PROBLEMS WITH VENEZUELAN COOPERATIVES

C O N F I D E N T I A L CARACAS 001954

SIPDIS


NSC FOR CBARTON
HQSOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 05/04/2015
TAGS: PGOV EAGR VE
SUBJECT: PROBLEMS WITH VENEZUELAN COOPERATIVES


Classified By: POLITICAL COUNSELOR ABELARDO A. ARIAS FOR 1.4 (D)


1. (C) Summary: Rural cooperatives are a pivotal part of
Venezuelan President Hugo Chavez's land redistribution
effort. Thousands of agricultural cooperatives are forming
to petition land and monetary grants from the GOV as
participants in Chavez's "Mision Vuelvan Caras" job training
program complete their instruction. At the same time, many
cooperatives, lacking sufficient GOV support and plagued with
land and financial disputes, are folding. In the near term,
failures of rural cooperatives will not pose significant
political problems for Chavez because Venezuela's population
is about 90 percent urban; Chavez has a strong personal
commitment to this program. End summary.


2. (C) Venezuelan President Hugo Chavez regularly hails
cooperatives as a key to his plan to redistribute land and
develop the agricultural sector. Some 90 percent of
Venezuelan cooperatives are agricultural, although mining,
carpentry, oil services, and other technical businesses have
also been collectivizing under Chavez, according to former
Agriculture Minister Hiram Gaviria.


3. (U) Most members of farming cooperatives are graduates
of Chavez's "Mision Vuelvan Caras" (About Face Mission) job
training program. Roughly half of Vuelvan Caras graduates
are involved in the agricultural sector; other sectors
include tourism, light industry, infrastructure management,
etc., according to the official website. Vuelvan Caras
participants--who often join up along with family
members--receive six months of training while receiving a
"scholarship" of about 80 dollars a month. After completing
their instruction, Vuelvan Caras participants form
cooperatives of six to eight people, propose a project, and
those planning to farm receive rights to work collectively a
plot of sometimes expropriated or--in the parlance of the
GOV--"rescued" land to realize their proposal. Popular
Economy Minister Elias Jaua told reporters the GOV spends
over USD 400 million to run each six-month program and then
nearly USD 300 million to finance cooperatives that form in
each graduating class.


4. (U) In March and May, over 500,000 participants
completed the Vuelvan Caras program, and Chavez used his 5
June "Alo Presidente" broadcast to celebrate the formation of
their new cooperatives. During the program, Chavez announced
the GOV would grant letters allowing peasants to farm some
32,000 hectares of a "rescued" ranch. The ranch's legal
adviser objected the same day that only the courts had the
authority to declare the ranch public land.

--------------
Problems
--------------


5. (C) Former Agriculture Minister Hiram Gaviria told
poloff the missions he visited were providing adequate
training, but he predicted the GOV would not provide the
money, technical assistance, supplies, and support in
bringing products to market that the graduates would need to
keep their cooperatives afloat. Manuel Gomez, the
anti-Chavez director of a Venezuelan peasant advocacy NGO,
told poloff in late May the GOV had spent millions of US
dollars on construction for a cooperative in Miranda State
that was not able to produce. He said over 50,000
cooperatives were registered with the government, but
determining how many really existed was impossible because
cooperatives tended to fold as fast as they formed.


6. (C) Inter- and intra-cooperative disputes are common.
Gomez told poloff a group of peasants were up in arms because
the GOV had booted them from the land used for the
aforementioned Miranda cooperative. Vuelvan Caras
participants in Monagas State in late May also protested that
the National Land Institute was planning to grant 500
hectares of local private land to cooperatives from another
area, according to press reports. A pro-Chavez website noted
that the director of the GOV office overseeing cooperatives
said his entity daily received over 20 complaints, 45 percent
of which stemmed from financial disputes between cooperative
members. A peasant asked by Chavez on his "Alo Presidente"
show if he had been planning to form a cooperative responded
that members of such groups ended up fighting amongst
themselves. Not satisfied with his explanation that

cooperatives were organized poorly, Chavez finally talked the
peasant into blaming the disputes on capitalism.

--------------
Crime Comes With Cooperatives
--------------


7. (C) Peasant organization leader Manuel Gomez said a
Venezuelan secret police (DISIP) officer confided to him that
the GOV's agrarian reform was "creating chaos." According to
the officer, scam artists promising land and cash grants were
charging peasants to sign up for fake cooperatives. DISIP
officers were investigating organizations with "campesino"
(peasant) in the title to try to catch the swindlers, Gomez
said.

--------------
Comment
--------------


8. (C) Although many cooperatives are failing, they are
unlikely to be a political liability for Chavez in the near
term. Many peasants, who fall for "get land quick" schemes,
are still looking to Chavez to solve their problems. If they
ever do turn on Chavez, they will not constitute a
significant voting bloc. Indeed, Chavez's tirades against
rich landowners more likely are aimed at the roughly 90
percent of the population that is urban and has little
understanding of rural issues. Chavez has a strong personal
commitment, however, to strengthening cooperatives and small
farmers, since they buttress his vision of a more
self-sufficient, non-capitalist, revolutionary society.


9. (C) The GOV, determined to spend its oil bonanzas on
programs that are both politically profitable and which point
to a "non-capitalist" path to development, is likely to keep
pumping money into these cooperatives. At best, they may
provide a subsistence living for some peasants. But without
attacking the chronic problems of Venezuelan agriculture,
most notably unfavorable exchange rate policies (the current
availability of foreign exchange at preferential rates for
food imports is the latest chapter in a long history of
anti-farmer policies),it is difficult to expect much real
benefit from the cooperative program.
Brownfield


NNNN
2005CARACA01954 - CONFIDENTIAL