ROCKY START TO BUSINESS-GOVERNMENT DIALOGUE

C O N F I D E N T I A L CARACAS 002807

SIPDIS


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

E.O. 12958: DECL: 09/07/2014
TAGS: ECON PGOV VE
SUBJECT: ROCKY START TO BUSINESS-GOVERNMENT DIALOGUE

REF: CARACAS 2668

Classified By: Economic Counselor Richard M. Sanders. Reason: 1.4 (b)
and (d).

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Summary
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1. (C) The GOV rejected talks with umbrella private sector
organization FEDECAMARAS after the latter issued a "Business
Manifesto" which cast doubts on the results of the recent
referendum on President Chavez's tenure in office and sharply
criticized other GOV policies. Interior Minister Chacon
stated that the GOV would not engage in dialogue "under
conditions" and would talk directly to other business
organizations and leaders. The GOV backed off somewhat when
FEDECAMARAS President Albis Munoz insisted that no conditions
were being demanded. Nonetheless, it remains unclear if,
when, and under what circumstances such dialogue will take
place. The business community's accommodation to Chavez
continues, with the departure under pressure of Rafael
Alfonzo, one of the hardest-line anti-Chavez industry
leaders, from the presidency of the Food Industry Chamber.
The U.S.-Venezuelan Chamber of Commerce (VENAMCHAM),which
held useful meeting with the Finance Minister and the
Chairman of the National Assembly's Finance Committee, is
nonetheless leery of a GOV effort to set it up it as a
counterweight to FEDECAMARAS. Both the GOV and the business
community have an interest in maintaining dialogue, but the
GOV aims to manipulate the private sector into definitively
accepting its place in the Chavista revolution. End summary.


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Offers, Rejection, Clarifications
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2. (C) Following Chavez's referendum victory, Albis Munoz,
President of the Federation of Chambers of Commerce and
Industry of Venezuela (FEDECAMARAS) offered to enter into
dialogue with the GOV, calling for the creation of "friendly
environments for national... reconstruction. Her comments,
well publicized nationally, caused considerable dissension
within her organization, which led it, after lengthy
close-door debate, to issue on August 30 a "manifesto" with a
distinctly political tinge. It led off by noting the
persistence of "doubts regarding the transparency and
veracity" of the August 15 referendum results. It denounced
the effort to "impose laws which limit freedom of expression
and foment the non-recognition of private property." Noting
that "communication is the ideal mechanism for
understanding," it called for "businessmen, workers,
consumers and government to close ranks in a common effort to
put Venezuela on the path of full economic and social
development, under democracy and with the values which define
our people."


3. (C) Interior Minister Jesse Chacon responded by saying
that the manifesto represented the views of the "extreme
right wing" of the business community. The GOV, he added,
was already undertaking discussions with various sectorial
chambers, and would work with businessmen to create a
"strategic agreement," but that FEDECAMARAS would not be
participating: "We do not dialogue under conditions."
Munoz subsequently clarified that the manifesto, while
reflecting the views of FEDECAMARAS' members, did not
constitute any effort to impose any pre-conditions on
dialogue with the GOV. GOV Executive Vice President Jose
Rangel, in turn, responded by calling this "an interesting
signal," adding that the GOV was "prepared to dialogue with
FEDECAMARAS and any other sector, but based upon the
constitution."

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One GOV View
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4. (C) On September 2, econcouns met with Francisco Natera,
a former FEDECAMARAS President who currently serves in the
GOV in the low profile post of "Minister of State for Special
Economic Zones." Natera's principal task has been to
maintain liaison with the private sector, most notably
through the staging of a series of public "encounters" Chavez
held with businessmen in Caracas, Maracaibo, Valencia and

Puerto La Cruz prior to the referendum. Natera asserted that
FEDECAMARAS had lost an opportunity to repair relations with
the GOV. Chavez, he said, had placed a telephone call to
Munoz after his referendum victory. Munoz, closeted with her
advisors, neither took the call nor returned it later. This
discourtesy, according to Natera, together with the
manifesto's outlining of purely political issues as
FEDECAMARAS priorities, made the GOV's hostile response
inevitable.


5. (C) Natera suggested that despite the apparent failure
thus far to re-establish normal relations between the GOV and
FEDECAMARAS, all was not lost. He thought that after "five
or six months" it could be renewed, noting that Chavez is
quite capable of changing his positions if it suits his
interest. He suggested that a change in FEDECAMARAS
leadership might be needed first. In the meantime, he added,
dialogue was taking place at other levels. Several important
sectorial organizations, such as the Banking Association and
the Chamber of Construction had either met or would shortly
meet with President Chavez. (Note: The Banking Association
met with Chavez on September 3. End note.) He also praised
the U.S. Venezuelan-Chamber of Commerce's (VENAMCHAM) highly
publicized meeting with Finance Minister Nobrega (See para.
9). He suggested that these various initial approaches would
be followed up by the formal creation of working groups at
the ministerial or sub-ministerial level.


6. (C) Natera denied any contradiction between Chavez's
asserted policy of outreach to the private sector and his
announcement of a new land reform initiative, including a
threat to expropriate idle land if owners did not negotiate
its sale. Chavez, he said, is a politician who must play to
different constituencies, and the rural poor are one of the
most important voting blocs whose support he will need ahead
of the regional elections. There are, he insisted, large
stretches of land not worked by their owners, who in many
cases do not even have good title. The extent of the problem
is well known, and landowners outside of these well-defined
situations have nothing to fear. He suggested that
implementation of land reform could be a subject for
business-government dialogue.

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A Hard-Liner Moves On, Under Pressure
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7. (C) As the status of the business-government dialogue
remains murky, one leading player in the organized business
community is leaving the scene, at least for now. Rafael
Alfonzo, head of a large, family-owned grain milling and food
importing business, announced his resignation from the
presidency of Venezuelan Food Industry Chamber (CAVIDEA).
Alfonso had been the private sector representative in the OAS
and Carter Center-sponsored negotiations leading to the June
2003 agreement which set the stage for the petition drive and
referendum on Chavez's tenure in office. One of the highest
profile business sector figures within the opposition, he had
publicly cast doubt on the validity of Chavez's August 15
victory. Alfonzo reportedly had strongly opposed within
FEDECAMARAS any effort to re-start dialogue with Chavez. He
attributed his departure to health concerns, but admitted
that given that his actions could be "misinterpreted" and
affect the interests of CAVIDEA's members, it was time to go.


8. (C) Alfonzo's departure followed a meeting of the
National Cereals Board, a GOV-industry consultative entity on
issues such as price controls and import permits on key
commodities, at which, according to industry sources, Vice
Minister of Agriculture Garzon specifically raised Alfonzo's
allegations of electoral fraud, saying that as long as
institutions such as CAVIDEA (and also farmers' association
FEDEAGRO) did not recognize the legitimacy of the government,
they would not be considered "valid interlocutors." He also
said that public declarations questioning the referendum
results or calling for revision of the Land Law were
unacceptable, since "losers don't place conditions."
Implicit in his comments, according to one participant, was a
threat that import permits and price increases (the latter
being crucial in Venezuela's high inflation economy),would
not be forthcoming without personnel and policy changes at
major industry associations. We have also heard from an
industry insider that food and beverage giant Polar was
instrumental in Alfonzo's departure.

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VENAMCHAM Moves Cautiously
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9. (C) In an introductory call on the Ambassador on
September 3, Imelda Cisneros, President of the U.S.-Venezuela
Chamber of Commerce (VENAMCHAM),discussed the August 26
meeting which her organization had held with Finance Minister
Tobias Nobrega and National Assembly Finance Committee
Chairman Rodrigo Cabezas. Cisneros, while satisfied
substantively with the results, was irked by the massive
publicity which Cabezas in particular had generated both
before and after the event. She saw an effort on the GOV's
part to set up a dichotomy between a "good" VENAMCHAM and a
"bad" FEDECAMARAS. Venezuelan Ambassador to the U.S.
Bernardo Alvarez_ had subsequently telephoned her to suggest
that his Embassy and VENAMCHAM jointly host a major
investment promotion event in Washington. She told the
Ambassador that she would be very careful about such
approaches, while trying to engage a very difficult
government on the range of substantive concerns which
VENAMCHAM had.

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Comment: No Dialogue of Equals
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10. (C) Despite the difficult beginning, we may yet see
FEDECAMARAS participating in formal dialogue with the GOV.
From its own institutional perspective FEDECAMARAS must find
a way to be able to talk to Chavez and his ministers or be
doomed to impotence and irrelevance at least through the 2006
elections. The business community as a whole also has an
interest in speaking with a unified voice, given that
Chavez's efforts to deal with individual chambers and
businesses reflect a "divide and conquer" strategy. For the
GOV the need for dialogue with FEDECAMARAS is less pressing.
Nonetheless, given the role of the business organization's
leadership in both Chavez's temporary ouster in April 2002
and in the December 2002-February 2003 general strike, its
reconciliation with the GOV, should it occur, would add to
the perception of Chavez's long-term invincibility.


11. (C) Chavez's vision of what the business-government
relationship should be probably entails smiling business
leaders publicly approving various economic development
schemes being financed with oil revenues, and some private
dickering over specific problems. One long-time observer
even suggested that the stability of Chavez's government
could benefit from the added communication that formal links
to the business community could provide, especially outside
of Caracas, as an alternative to misinformation from corrupt
and sycophantic politicians at the state and local level.
But to judge by the initial sparring, if the business
community acts as if it has the right to criticize core
political interests of the Bolivarian revolution such as its
management of the electoral process and the courts, its
planned law regulating the press, and possibly (despite
Natera's comments) land reform, it will get the back of
Chavez's hand.
Brownfield


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2004CARACA02807 - CONFIDENTIAL