NO PROGRESS ON POVERTY UNDER CHAVEZ - UNDP

C O N F I D E N T I A L CARACAS 002003

SIPDIS


STATE PASS USAID FOR DCHA/OTI - PORTER
NSC FOR SHANNON/BARTON

E.O. 12958: DECL: 06/15/2014
TAGS: ECON PGOV SOCI VE
SUBJECT: NO PROGRESS ON POVERTY UNDER CHAVEZ - UNDP


Classified By: ECONOMIC COUNSELOR RICHARD M. SANDERS

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Summary
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1. (SBU) The Chavez government appears to have made little
progress on its alleged "flagship" issue - that of
alleviating poverty, according to the United Nations
Development Program (UNDP) office in Caracas. There is no
mechanism in place to track the results of its various ad hoc
social welfare "missions" which in any event are only a year
old for the most part. Some of its programs, notably the
"Bolivarian Schools" initiative, may indeed have value.
Venezuela's slippage in terms of meeting the UN's Millenium
Development Goals puts it in the "high priority" category.
Even GOV poverty figures indicate deterioration, although the
rate varies depending on what methodology is used. The UNDP
has briefed President Chavez on its findings; he reportedly
expressed surprise and concern over the lack of good news,
but we do not expect any policy change in the near future.
End summary.

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Lots of Programs, Results Hard to Track
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2. (SBU) On June 10, econcouns met with Claudia Jiminez_,
Coordinator for Human Development at the Caracas office of
United Nations Development Program (UNDP). Asked for her
opinion of the range of "missions" (ad-hoc programs aimed at
specific areas of social need, such as basic medical care,
primary, secondary, and tertiary education, and unemployment)
that the Chavez government has created, she was skeptical.
Most of these projects have been mounted within the last
year, and it is too soon to tell what there results are. In
any event, she added, such statistics as the GOV provides
tend to be descriptive of the programs' scope -- how many
students graduated, etc. -- with little more information
provided. For example, with regard to the GOV's basic
literacy campaign, "Mision Robinson," there is no way of
knowing what the real level of literacy achieved for most of
its graduate is. For "Mision Barrio Adentro" ("Inside the
Slums"),its medical care program using Cuban doctors, there
is no monitoring of the overall health of the recipients of
the services.


3. (SBU) Jiminez_ was more positive about some of the GOV's
education programs, particularly its "Bolivarian Schools"
program, one of the Chavez government's first initiatives,
which provides funding for certain designated schools to
provide full (as opposed to half) day teaching schedules and
makes school lunches available. This program was in fact a
reconstitution of earlier educational initiatives of the
1960's which had been abandoned as Venezuela's economy
declined and resources dried up. Other more recent
initiatives, such as such as "Mission Rivas" and "Mision
Sucre," high school and university scholarship programs, were
more dubious. She shared our impression that for the most
part they were little more than transfer payments with little
or no genuine study requirements. However, she added, the
GOV's own new "Bolivarian University," established in an
office complex belonging to state oil company PDVSA, however,
appears to be real, with classes getting underway.

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A Crisis of "High Priority"
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4. (SBU) Asked whether the UNDP's own statistics showed any
important improvements in the living conditions of
Venezuelans' since Chavez took office in 1998, Jiminez_ said
that the UNDP had been working directly with various
ministries to obtain data regarding Venezuela's progress
towards meeting the UN's "Millenium Development Goals."
(These goals, first identified in 1990, call for significant
progress by 2015 in a range of areas including eradicating
hunger and extreme poverty, reducing infant mortality,
improving maternal health, combating HIV/AIDS and malaria,
and guaranteeing environmental sustainability.) The UNDP,
she said, considered Venezuela to be to be a "high priority"
country, which meant that it was either moving extremely
slowly towards fulfilling these goals (or indeed moving
backwards). Decaying performance on poverty, nutrition, and
education were Venezuela's principal weak points. The high
level of income inequality was considered to be an

aggravating factor in Venezuela's poor performance.

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Not Much Better by the GOV's Numbers
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5. (SBU) Jiminez_ provided econcouns with a statistical
summary entitled "Poverty Indicators, 2003," which had been
briefed to her by Elias Eljuri, head of the GOV's National
Statistical Institute (INE). INE uses two ways to calculate
poverty: one simply based on purchasing power, and an
alternative, basedon "unmet basic needs." By the former
method, pverty had been on a slow decline from the first
alf of 1998 through to the second half of 2001, when it rose
again, through the first half of 2003 (the latest period for
which figures are given),presumably as the economic crisis
began to bite.

% Population in Poverty % in Extreme Poverty

H1 1998 49.0 21.0
H2 1998 43.9 17.1
H1 1999 42.8 16.6
H2 1999 42.0 16.9
H1 2000 41.6 16.7
H2 2000 40.4 14.9
H1 2001 39.1 14.2
H2 2001 39.0 14.0
H1 2002 41.5 16.6
H2 2002 48.6 21.0
H1 2003 54.0 25.1


6. (SBU) By the GOV's own figures, therefore, the poverty
rate in Venezuela has ended up somewhat worse than when it
started when viewed in terms of income. However, according
to Jiminez_, the GOV gives more weight to measuring poverty in
terms of "unmet basic needs." This looks at measures such as
number of children between seven and twelve years of age who
do not attend school, number of persons sharing bedrooms,
adequacy of housing, number of households, the head of which
has less than three years of schooling, and access to water
and sewage. By this measure the situation is a bit more
stable (and comes in at lower levels),but again the trend
shows no improvement.

% Population in Poverty % in Extreme Poverty

1998 28.9 10.8
1999 29.3 9.9
2000 30.1 10.5
2001 27.8 9.3
2002 31.2 13.0
2003(H1) 30.5 12.7


7. (SBU) Jiminez_ suggested that the GOV preferred this
latter series because (in addition to providing an overall
lower rate),it was less sensitive to the damage done to the
economy in 2002 and 2003. This was the case because some of
the indicators, such as availability of plumbing and sewage
lines do not change quickly over time. In Jiminez_' view,
however, the most pressing problem facing Venezuela's poor
was their decreased purchasing power, which was captured by
the first time series. She noted that while for most of
Chavez's term in office, the minimum wage kept pace with the
increase in the price of a basic basket of foods, starting in
the first half of 2002, a gap opened up, and by the second
half of 2003, the minimum wage was 210,000 bolivars, while
the food basket cost 255,000 bolivars.


8. (SBU) It is worth noting that the Andres Bello Catholic
University, which has a long-standing research program on
poverty in Venezuela, using a methodology based on purchasing
power, comes up with numbers that suggest an even more
dramatic decay in living standards:

% Population in Poverty % in Extreme Poverty

1998 56.5 21.4
1999 57.2 22.0
2000 57.1 21.2
2001 55.6 20.9
2002 68.5 33.2
2003 74.2 40.4

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Telling the Bad News to Hugo

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9. (C) In early May, Antonio Molpeceres, head of the UNDP
office in Venezuela, briefed President Chavez and his "social
cabinet" (Ministers of Planning, Health, Labor, Education,
and Environment) on their findings. As he recounted the
meeting to the Ambassador, Chavez was very attentive, and
seemingly surprised to find the persistently poor
performance. Cabinet members rushed to blame the problems on
opposition "sabotage" of the economy in the December
2002-January 2003 general strike. However, Chavez cut them
short, noting that the figures indicated deterioration which
predated those events. In her discussion with econcouns,
Jiminez_ said that her impression was that the different
ministries took seriously UNDP's analysis and valued their
relationship with it and United Nations system organizations
generally, but she could not point to any specific course
corrections that were contemplated. Molpeceres (who has
departed to take up a new posting in La Paz) told the
Ambassador that President Chavez simply does not understand
the positive correlation between the general health of the
economy and social indicators.

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Comment
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10. (C) The decline in Venezuela's social indicators under
Chavez is a continuation of a long-term decline, which his
government has failed to reverse. Three of the six years
1998-2003 were marked by shrinkage in the economy.
Inflation, which ran at 29.9 pct in 1998, was running at 27.1
pct in 2003. Unemployment, 11.0 pct in 1998, ran at 16.8 pct
in 2003, while underemployment, which ran at 49.8 pct in
1998, ran at 52.7 in 2003. An index of basic food
consumption (giving 1995 as 100) came in at 84 pct in 1998,
and dropped to 75 pct for 2003. In fairness to Chavez, the
general strike made 2003 an especially dismal year; 2004 is
going to see a (statistically at least) important rebound.
Exchange controls which keep interest rates low and money
inside the country, combined with wide open fiscal policy are
likely to increase the "feel good" factor. The various
social welfare "missions" will continue to be relentlessly
publicized, whatever their real world impact may be. But for
Venezuela's millions of poor people, life is harder than it
was when Chavez took office. As Chavez heads into the
referendum on his tenure in office, the UNDP's briefing
cannot have been be very comforting for him.
SHAPIRO


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2004CARACA02003 - CONFIDENTIAL