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). -------------- Summary -------------- ¶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. -------------- Offers, Rejection, Clarifications -------------- ¶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." -------------- One GOV View -------------- ¶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. -------------- A Hard-Liner Moves On, Under Pressure -------------- ¶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. -------------- VENAMCHAM Moves Cautiously -------------- ¶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. -------------- Comment: No Dialogue of Equals -------------- ¶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 NNNN 2004CARACA02807 - CONFIDENTIAL