“[This new regime] has brought with it a change of hands and a redistribution of the loot among a new group of friends, relatives, accomplices, and parasitic hangers-on that constitutes the political retinue of the Dictator. What great shame the people have been forced to endure so that a small group of egoists, altogether indifferent to the needs of the homeland, may find in public life and easy and comfortable modus Vivendi.”Fidel Castro, October 16, 1953 – “History Will Absolve Me” speech to the court which secretly tried him for the failed July 26 attack against the Moncada army barracks. The quote is taken from Havana Nocturne – How the Mob owned Cuba, and then lost it to the revolution, by T.J. English; Harper, 2007; Page 125.
Fidel’s words 56 years ago have a very familiar ring to anyone living in today’s Bolivarian Venezuela.
A populist theme (among many) which Hugo Chavez has used effectively before/after becoming president of Venezuela is that his revolution would save “el pueblo” (the people) from the corrupt traditional parties – mainly AD and Copei – and their friends, relatives, accomplices, and other parasitic hangers-on that constituted their political retinues.**
Chavez made good on his pledge. Some of the old Fourth Republic “entrepreneurial” insiders (mainly bankers) are still around, doing business with the Bolivarian regime. However, the “negocios” thriving today inside the Bolivarian regime between ministers, military officers, and “Bolibourgeois entrepreneurs” involve an entirely new group of players.
One recent example: The $5 billion bond issue was priced at 140% of par value, though the Chavez government easily could have priced the issue at 180% to 200% of face value.
However, by pricing the bonds at 140% of face value, whoever buys these bonds would pay BsF 301 for bonds with a face value of $100. If these bonds are then sold in New York at 70% of face value, which is a reasonable price for Venezuelan government bonds with the characteristics of the 2019 and 2024 bonds, the effective sales price in bolivars would be BsF4.30 per dollar.
There was no transparency in how the bond issue was allocated, and it’s likely that certain people close to the regime are making mind-boggling fortunes. By one estimate (VenEconomy), the total amount of money in play here could represent over $2 billion of extra profit for the individuals who bought the bonds.
There also was no transparency in how three Spanish contractors – Duro Felguera, Iberdrola and Elecnor – were awarded turnkey contracts worth over $4 billion recently to build two gas-fueled combined cycle thermal power plants with a total capacity of 2,620 MW in the Tuy Valleys near Caracas and Cumana in Eastern Venezuela. In fact, the first news reports originated in Madrid, not Caracas.
And there is no transparency in how Pdvsa is making deals with Russian, Iranian, Chinese, Cuban, and Belarusian oil companies affecting Venezuela’s oil and gas resources. These deals-in-progress reportedly are worth over $100 billion of investments over the coming five years.
Presumably part of these investments will be financed via bilateral banks like the Iranian Development Bank already operating in Caracas. The Russians also have pledged to create a bank with Pdvsa.
Moreover, the oil and gas deals are linked directly to fast-growing bilateral security and defense alliances between the Chavez regime and these countries.
President Chavez justifies his extensive expropriations and nationalizations (i.e. theft) of foreign- and privately-owned assets by saying he is “returning” sovereign Venezuelan assets to the rightful owners of these assets – “ el pueblo.”
But Chavez has been giving away Venezuela’s wealth and sovereignty for a decade. On paper, Chavez has pledged or given away about $100 billion. Has all this money been disbursed? No, thankfully. But accurately quantifying how much has actually been disbursed is almost possible – because there’s no transparency or independent administrative oversight.
However, practically all heads of state who engage with the Chavez regime get very rich very quickly. For example, the Kirchners of Argentina, Evo Morales in Bolivia, Daniel Ortega in Nicaragua, and Rafael Correa in Ecuador have prospered personally since they started hanging out with President Chavez. African heads of state also have received cash gifts from Chavez.
Even ordinary foreign public officials who engage with Chavez get wealthy very quickly. For example, the individual in Honduras who was former President Mel Zelaya’s liaison with the PetroCaribe initiative has acquired over $40 million of property in Honduras over the past year.
Chavez also has given away pieces of Venezuelan territory to many foreign governments and non-state actors.
For example, the Iranian regime has a substantial presence in Venezuela.
Basic Industries and Mining Minister Rodolfo Sanz stupidly admitted recently that the Iranians are helping Venezuela’s regime search for uranium in Bolivar state. This was promptly denied by Science and Technology Minister Jesse Chacon, who clarified that the Russians, not the Iranians, were helping Venezuela’s nuclear development ambitions.
Chavez tried to dismiss the mess his ministers created by joking that it was all false. But Chavez is lying.
Venezuela and Iran have secret nuclear cooperation agreements in place which, de facto, will serve Caracas as complements to the nuclear cooperation agreements it has in place with Russia.
The Iranians also reportedly operate an intelligence situation room at a coastal location in Carabobo state between Puerto Cabello and El Palito.
Under Chavez, Venezuela’s armed forces have adopted Cuban national security doctrine and have an explicit mutual defense pact. The Chavez regime also has allowed Cuba’s DGI to set up a permanent situation room in Venezuela which is staffed by up to 600 veteran analysts and military personnel.
Cubans have been deployed for years now inside the National Registry, the Seniat tax authority, the Sudeban banking system authority, the Onidex passport and identity card authority, DGIM, Disip, the Interior & Justice Ministry, Foreign Ministry, Education Ministry and other entities of the Chavez government.
The Cuban regime also has a 49% stake in the new Bolipuertos national port authority that was created after Chavez nationalized all of the country’s ports and related services on the grounds that ocean transport is a strategic activity.
Chavez recently welcomed over 1,000 new Cuban doctors to repopulate the collapsed Barrio Adentro medical mission.
It’s difficult to say with any accuracy how many Cubans currently are deployed in Venezuela. But some estimates range as high as 40,000 to 50,000 Cuban nationals who are believed to be deployed in Venezuela. Many are here on missions of one sort or another. But there are many Cubans in-country whose presence could help Chavez survive unexpected internal instability.
Russians are also present in Venezuela. Their numbers are still small, consisting mostly of oil technicians and mechanics/technicians here to maintain Venezuela’s Russian-made helicopters and fighter bombers.
Chavez has purchased and ordered over $7 bn of Russian-made weapons since 2005. His most recent orders include over 90 T-72 tanks, infantry rocket launchers and several surface-to-air missile defense systems.
President Chavez has committed Pdvsa to a major strategic alliance with Russian oil companies in the past six weeks. Pdvsa has declared that its joint venture agreement with the Russia Consortium (LUKoil, Gazprom, TNK-BP, Rosneft and Surguneftegaz) will be the “template” for its other planned joint ventures with Chinese, Iranian and other oil companies.
Chavez also is lobbying Russian defense leaders to consider using Venezuelan naval and air force bases as refueling/maintenance assets in the Western Hemisphere. Reportedly, the main ALBA countries (Bolivia, Ecuador, Nicaragua) also are courting a larger Russian defense presence in their respective territories. Chavez obviously is behind ALBA’s courtship of Moscow.
China also has a growing security presence in Venezuela, though Beijing has been very discreet about its expanding footprint here. China wants access to Venezuela’s oil and gas, and its other strategic commodities. President Chavez pledged in Beijing on 24 December 2004 that Venezuela’s oil and gas resources were guaranteed for China’s economic development.
But the Caracas-Beijing relationship has evolved more slowly that the Caracas-Moscow alliance. Bilateral agreements in place represent combined oil-related investments totaling over $60 billion in Venezuela and China. But no ground has been broken yet on any major joint ventures, although this may change by first quarter 2010.
Belarus, a rogue criminal state which always represents the interests of other rogue state and non-state actors, is also present in Venezuela, though little is known of Belarusian intelligence activities here.
** Chavez was right – in a way. Anyone who lived in Venezuela during the past 35 years between 1973 until today will recall literally hundreds of prominent and not-so-prominent names which profited greatly in the shadow of the Guanabana era when AD (white) and Copei (Green) divvied up the spoils.
For example, personally we recall the “Twelve Apostles” of the first presidency of Carlos Andres Perez, and the countless “entrepreneurs” who dutifully showed up for “business” meetings at the home of CAP’s lifelong mistress Cecilia Matos.
We also recall the Cadafe and Recadi (the first Cadivi) scandals of the Luis Herrera Campins presidency in which tens of billions of dollars vanished without a trace.
“El chino de Recadi” is the only individual we remember ever being jailed for alleged corruption during the LHC era.
LHC was followed by the vulgarity of the Jaime Lusinchi presidency in which his mistress and eventual wife, Blanca Ibanez, marched at the head of the corruption parade.
Then CAP returned for a second bite at the apple, but his short-lived hopes of becoming Latin America’s answer to Felipe Gonzalez died in the “caracazo” of February 1989, followed by the frenzied race to steal more billions by people with last names like Tinoco, Cisneros, Castro Llanes, Alvarez Stelling, etc.
CAP was toppled in a constitutional coup in which the old bicameral Congress, Supreme Court and Jose Vicente Rangel (aka Grima Wormtongue) played starring roles, but only after two failed coups in less than a year failed to dethrone him.
Rafael Caldera was the last president of Guanabana Venezuela, and it was a fitting end. A very long in the tooth and visibly infirm Caldera stumbled through five years without making things worse, which is a blessing of sorts. But Miraflores presidential palace during his reign was corruption central, thanks to the president’s sons and his son-in-law the general.
However, a decade into the Chavez era, corruption in Bolivarian Venezuela has grown explosively.
In the old Fourth Republic, someone who stole $20 million while serving in a government post or associating with public officials was considered a bold scoundrel, a veteran banker tells Caracas Gringo.
“But since Chavez has been in power the fortunes being amassed corruptly by individuals are in the hundreds of millions and even billions of dollars,” he adds.