Apr
7
2011
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In Case You Missed It… Venezuela’s militia: A Caribbean Tripoli?

Hugo Chávez grooms a militia
The Economist
April 7, 2011

IT IS a long way from Tripoli to Caracas. But although Hugo Chávez, unlike his friend and close ally Muammar Qaddafi, is an elected president, there are some striking similarities between the Libyan and Venezuelan regimes. Mr Chávez’s grassroots “communes” resemble Colonel Qaddafi’s “people’s committees”, for example. And a new decree, published last month, speeds up the creation of a sectarian militia like that which opened fire against unarmed protesters in Libya.

A year ago Mr Chávez assembled more than 30,000 uniformed, gun-toting militiamen and women for a parade in the centre of Caracas. Unsheathing a sword that belonged to Simón Bolívar, Venezuela’s independence hero, he led them in an oath to work tirelessly to “consolidate…the socialist revolution”. Officials claim that the militias total 125,000, and that the goal is to reach 2m. Sceptics put the number trained so far at under 25,000.

Under the new law, the Bolivarian militia will now have its own officers and will be commanded directly by the president. That is something the army previously resisted. But General Carlos Mata Figueroa, the defence minister, insists that the militia is a “complementary”, not parallel, force. According to Carlos Escarrá, a chavista legislator, it is “disingenuous” of opponents to suggest that the militia “will be a sort of praetorian guard for the president”.

Mr Chávez’s own statements suggest otherwise. The president has always said that his leftist “revolution” is “peaceful, but armed”, and that violence would ensue if it were to be thwarted. In December 2012 he faces a presidential election which opinion polls suggest he might lose. But both he and his top general, Henry Rangel Silva, have said that the armed forces would resist the orders of a post-Chávez government. According to General Rangel, the high command is “wedded to the political project” of Mr Chávez.

The officer corps may not be. A recently retired military dissident says only 10% are unconditional chavistas, with 20% constitutionalists and the rest pragmatic. If so, Mr Chávez’s decision to strengthen his paramilitary force may make sense to him. But it bodes ill for peace in Venezuela.

Like Colonel Qaddafi, Mr Chávez also has foreign fighters he may be able to count on in a fix. Venezuela has an unknown number of Cuban military advisers. Some sources say the Cubans give orders and (with Russians) run the intelligence service. But tens of thousands of Cubans, all with military training, have been deployed across the country as medical staff, sports instructors and the like. Many have defected and fled abroad. But some might defend the revolution, guns in hand.

Such a scenario is an explicit part of the government’s planning. Mr Chávez claims, and may even believe, that “the empire” (ie, the United States) is seeking an excuse to topple him by force. Colonel Qaddafi, he declared, “is doing what he has to do, resisting imperialist aggression”. The doctrine of Venezuela’s armed forces now includes a version of what Cuba calls “the war of all the people”. In theory, all Venezuelans must train to resist an occupier.

Many Venezuelans fear that the militia is really aimed at Mr Chávez’s domestic opponents. The president accuses the opposition leadership, almost daily, of being a fifth column for foreign capitalists desperate to grab the country’s oil. From there, it is a short step to imagining the chavista militia, armed with Russian Dragunov sniper-rifles, taking aim at counter-revolutionaries. “It is not possible to stage an unarmed revolution against this bourgeoisie,” Mr Chávez told his militia rally last year. Mere bravado, perhaps, but many Venezuelans fear he may be serious.

 
Apr
6
2011
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In Anti-Business Venezuela, U.S. Companies Carry an Added Burden

By Francisco Toro of CaracasChronicles

Does Venezuela single out U.S. companies seeking to do business there for worse-than-usual treatment?

At first glance, it might seem like a churlish question. After all, Venezuela ranks 172nd out of 183 countries – and dead last in Latin America – in the World Bank’s Ease of Doing Business Report. Even Haiti, Zimbabwe and Uzbekistan ranked better than Venezuela in the Bank’s report. In terms of investor protection and easing access to credit, Chávez’s Venezuela does even worse, ranking 179th and 181st respectively. The same study finds that, in 2010, Venezuela boasted the most rapidly deteriorating business environment in the world.

Where standard treatment of businesses in general has fallen to such abysmal levels, it takes some doing to treat those from a given country even worse than the rest. Yet, that’s arguably what Venezuela has managed to do to U.S. investors.

In a political climate where the government blames most problems – real or imagined – on the evils of capitalism, no one’s property is safe. But, even among the prevailing hostility towards the private sector, U.S. firms are repeatedly singled out.

American businesses in Venezuela carry the burden of association with the government’s favorite bogeyman: U.S. capitalism. Stable brands, such as McDonald’s and Coca-Cola, are continuous targets of harassment and government intervention. In 2008, both U.S. companies faced 48-hour punitive shut-downs over alleged accounting irregularities that neither was given a chance to refute in a formal setting.

A State Department imposed ban on exports to Venezuela of U.S. weapons – in place since 2006, – has led Venezuela to seek weapons elsewhere. The measure eliminates a potential leverage point for U.S. diplomacy, which may come in handy in advocating for U.S. companies.

Venezuelan businessmen seeking protection from Mr. Chávez’s nationalization binge have been hurriedly exploring ways to register their companies as Spanish. Like Brazil, Canada, Peru and several other countries, Spain signed a bilateral investment protection treaty with Venezuela over a decade ago. The treaty gives Spanish firms a measure of diplomatic representation if and when they become targets of the Venezuelan government. Beyond that, Venezuela’s increasing reliance on Spanish firms for, among other things, naval procurement and electric plants has created a deep bond of interdependence that, at times, serves as somewhat of a “break” on the Venezuelan government’s excesses.

The tangible results of such cooperation are plain to see. For example, when the ownership stake of Spain’s Banco Santander in Banco de Venezuela was a target for forceful acquisition by the State, the Spanish owners were generously compensated, by about $1.05 billion. Moreover, this compensation figure was agreed to quickly, within a year of the takeover announcement, sparing Santander the uncertainty that has plagued similar negotiations with enterprises from other countries.

No sane Venezuelan businessman would consider registering in the United States for diplomatic advantage. Because there is no bilateral investment protection treaty between Caracas and Washington, American firms slated for a State takeover in Venezuela are left to fight their own battles against a deeply hostile government. In those cases, compensation is seldom generous and never agreed to quickly.

In the most well-known case – the government’s takeover of ExxonMobil and ConocoPhillips operations in the Orinoco Belt in 2006 are to this date under negotiation, dragging on for the better part of half a decade. The arbitrators from the World Bank’s International Center for the Settlement of Investment Disputes (ICSID) are not expected to hand down a final settlement agreement any time soon.

That said, a bilateral investment protection treaty does not entirely shield foreign investors in Venezuela, as Swiss cement maker Holcim found out in 2008 when its Venezuelan operations were taken over by the Chávez government despite a 1994 bilateral investment protection treaty. Unable to settle matters with Caracas, Holcim was forced to go to the ICSID. The Swiss company eventually settled its claim privately in 2010 for a relatively modest $650 million. Plenty of other firms from countries allegedly protected by investment protection deals – from Britain’s Vestey Group to Argentina’s Ternium – have faced long, uncertain compensation processes after rushed, unilaterally-decided State takeovers.

In final analysis, the Chávez government has gone out of its way to make Venezuela uncommonly hostile to foreign investors. From exceptionally cumbersome labor regulations to major hurdles in the foreign exchange of currency, Chávez’s policies have resulted in the near total collapse of foreign investment in Venezuela. Under such circumstances, businesses can hardly afford one more competitive disadvantage, but no enterprise is worse off than that with a “Made in USA” label.

 
Apr
4
2011
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Jailed Venezuelan Drug Lord Implicates Chávez Government in Drug Trafficking

In a show aired Sunday night on Spanish-language TV network Univisión, suspected Venezuelan drug kingpin Walid Makled said he has “conclusive evidence” of the involvement of high-ranking Venezuelan officials in the production and distribution of drugs. Highlights of the interview in the program “Aquí y Ahora” include the following allegations:

–Makled paid $5.5 million to Venezuela’s current navy commander for a major warehouse concession at Port Cabello, the country’s main port.
–On a monthly basis, Makled made payoffs totaling $1 million to at least 40 senior Venezuelan military officials.
–Venezuelan Armed Forces Commander-in-Chief Henry Rangel Silva and Military Intelligence Chief Hugo Carvajal were on Makled’s illicit “payroll”.
–At least five cocaine-laden planes flew daily from the city of San Fernando de Apure with “100 percent” knowledge of Venezuelan officials.
–The Venezuelan military protects drug labs in the country.

Makled, also known as “El Turco” (the Turk), said he is in possession of six videotapes that are part of the “conclusive evidence” he is only willing to share with U.S. prosecutors. That may never happen, unless Colombian President Juan Manuel Santos changes his mind. The Colombian president finds himself between a rock and a hard place. Both Venezuela and the United States have requested Makled’s extradition. In deciding, Santos must choose between indulging its next door neighbor or complying with the desires of its most important ally. Colombia’s Supreme Court approved Makled’s extradition on March 25. President Santos has signaled he is leaning towards honoring Venezuela’s request.

During the interview conducted at the “La Picota” prison in Bogotá, Makled was asked about his ties to terrorist groups FARC and Hezbollah. Makled, who is the son of Syrian immigrant’s, would say only: “That, as well, I will tell to a U.S. prosecutor.”

Click here to watch Makled’s interview on Univisión.