POLITICIZING VENEZUELA'S ECONOMIC BUREAUCRACY

C O N F I D E N T I A L CARACAS 001313

SIPDIS


NSC FOR CBARTON
USAID DCHA/OTI FOR RUSSELL PORTER

E.O. 12958: DECL: 03/22/2014
TAGS: ECON ETRD PGOV VE
SUBJECT: POLITICIZING VENEZUELA'S ECONOMIC BUREAUCRACY

REF: A. 93 CARACAS 03454


B. 93 CARACAS 03769

C. 93 CARACAS 02745

D. CARACAS 00627

E. 93 CARACAS 01995

F. 93 CARACAS 04002

Classified By: Ambassador Charles S. Shapiro for reasons 1.4 (b) and (d
).

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SUMMARY
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1. (C) Current efforts to ensure loyalty within Venezuelan
government institutions by using the list of persons who
signed the recall petition against President Chavez, take
place against the backdrop of a longer history of politically
motivated firings and personnel shuffling aimed at cementing
the administration's control over the bureaucracy. Emboffs
have received numerous reports of technicians, particularly
in the economic and trade ministries, being replaced by
officials who have closer military, party or personal ties to
Chavez and/or his top advisors. This trend, which includes
the October 2003 appointment of a former military officer as
Minister of Production and Trade, has already begun to have
significant effects on Venezuela's foreign as well as
domestic economic policies. END SUMMARY.

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GETTING RID OF THE TECHNICIANS
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2. (C) Former Air Force Lieutenant Colonel Wilmar Castro, a
participant in President Hugo Chavez's 1992 coup attempt,
replaced Minister for Production and Trade Ramon Rosales in
October 2003 (ref A). This marked a trend within the
economic ministries of replacing technically sophisticated
officials at the ministerial and vice-ministerial level with
persons whose political connections outweighed their
experience in their new fields. (Rosales, an academic
specialist on international trade was a rabid opponent of
"globalization" but was regarded by business as a
knowledgeable and somewhat sympathetic interlocutor in
specific issues.) Since then, we have received other reports
of politically motivated personnel shifts, reaching
considerably further down into the ranks of civil servants.
In December 2003, Eduardo Porcarelli, former Director for the
Office of Foreign Trade in the Ministry of Production and
Trade (MPC),told econoffs he had resigned from his position
in September 2003 because he had been increasingly
marginalized within the Ministry. Roberto Arias, a trade
specialist in the same MPC office, also described his
transfer to a different government job as politically
motivated and illegal. Arias told econoff that four people
in the office had been transferred or resigned within a two
month period.


3. (C) Arias and Porcarelli noted the importance of their
former office to the development and promotion of Chavez's
international economic policies. Their replacements, who are
for the most part, political appointees with little
international trade experience, are now managing preparations
for WTO negotiations and Venezuela's upcoming association
with MERCOSUR (ref B). Porcarelli and Arias confirmed the
accounts of others in MPC, the Ministry of Agriculture and
Lands, and the Ministry of Planning and Development, that
technical experts are being sidelined on critical issues.


4. (C) Jorge Szeplaki, Superintendent of Venezuela's
anti-trust agency (PROCOMPETENCIA),told econoffs his
organization had been stripped of its traditional role as one
of the technical advisors in the preparations for FTAA
negotiations. According to Szeplaki, the Presidential
Commission now managing Venezuelan FTAA policy is made up of
ideologues who have close relationships with Chavez. The
President of the Commission, former Vice Minister of
Industry, and now a board member of Petroleos de Venezuela
(PDVSA),Victor Alvarez, told econcouns in August 2003 that
the GOV would lobby to postpone FTAA negotiations until all
the countries involved had reached "economic parity" (ref C).
Alvarez is a self-proclaimed opponent of laissez-faire
economics and the government's chief proponent of a Latin
American-led regional alternative to the FTAA. The Ministry
of Foreign Affairs, according to Amb. Oscar Hernandez,

Director for International Economic Affairs and former
permrep to the WTO in Geneva, is completely sidelined on
international trade negotiations.


5. (C) Jose Fermin, a career civil servant and former top
legal advisor in the Venezuelan Patent and Copyright Agency
(SAPI),told econoffs in January he was one of many dismissed
from the agency for political reasons. Fermin said his
January 2004 removal was ordered by SAPI director Eduardo
Saman because he refused to fall in with Saman's politically
influenced policies. Industry contacts confirm that several
career civil servants with significant technical expertise
have been dismissed from SAPI as a result of which patent
applications have been stalled. Saman is on record as an
opponent of expanded IPR protection for international
pharmaceuticals which he views as potentially detrimental to
Venezuela's health care system (ref D). (Note: When Fermin
met with econoffs, Saman was in Cuba to discuss the
implementation of part of the 2000 Venezuela-Cuba Agreement
(ref E) which calls for cooperation on IPR issues.)


6. (C) Under Saman's influence, SAPI has decreased the
number of new patents awarded to pharmaceutical products, the
GOV has instituted a policy of approving domestic copies of
internationally patented pharmaceutical products for sale in
Venezuela, and the National Assembly is considering changes
to the new Industrial Property Bill which would worsen the
legal framework for protection of intellectual property.
(Comment: Saman was himself briefly removed from office last
year by former Minister of Production and Trade Rosales, but
was returned to his position once Rosales was removed.
Industry sources say Saman's close relationship to Chavez
facilitated his quick return to SAPI and Rosales' ouster.)


7. (SBU) The technical experts in the food sector also
appear to be targets. Ministry of Agriculture and Lands
(MAT) sources tell emboffs that former Vice Minister Oswaldo
Carnevalli, a respected figure in the industry, was fired in
June 2003 because he publicly noted the need to raise food
prices, a realistic assessment which was perceived by his
superiors as "counter-revolutionary." His position was
filled by General Rafael Oropeza. Former MAT Director of
Marketing Carlos Abello told emboffs he was pressured to
resign because he would no longer manipulate the issuance of
import licenses. Abello was ultimately replaced by an
unknown, Irahil Mendez. Industry sources say costs per ton
for corn import licenses have recently increased and at least
one U.S.-affiliated company has not been able to get licenses
since September 2003.

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CHANGING THE RULES OF THE GAME
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8. (C) Current MPC Assistant Director of Foreign Trade Nilsa
Mujica told econoffs the trend of transferring and dismissing
civil servants could be justified under Venezuela's November
2001 Public Authority Law, which provides the legal framework
for hiring and firing government employees. In her words,
"the new law makes it easier to remove unproductive personnel
and decreases labor liability". Article 98 of the law
provides for dismissal of career civil servants if
administrative changes, office closures, or personnel
downsizing are required and previously approved by the office
of the President. "Participating in strikes that do not meet
legal requirements" is another reason for dismissal of public
servants under the law.


9. (C) Mujica complained to econoff that the 2001 law had
revoked previous safeguards for career employees making them
almost as vulnerable to abrupt dismissal as political
appointees. The situation for public servants was worsened
by the October 2003 dismantling of Venezuela's First Court
for Contentious Administrative Matters. The Supreme Court
called this action necessary to deal more efficiently with a
high case load, however, the court has yet to be replaced
with an equivalent court. The First Court heard cases
dealing with alleged illegal government actions and acted as
a court of appeals for illegally dismissed public employees
(ref F). According to Mujica, the court almost always found
in favor of employees in those cases. She suggested to
econoff that the absence of any avenue for appeal has had a
chilling effect on employees who might have considered
protesting what they see as a trend of politically motivated
transfers and firings in the economic ministries.

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COMMENT
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10. (C) Politically motivated firings and harassment within
the public sector have become more visible as the GOV targets
people who signed the recall petition against President
Chavez. A longer pattern of replacing non-partisan figures
in the economic ministries with Chavez loyalists exists. As
Chavez seeks to keep his approval ratings up, the importance
of the ministries that oversee significant domestic
"development" funds as well as overall economic policy, also
increases. The GOV is likely to continue to pursue a
strategy which gives the President more control over the
bureaucracy and more secure access to funds that could boost
his popularity.
SHAPIRO


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2004CARACA01313 - CONFIDENTIAL