this level of the revolution are all politically, and physically, expendable in the execution of Chavez’s core objective of being President-for-Life of Venezuela.
But the regime’s top gangsters, who enriched themselves doing corrupt business with Bolibourgeois impresarios like Fernandez Barrueco and his ilk, won’t get touched even “con el petalo de una rosa.” Chavez cannot easily dispose of senior regime officials like Diosdado Cabello, Jesse Chacon, Jose Vicente Rangel (aka Grima Wormtongue) and others of their caste.
These hard men have been among the president’s most loyal cohorts – even his partners-in-crime in planning/executing strategies and tactics which culminated in the lethal political violence of 11-14 April, 2002. But Cabello and JVR, particularly, have always been potential threats to Chavez because of their closeness to the Bolivarian Caesar of a revolution born in treachery and betrayal.
When folks talk about chavismo without Chavez, they mean the “capitalist” chavistas represented by Cabello, JVR and others who have substantial personal interests at stake in practically all of the Bolibourgeois banks associated publicly with the revolution – including Fernandez Barrueco’s intervened banks. Et tu, Diosdado?
Ricardo Fernandez Barrueco’s fall from the commanding heights of Bolivarian grace was stunningly swift. Is he going down alone, or will other Bolibourgeois “bankers” lose their banks and their personal freedom soon?
Is Fernandez Barrueco’s sudden demise an isolated event, or is he the first domino in a government move to take over all of the insolvent Bolivarian banks associated with the regime?
President Hugo Chavez praised Fernandez Barrueco as a true socialist entrepreneur in 2006 during an Alo Presidente broadcast. But now Fernandez Barrueco is jailed at Disip’s Helicoide headquarters, already condemned by the regime publicly as an”organized delinquent.”
The Attorney General’s Office reportedly plans to charge Fernandez Barrueco with alleged crimes under the Organized Delinquency Law and the Presidential Decree partially reforming the Banking Law.
Fernandez Barrueco’s alleged crimes include the purchase by three of his banks of BsF 1.2 billion (BsF 400 million per bank) from a brokerage company called Inverfactoring. This is $558 million at the official exchange rate or $222 million at the swap rate, says Devil’s Excrement.
The domain name Inverfactoring.com appears to be owned by two servers which are owned by Inverunion, whose owner is Gonzalo Tirado, the financial “entrepreneur” who created Stanford Bank de Venezuela. Tirado for years has been a key “banker” and bagman for senior regime figures.
Fernandez Barrueco also purchased BsF 443 million of rights from Activos Corporativos AG, another Caracas brokerage company. This is $200 million at the official exchange rate or $82 million at the swap rate. We’re still looking for the identities of its owners, though it appears to have offices on the third floor of Centro Empresarial La Lagunita (Office 313), and lists its main business activity as “manufacturing,” according to an Internet business listing.
Not a peep of protest or support has come from any of Fernandez Barrueco’s longtime associates, like Public Works and Housing Minister Diosdado Cabello and Adan Chavez, the president’s older brother and former ambassador to Cuba. However, the government’s decision to arrest Fernandez Barrueco and prosecute him for alleged organized crime has the potential to blow up into perhaps the biggest political and financial corruption scandal the Chavez regime has experienced.
Fernandez Barrueco is a walking encyclopedia in terms of his broad knowledge of the Bolivarian revolution’s systemic corruption, including how it’s organized, who’s who in the regime’s criminal hierarchy, and where the money flows. Fernandez Barrueco is “Mr. Arepa” in the Bolivarian revolution. His food companies have been primary suppliers for Mercal and Pdval for years. He also owns commercial fishing, canning, cattle ranching, farming and other agricultural assets – and several shipping companies.
Caracas Gringo was told on 20 November that there is some discussion within the regime about the convenience of charging Fernandez Barrueco with conspiring to assassinate President Chavez. Sounds far-fetched, but if the report is accurate it suggests the Chavez regime is going to bury Fernandez Barrueco behind bars for a very long time.
Sources close to Fernandez Barrueco say he is being framed, that he is the victim of a conspiracy. Perhaps they are right, but who are the conspirators? Fernandez Barrueco for years has been a frontman (“testaferro”) for Cabello, and more recently he also was in “business” with the president’s brother Adan.
Fernandez Barrueco’s association with Cabello also put him next to Science and Technology Minister Jesse Chacon, whose brother Arne owns Baninvest, thanks to the generosity of Pedro Torres Ciliberto, who five years ago sold then-penniless Arne 49% of Baninvest on credit. Torres Ciliberto, who owns several banks and insurance companies, is also a longtime “testaferro” for Jose Vicente Rangel (aka Grima Wormtongue). Fernandez Barrueco also has done “business” with Pedro Luis Martin, the former director of Disip’s financial intelligence division (and a longtime associate of Luis Miquilena). It’s an incestuous revolution.
Did these powerful men turn against Fernandez Barrueco? If there was a falling out, money almost certainly was the cause. This has been a bad year for many of the regime’s leading gangsters, many of whom are believed to have suffered heavy losses in Antigua and Andorra.
The collapse of the Stanford Financial Group reportedly cost Venezuelan depositors over $1 billion, most of it funneled from Stanford Bank de Venezuela to Stanford Bank Antigua, and from there to wherever. But the Chavez regime a few months ago gave the government of Antigua $50 million in cash…for what? Perhaps to ensure the US Treasury and Justice Departments are denied access to all financial records involving Venezuelan clients of Stanford Bank Antigua.
In September, authorities in Andorra reportedly froze billions of dollars deposited in accounts owned by Venezuelans, including individuals reportedly very close (family) to President Chavez. Andorran and US officials reportedly determined that many of the frozen accounts were being used to move funds to terrorist groups. Some Venezuelans with accounts frozen in Andorra also were determined to have accounts in Miami. It’s unclear if there’s a connection with Rosemont.
The Miami Herald reported that US authorities also are pursuing investigations of Venezuelan-owned accounts in Panama and China.
Meanwhile, the complete absence of even a wee gesture of support from the regime “capos” Fernandez Barrueco did business with for years suggests strongly that his fate already has been decided by President Chavez.
Reports also have surfaced that the intervention of Fernandez Barrueco’s banks, which was ordered by Economy and Finance Minister Ali Rodriguez Araque, reflects a bitter political confrontation within the regime between so-called “socialist chavistas” and the “capitalist chavistas.”
Some of the regime’s leading “capitalist chavistas” include Adan Chavez, Asdrubal Chavez at Pdvsa, Cabello and Jesse Chacon, Jose Vicente Rangel, Pedro Torres Ciliberto, Ramon Rodriguez Chacin, Pedro Luis Martin, Arne Chacon, Gonzalo Tirado, and Jose Zambrano, among others.
Rodriguez Araque is said to be aligned with the “socialist chavistas,” who reportedly take political advice from Havana. If so, this would appear to place him in conflict with a group of gangsters that includes at least a pair of homicidal sociopathic personalities (Pedro Luis Martin and Ramon Rodriguez Chacin).
Rodriguez Araque says that the sources of Fernandez Barrueco’s money used in buying the four banks could not be determined.
But the bank intervention orders published in the Gaceta Oficial say that Fernandez Barrueco purchased rights totaling between $558 million (official rate) and $222 million (swap rate) from a brokerage apparently owned by Tirado, who for over a decade has been one of the top “bankers” of the Bolivarian Bolibourgeois and has done business with members of the First family including Adan Chavez.
Fernandez Barrueco also acquired between $200 million and $82 million of rights from Activos Corporativos AG, which we suspect may be owned by one of the regime’s longtime bankers.
The “rights” his banks acquired total $758 million (official rate) or $304 million (swap rate). What do they consist of, precisely? How much did Fernandez Barrueco actually pay in cash or securities for these rights? Where are they today? Did he trade them away to third parties, and if so, to whom and at what price? Did Inverfactoring trade its contracts with Fernandez Barrueco’s banks to other investors?
Tirado is a regime banker. He works with regime assets – government money and the personal wealth accumulated corruptly by the regime’s political and business Bolibourgeois elites. The rights which he apparently sold to Fernandez Barrueco’s banks likely were regime-owned assets, officially and/or privately.
But three of the four intervened banks (Banpro, Bolivar and Confederado) are insolvent shells. There may be some assets with value – real estate, office equipment and furniture – but financially they’re broke, almost wholly dependent on government deposits before/after the interventions.Will the interventors ultimately dissolve the banks and sell any marketable assets to other financial institutions? That would appear to be the right course of action. All of the banks associated with the regime are technically insolvent/gutted anyway.
Public prosecutors may use some information obtained from the data banks of the intervened banks to ensure that Fernandez Barrueco is lynched legally. But other corrupt dealings through these banks by senior regime figures – Fernandez Barrueco’s former business associates – will mostly get buried officially; though, of course, there probably will be information leaks given the politics underlying the intervention.
Ricardo Fernandez Barrueco was telling financial reporters only a couple of months ago that he had “over $1 billion in cash on hand” to acquire banks, insurance companies and other financial entities.
But today his life probably isn’t worth two “lochas.”
The government’s intervention of Fernandez Barrueco’s banks – Banpro, Bolivar, Confederado and Canarias – leaves him dangling alone at the end of a brittle branch over a bottomless pit. His usefulness as a front-man (“testaferro”) for certain gangsters at very senior levels within the regime of President Hugo Chavez is at an end.
Worse yet for his longevity, Fernandez Barrueco is a “person of interest” in at least six official and independent investigations currently under way in Venezuela, the U.S., Panama and other countries in the region.
Fernandez Barrueco has become radioactive as a result of all the attention he attracted with his increasingly thuggish business methods, which include reportedly commissioning at least three abductions in Venezuela and Panama, and a contract murder in Panama.
He is toxic waste to some former associates – like Public Works and Housing Minister Diosdado Cabello and Adan Chavez, the president’s older brother – who no doubt would like to see him disposed of quickly before others are contaminated.
Locking Fernandez Barrueco in a Disip dungeon, as the regime did with Eligio Cedeno, doesn’t appear to be an option for the regime’s top gangsters.
The Danilo Anderson option would appear to be more attractive to certain Bolivarian gangsters who probably want absolute guarantees that Fernandez Barrueco will never talk to, say, the US Justice Department.
It’s a safe bet that Fernandez Barrueco is not in Venezuela right now. His business operations are headquartered in Panama, and he also has companies in Ecuador and Brazil. But Noticias24 reports that Fernandez Barrueco has been detained at Disip headquarters, where Eligio Cedeno has been jailed for almost three years. Reportedly Fernandez Barrueco went there voluntarily, though it’s not clear why Disip has any jurisdiction over a banking matter, and no arrest warrants have been issued to justify his detention.
The Economy and Finance Ministry resolutions announcing the intervention of the banks include specific allegations of irregularities and illegal activities that appear to expose Fernandez Barrueco to criminal charges, if the regime makes a political decision to prosecute him.
But it’s likely there will be huge pressures within the regime to restructure the intervened banks, erase all digital and paper evidence of wrongdoing, and bury any serious investigations of corruption and criminal enterprises including, possibly, the laundering of FARC drug money.
The intervention of Fernandez Barrueco’s banks was announced by Economy and Finance Minister Ali Rodriguez Araque. Caracas Gringo asked one of the country’s premier bankers who Ali Rodriguez could be allied with in this apparent “pleito entre bandidos,” and the immediate response was: “…with the Devil.”
Rodriguez Araque (a former Marxist guerrilla in the 1960s) has very old links with the Cuban regime, particularly the DGI. For decades, Rodriguez Araque has been one of Fidel Castro’s top henchmen in Venezuela (Jose Vicente Rangel aka Grima Wormtongue is another longtime top Castro henchman in Venezuela, going back to the early 1960s.) Just this week, Rodriguez Araque said at a Socialist event that that the Bolivarian revolution “needs Cuba.”
President Chavez has said several times this year that the national banking system will be restructured to conform to the new socialist model he is forcing down the throats of the Venezuelan people. This implies a much larger state presence in banking, and a much smaller private banking sector.
A good place to start this process is by taking control of the pro-regime banks which are undeniably bankrupt, like Fernandez Barrueco’s banks.
The government ordered an “open intervention,” which means the four banks continue to operate “normally.” But the truth is that the four banks are insolvent. They have been looted completely.
The government is putting cash into the banks to keep them “solvent,” but anyone with money deposited at any of the four intervened banks would be wise to withdraw all of it immediately.
The intervention also provides effective political and legal cover for the systematic erasure of all digital and paper evidence of who looted the four banks.
Fernandez Barrueco’s name heads the list, but he was only a “testaferro” for other senior figures in the Bolivarian regime, including the First Family.
Caracas Gringo suspects that the intervention of the four banks could be a political damage control and cleanup operation in which Fernandez Barrueco and perhaps others are expendable. The Chavez regime has always eaten its own.
Our suspicions increase on reports that Rodriguez Araque also may order the intervention of Banco Real and Central Banco Universal (Pedro Torres Ciliberto), BNV Banco Universal (Julio Herrera Velutini), and Banorte and Banco Federal (Jose Zambrano). Adan Chavez reportedly has connections with Banorte.
Fernandez Barrueco for years has been an associate of Cabello and Adan Chavez. Torres Ciliberto is a “testaferro” and longtime business associate of Grima Wormtongue, Ana Avalos de Rangel and their son, JVR Jr. Torres Ciliberto also is associated with Arne Chacon, brother of Cabello’s longtime sidekick, Science and Technology Minister Jesse Chacon.
The Bolibourgeois bankers and the senior regime thugs they front for have become immensely wealthy since 2002. The banks they own generated huge profits playing with public deposits, government debt and the “permuta” market. All of the Bolibourgeois banks, which include a lot of “old” (pre-Chavez) names in banking, also have laundered money.
But the banks are hollow shells. Without the regime’s continued support, the banks are essentially insolvent. What better way to create the new socialist banking model, and forever erase all evidence of corruption and illicit enrichment by senior regime figures than to intervene and restructure the Bolibourgeois banks on the indisputable basis of their insolvency?
But some very important loose ends remain, like Fernandez Barrueco.
President Hugo Chavez and the Revolutionary Armed Forces of Colombia (FARC) are jointly mobilizing against the Colombia-US agreement that allows US counterdrug and counterterrorism forces to deploy from over a half-dozen Colombian army, air force and navy bases.
The FARC has issued a communiqué calling on all patriotic revolutionaries to join forces to fight the US military presence in Colombia, defend the Bolivarian revolution, and halt the planned US invasion of Venezuela.
The FARC also has called on residents of the Colombia-Venezuela border to create “anti-imperialist committees” to oppose the Colombia-US base use agreement.
Nelson Bocaranda reports that the Colombian government has intelligence reports about recent meetings in Caracas between FARC and ELN leaders and “the very highest leadership of the Bolivarian government.”
At these meetings, he says, offensive strategies including propaganda/disinformation campaigns and armed attacks in Colombia have been discussed.
Chavez claims a US military invasion of Venezuela will be launched from the military bases which the US is “establishing” in Colombia. Chavez is lying, of course. He knows that the US assets will be allowed to deploy from existing Colombian military bases over which the Colombian government and armed forces will retain full control at all times. He also knows that there will never be over 800-900 US military and civilian personnel in Colombia at any time.
But the Colombia-US base use agreement constitutes a real obstacle to Chavez’s plans to expand the Bolivarian revolution into Colombia. The US military presence, while very small, will hinder Chavez’s ability to foster instability in Colombia. The US presence also will serve as a deterrent against the possibility that Chavez someday might actually start a war with Colombia.
A democratic Colombia aligned closely with the US is a huge geopolitical thorn in Chavez’s rump. Radical Bolivarian leaders aligned with Chavez rule in Bolivia and Ecuador, while Paraguay’s president, the randy Father Fernando Lugo, tilts toward Chavez. Peru’s democracy stands on cracked and weakened institutional foundations, its indigenous majorities are restive, and Shining Path reportedly is making a strong comeback in that country’s coca growing regions. Chavez appears to be optimistic that his revolutionary allies in Peru will prevail sooner than later.
Democratic Colombia is a wedge through the middle of Chavez’s scheme to revive the 21st century equivalent of Gran Colombia with his Bolivarian revolution. But if Colombian democracy can be replaced with a Marxist Bolivarian government aligned with Caracas and Havana, the possibilities of achieving this political goal might improve significantly. The US would be booted completely out of South America, and democratic Panama’s southern flank would be exposed to Bolivarian expansion into Central America where Chavez already has a Marxist ally in Nicaragua’s Ortega.
Colombia will hold presidential elections in first-half 2010. It’s still unclear if President Alvaro Uribe Velez will be legally eligible to run for a third term. But Chavez hopes to influence the outcome of those elections. Colombia already has a Bolivarian party competing in next year’s elections. Its leaders deny receiving any aid from Caracas, and say they are not politically associated or aligned with Chavez. But these assurances are not credible.
Chavez has many allies in the Colombian establishment who share his radical Marxist ideology or who would sell out for chump change. For example, Chavez is personally close to Colombian Senator Piedad Cordoba, the FARC’s de-fact top mouthpiece in that country’s Congress. Reportedly, Chavez also is in touch with former President Ernesto Samper, whose 1994 presidential campaign received millions of dollars in contributions from the defunct Cali cartel, which broke up in 1995.
When the Cali cartel broke up, the FARC took over the bulk of Colombia’s illicit narcotics industry, briefly controlling as much as 85% of the business before the market shook out as new drug trafficking organizations emerged from the ashes of the Cali and Medellin cocaine cartels. However, today the FARC still controls over half of the Colombian cocaine industry.
Chavez and the FARC have been strategic and political allies for at least 15 years. Chavez’s first personal contacts with the FARC reportedly occurred in the mid-1980s when he was a young army officer stationed at Elorza in Apure, and already conspiring actively to overthrow Venezuela’s democratic government. But in 1994 Chavez forged an explicit political and strategic alliance with the FARC in meetings that took place in Colombian territory.
Since Chavez became president in early 1999, the FARC and ELN have been allowed to roam freely in Venezuelan territory. It’s public record that top FARC leaders hide in Venezuela under false identities backed by legal identity documents issued by the Chavez regime. FARC and ELN leaders enjoy official DGIM and Disip protection, are lodged in protected safe houses, and are provided with official transportation and security escorts in Venezuela.**
Chavez’s longtime personal liaison to the FARC’s top leaders is former Interior & Justice Minister Ramon Rodriguez Chacin, who left the regime in third quarter 2008 just before the US government designated him as a material collaborator of the FARC. Rodriguez Chacin reportedly cooperates with the FARC’s Bolivarian Continental Coordinator (CCB), an initiative which seeks to expand the FARC’s political presence regionally/globally. But since FARC is also the world’s largest cocaine trafficking enterprise, wherever the FARC sets up politically, its drug trafficking arm also grows. It’s certain that Rodriguez Chacin was present at the meetings between FARC/ELN leaders and very senior regime officials reported by Bocaranda.
Increased border violence, particularly along Tachira’s border with Colombia, is one likely consequence of the Chavez regime’s explicit alignment with the FARC against the Colombia-US base use agreement. But if the Chavez regime cooperates or supports future FARC and ELN attacks launched against Colombia from positions inside Venezuela, border violence also could flare up in the states of Apure and Zulia. Growing instability along most of the 2,200 km-long border separating the countries would give President Chavez a good excuse to militarize the governments of these states.
** It’s difficult to estimate the number of FARC fighters based in Venezuelan territory, but there could be anywhere from 800 to 1,500 fighters. It’s known that three FARC fronts have a permanent presence in-country managing the group’s narcotics trafficking, money laundering and arms smuggling operations in Venezuela.
Their criminal associates in the Chavez regime include key figures like military intelligence (DGIM) director Hugo Carvajal, and former Disip director Henry Rangel Silva. The US government also designated these officials as FARC collaborators in September 2008.
The ELN and Bolivarian Liberation Front (FBL) also operate in Venezuela. The ELN may have several hundred fighters in Venezuela. The FBL claims to have between 2,000 and 3,000 armed members who support Chavez and the Bolivarian revolution.
Organized paramilitary groups, mostly restructured remnants of the now-defunct United Self Defense Forces of Colombia (AUC), also operate in Venezuela, but their numbers are unknown.
These organized militant groups, which claim an ideological motivation for their criminal activities, tend to concentrate along both sides of the border. In Venezuela their numbers are higher in states like Apure, Tachira and Zulia; but increasingly they have spread throughout the country and now have some presence in cities far from the border like Caracas, Puerto La Cruz, Cumana and others.
There are also literally hundreds of small criminal enterprises on both sides of the border engaged in smuggling consumer goods, gasoline and diesel, illegal narcotics, weapons, stolen vehicles, people and whatever else they can turn a profit doing.
Caracas got hit each time for a few minutes to a several hours. But power outages rarely last for a very long time in Caracas, thanks historically to good old dependable Electricidad de Caracas.
Most residents of Caracas take the stability of their electricity for granted. However, is this complacency justified? Or, in truth, are we Caracas residents fooling ourselves about the apparent stability of our electricity supplies?
The last national outage involved almost simultaneous failures at the Planta Centro and Tacoa thermal power plants. Moreover, the Bolivarian power technicians at the “New Electricidad de Caracas” (NEDC) had problems restarting Tacoa, the 1,200MW thermal power generation plant on the coast of Vargas state below Caracas.
Caracas currently consumes 2,300MW, but NEDC only generates 1,800MW and must import 500MW from Guri.
But Jose Manuel Aller, a professor at Simon Bolivar University in Caracas, says that NEDC’s 1,200MW Tacoa thermal power plant “has problems.”
Tacoa is generating 1,200MW, but “under very bad conditions…they’re burning too much fuel oil and that is damaging the burners on the boilers,” Aller says. What does NEDC say? No comment.
But Venezuela currently has a power supply deficit of at least 1,500MW, with Tacoa generating at full capacity. If Tacoa goes offline abruptly and cannot be restarted quickly, the national power supply deficit would almost double to 2,700MW.
Corpoelec has no spare generation capacity whatsoever to redirect to Caracas if Tacoa goes down, unless it withholds power supplies now shipped from Guri to other areas of Venezuela.
Worse yet, if Tacoa is forced offline for any length of time it could trigger larger national outages because Guri has no spare hydro-power capacity to redirect towards Caracas on a decrepit national transmission grid.
Boosting the already overloaded transmission system’s power load further would cut off power supplies to the basic Guayana industries, and likely also trigger multiple equipment breakdowns at various sub-stations and other points on the transmission grid.
Caracas could remain blacked out for many hours, possibly even for days if major repairs are needed.
Without power, absolutely everything in Caracas without alternative power generation assets, say, like the shopping malls, would shut down.
A prolonged power outage lasting several days in the greater Caracas metropolitan area, home to over 6 million human beings, likely would trigger a social crisis of an intensity not seen in Venezuela since the “caracazo” of 1989.
Imagine the opportunities for targeted political mayhem by a corrupt regime intent on increasing its power and control over everything – a lo Castrista.
But EDC president Javier Alvarado says Caracas residents have nothing to worry about. By 2011 the company will no longer need any power supplies from Guri.
Alvarado says NEDC will invest over $1 billion through end-2011 to increase its power generation capacity by 1,600MW, to 3,900MW, guaranteeing the capital region’s power supplies for years to come.
Alvarado is referring to Termocentro, the 1,620MW thermal power generation plant in the Tuy Valleys which old foreign owner AES planned to build at one point. But Termocentro is over three years behind the original timetable in place just before Chavez nationalized the old, dependable EDC.
In May 2009, Termocentro was awarded as a turnkey project by NEDC, with the requisite approval of Public Works and Housing Minister Diosdado Cabello, to Spain’s Duro Felguera group at an announced cost of over $2 billion, double the number given by Alvarado.
NEDC is already piling up very substantial losses just two years after it was nationalized by Chavez, so where does Alvarado expect to raise $1 billion in cash for capital expenditures?
NEDC is drafting a “fair and representative” rate hike proposal directed at high consumption residential and commercial power users. Soak the rich to subsidize the poor. Chavez loves this populist silliness, though it’s always ineffectual in practice.
But what if Alvarado’s assurances are overstated?
President Chavez has stubbornly refused to countenance any power rate increases since 2003. With Venezuela’s GDP down 4.5% in the third quarter, with inflation rising toward 30%, and Chavez’s approval rating falling below 50% a year before National Assembly elections, NEDC may not get the rate hikes it needs to raise at least part of the $1 billion cited by Alvarado.
All current indications point to the country’s power crisis growing worse over the coming year. Corpoelec officials privately admit that power rationing will continue during all of 2010.
President Chavez created a new Electric Energy Ministry, and appointed a politician who can’t describe the electrical architecture inside a light bulb as the new minister in charge of ending the power crisis.
The president also earmarked less than $200 million of emergency investments before end-2009 to restart a heap of rusting, obsolescent piles of junk which collectively will add over 1,400MW of generation capacity to the national power grid.
And Chavez ordered a bunch of power conservation measures to reduce consumption immediately by 20% or more. Again, good populist nonsense, but the actual results in terms of less power consumption will be meager at best.
Power industry experts say the country needs over $20 billion of investment, at today’s prices, to install over 8,000MW of new power generation capacity over the coming five years.
Additional billions of dollars must be spent to restart over 7,000MW of thermal and hydropower generation capacity currently offline. At least 2,000MW of this offline capacity – Planta Centro – is unsalvageable.
As a result, the $20 billion investment figure cited by Venezuelan power experts could be a low-ball estimate, perhaps by as much as $5 billion to $10 billion. But Corpoelec and its subsidiaries – including NEDC – are all in deep red financially.
Moreover, the state-owned power sector’s combined debts total over $6 billion, according to Fetraelec national power union economists. At least $4 billion of this is owed to Edelca by Cadafe and other government entities. Cadafe is owed $2 billion by its public sector clients.
But even assuming that the Chavez regime comes up with the capital the state-owned power sector needs ($20 billion over the next five years or $4 billion a year at minimum), since 2000 state-owned utilities (mainly Cadafe) have never completed much over 25% of their programmed capital expenditures in generation, transmission and distribution assets. This dismal record won’t improve under the new Electric Energy Ministry. In fact, even worse should be anticipated.
President Hugo Chavez is still warning of an armed conflict between Venezuela and Colombia. But his anti-Colombian warmongering rhetoric is a red herring.
The threats to Chavez, and to Venezuela’s security and stability, are internal. On the shortlist:
*Lights Out: The state-owned power sector has collapsed. Tellingly, the power sector’s collapse intensified after Chavez nationalized the industry and created Corpoelec. Venezuela faces at least five years of continued daily power outages due to infrastructure breakdowns and rationing – and this is a best-case forecast which assumes the regime has the capacity to add over 8,000MW of new generation capacity within five-years, plus essential related transmission/distribution infrastructure. But the Chavez regime’s ten-year track record in the power sector is horrifically poor, and the sector’s prospects are very poor. Something most Caracas residents are not aware of is that Tacoa, the 1,200MW thermal power plant operated by Electricidad de Caracas, needs urgently to be upgraded/modernized – or better yet, replaced completely.
*Mortgaged Oil: Venezuela’s crude oil production capacity has collapsed by over 1.6 million b/d during the Chavez era. The “new” Bolivarian Pdvsa has not completed a single major crude oil production and refining project since 2003. Its gas development initiatives are also stalled. The “Siembra Petrolera” plan announced at end 2005 is running over two years behind the original schedule. Chavez went on a three-year nationalization binge which resulted in the accelerated operational deterioration of all of the nationalized assets, and left Pdvsa (i.e. all Venezuelans) facing international lawsuits seeking potential combined damages in excess of $30 billion, of which about $20 billion are being sought by ExxonMobil and ConocoPhillips.
*Homicidal Crime: At least 19,400 people will be murdered in Venezuela in 2009, compared with over 14,600 in 2008. In 1998, the year before Chavez took power almost 11 years ago, only 4,560 homicides were reported. Since Chavez has been president, at least 110,932 homicides have occurred nationally, of which roughly 30% or almost 33,280 happened in the greater Caracas area. Practically all of these homicides are poor young men between the ages of 14 and 29. While Chavez farcically threatens a war with Colombia, the reality is that Venezuela already is at war with itself.
*Food deficit in 2010: Chronic widespread food shortages probably will materialize in 2010. Food prices also will climb sharply next year. The government will increase food imports, but shortages will persist and wholesale/retail food inflation will rise despite price controls. Like the power crisis, the coming food crisis has been building up for years and was created by the Chavez regime. The revolution has expropriated over 2.5 million hectares of productive cattle and farm land, and today directly controls/operates over 10% of the national food sector in terms of total tonnage sold monthly.** But agricultural production is falling across the board. At the close of 2009, Venezuela faces confirmed deficits in 2010 of sugar, rice, coffee, black beans, sorghum, beef, powdered milk, eggs, poultry, cooking oil, and much more.
*Broken Military, Marxist Militia: Chavez has purchased or placed orders for over $6 billion of mostly Russian weapons since 2005; over 100,000 AK-103/104 assault rifles, dozens of transport helicopters and gunships, two squadrons of Sukhoi-30 fighter/bombers, Spanish-made missile-capable patrol frigates, Chinese radar systems, and much more. In recent months Chavez also has placed orders for up to 90 T-72 battle tanks, three types of air defense missile systems, and ground combat missile systems. But the Bolivarian armed force has been broken, politicized and corrupted, and has become increasingly unprofessional under Chavez’s command. Separately, Chavez has created a civilian militia which reports directly to him. The goal was to deploy a militia of 2 million, which of course will never occur. But even a motivated militia of a few thousand persons trained in urban combat and guerrilla tactics could wreak havoc and chaos, and hold its own in clashes with the country’s structurally weakened conventional military forces.
*Militarized Gangsterism: Previous posts have discussed the organized crime groups controlled at very senior levels of the Chavez regime. Some of these groups have political/business links to several of the president’s closest family members. But a point we have not examined in detail is the heavily militarized character/structure of the most powerful organized crime groups within the regime. One example: the corrupt “machine” at Cadivi whereby importers apply for dollars at the BsF 2.15 exchange rate, but wind up obtaining approved foreign exchange at a real effective exchange rate of BsF 3.50 per dollar – is controlled by military personnel and is Current Public Works and Housing Minister Diosdado Cabello laid the groundwork for the Cadivi corruption machine when he was vice president of Venezuela. Interestingly, it appears that the Cadivi military mafia is still coordinated from within the office of the vice presidency.
*Compromised Sovereignty: Iranian President Mahmoud Ahmadinejad said this week that the strategic alliance between Iran and Venezuela is “necessary.” And he is right. Venezuela’s state-owned Conviasa flies to Tehran and Damascus, and reportedly helps the Iranian regime circumvent UN controls on exports of prohibited missile components and other weapons technologies. Hezbollah has a known presence in Venezuela, particularly on Margarita Island. And it’s no coincidence that Iran’s political/intelligence presence is expanding in ALBA countries like Bolivia, Ecuador and Nicaragua.
Of course, the biggest foreign presence in Venezuela is Cuba. Chavez has imported Cuban advisers and experts to practically all of Venezuela’s most important governance and security institutions. There were over 7,000 Cubans “in-country” back in April 2002 when Chavez had his troubles, but today it’s estimated that there are over 60,000 Cubans in Venezuela on official missions from Barrio Adentro alleged medical services to political intelligence operations and military indoctrination/training. Venezuela’s military officially adopted Cuba’s national security doctrine in mid-2005. Cuba’s intelligence service (DGI) now has over 600 agents stationed in Venezuela. The “situation room” operated by the DGI includes veteran Marxist operatives from Spain and other countries, by some accounts. Cuban “advisers” are helping to create and organize the new National Police. Cubans are also “advising” on the reorganization/modernization of the national identity and passport service (Onidex), the national system of civil/mercantile registries and notaries, the Seniat tax and customs administration, the country’s commercial ports, and the ministries of health, education, labor, commerce and small industries, finance, planning, and agriculture, among others.
Chavez created the dragon he rides today, 11 years into a “revolution” which has left Venezuela in ruins in every way imaginable – social, institutional, structural, economic, even moral. His popularity is falling below 50% a year before the National Assembly elections, which Chavez recently predicted he probably will lose. But then Chavez declared with certainty that he will be Venezuela’s president again from 2013 to 2018. However, assuming discussion that Chavez is defeated in the 2012 elections, whoever takes the helm in Miraflores will have little or nothing in terms of resources for a national reconstruction of a country in the throes of acute social and political instability. Some political opponents this week criticized the Chavez regime as “a lost decade,” but it’s more accurate to speak of a lost generation or even longer. In fact, Venezuela may not recover from the wreckage of the Chavez regime for decades to come.
** While 10% may seem like too small a slice of the sector to talk of state control, the Chavez regime also has created a complex structure of laws, regulations and new layers of bureaucracy through which the regime increasingly tracks and attempts to administrate the importation, storage, distribution and sale of all food products nationally. The official explanation is that the government wants to ensure that every part of Venezuela gets its necessary food supplies. But the real political goal is to control food consumption, as in Cuba. It remains to be seen if Chavez can achieve this goal, but that is the direction his regime is taking.
At least 19,400 persons will be murdered in Venezuela this year, an increase of 4,816 homicides (33%) compared with 14,584 homicides recorded in 2008, according to Incosec, an NGO that uses homicide statistics nationally to create a dynamic “map” of murder in Venezuela.
That’s a national average of over 1,616 homicides per month, over 53.8 homicides per day, and over 2.24 homicides every hour.
Incosec predicts that at least 3,376 of the homicides recorded in 2009 will occur in Caracas, up 1,211 (over 35.8%) compared with 2,165 homicides in 2008. That works out to over 281.3 homicides per month.
Incosec’s map confirms that random homicidal violence happens everywhere in Caracas.
But the overwhelming majority of homicides in Venezuela’s capital city are concentrated in three sectors defined by crushing poverty, large populations of unemployed feral young men, and a violent macho culture where even the slightest disrespect is a motive for murder. These sectors are:
*Antímano, Sucre, 23 de Enero, La Vega, El Valle and Caricuao.
*Petare, La Dolorita and Caucagüita.
*Las Minas de Baruta and parts of Las Mercedes. But this sector experiences significantly less homicidal violence than the two above.
Incosec’s national map of homicides confirms what everyone already knows: homicidal violence is greatest by far in the country’s poverty-stricken “barrios.”
To be poor in Venezuela is to live under a permanent sentence of death held at arm’s length by extreme caution, sharp wits and a large dose of good luck.
Chavez has always maintained that he defends Venezuela’s poor, but the alarmingly swift growth in homicidal violence is victimizing mainly the poor – Chavez’s original base constituency.
Poverty and homicide go together everywhere in the world. The fact that the homicide rate has soared since Chavez has been president says everything about the failure of his Bolivarian revolution.
Since Chavez was elected president of Venezuela at the end of 1998, the homicide rate in Caracas climbed from 63 murders for every 100,000 inhabitants at in 1998 to 130 murders for every 100,000 inhabitants in 2007, according to Central University’s Center for Peace and Human Rights.
President Chavez has always been indifferent to the insecurity crisis suffered daily by ordinary Venezuelans. In the thousands of hours of endless broadcasts over the past decade ranting about anything that pops into his mind, there hardly has been any mention or acknowledgement by Chavez that violent crime is rampant in Venezuela.
In fact, Chavez has consciously fostered a culture of violence and class hatred as part of his agenda to create the “new” Bolivarian Venezuela.
The Chavez regime also has supplied weapons and financial support to dozens of armed irregular groups like the Tupamaros, Carapaicas, Comando Alexis Vive, La Piedrita, and Lina Ron’s bikers, among others. All of these groups are based inside 23 de enero, which historically has been a hotbed of Marxist revolution in Venezuela.
These armed groups are organized, and have defined political missions. The Tupamaros and Carapaicas have been active since before Chavez was elected president. Other groups like the Comando Alexis Vive and Lina Ron’s jackals are newbies to the armed revolution. These groups proclaim their undying loyalty to “Mi Comandante-en-Jefe Presidente Chavez,” but their revolutionary zeal is a great cover for criminal enterprises like drug trafficking, extortion, express kidnappings, car theft and other activities.
Beneath these organized irregular groups with defined political missions, there is a vast universe of tens of thousands of young men who belong to thousands of small gangs in the “barrios.” These gangs usually consist of young men of roughly the same age from families who all live in the same alley or street. Their numbers vary, but usually total at least 12 or more young men – strength in numbers. Often they form for self-protection against other gangs, they acquire some firepower, and they are very territorial.
Many may work on and off in the formal or informal economies, but crime is the main source of steady income for these gangs. Their activities include drug trafficking, extortion, armed robbery, vehicle and motorcycle theft, burglary, etc. They operate in the barrios mostly, but many go hunting off the reservation, preying on unwary victims in the more upscale sections of Caracas. Mortality rates (hence turnover) are high for these youth gangs. When they’re not killing each other in turf wars and blood feuds, they are battling the police and National Guard.
Eventually the survivors age out of the game, and new generations rise. Perpetual poverty assures an endless supply of new recruits in their early teens. The ones who live to 18 or 19 become gang leaders, but by their late-20s they’re old men past their prime.
Interior & Justice Minister Tareck Al Assaimi says the regime has contained the homicide rate in 2009 to levels comparable to 2008 – whatever that means. But the government refuses to issue new official crime statistics. It hasn’t issued any homicide and other violent crime statistics since first quarter 2009.
Al Assaimi also says that the first elements of the new National Police will be deployed before end-2009. Little is known about the National Police. But a couple of things stand out.
Cuba supplied the “technical advice,” and many currently active police officers are transferring into – or being absorbed by – the National Police from their current jobs in the Metropolitan Police, PoliCaracas, PoliSucre, PoliBaruta, etc. The Cuban national police have always been used mainly as an instrument of repression and intimidation. And the way existing police forces are being absorbed into the National Police suggests that ideological purges and proselytism will take priority over protecting the general population from violent crime.
However, can the new National Police make even a small dent in Venezuela’s violent crime wave, which now reportedly surpasses every country in Latin America including Colombia, Brazil and Mexico? The prospects of that happening aren’t good.
The Chavez regime years ago enacted Penal Code reforms and other legislation that consolidated a revolving-door system for violent career criminals. The Attorney General’s office functions mainly as a political prosecutor for the regime, but does poorly against violent crime. The courts are more politicized than ever, and more corrupt. Fewer than 3% of homicides result in convictions.
At some point, the Chavez regime will have to make a serious effort to contain/reduce homicidal violence. But perhaps this is wishful thinking.
It’s difficult to believe that the regime can effectively contain/control violent crime when so many of its senior “security” chieftains – like DGIM’s Hugo Carvajal, Disip’s former director Henry Rangel Silva, and many other active and former “chavista” officials of CICPC, Disip, DGIM, PM, Policaracas, etc. are actively involved in criminal enterprises.
Meanwhile, the gangs are growing bolder nationally. Recently the National Guard Colonel in command of the “Caracas Segura” anti-crime offensive was shot dead by a pair of gunmen on a motorcycle who were intent on stealing the officer’s SUV. He was the fourth police commander killed nationally in 2009.
Al Assaimi has talked of a plan to disarm the general population. Venezuela has about 27 million inhabitants, but by some estimates the country is flooded with between 15 million and 17 million unlicensed/unregistered handguns, shotguns and other small arms. But it won’t work. Venezuelans won’t disarm. The macho culture of death is too deeply embedded in the “barrios.”