GIVING MONEY DIRECTLY TO THE PEOPLE: CHAVEZ'

C O N F I D E N T I A L SECTION 01 OF 04 CARACAS 001067

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 04/11/2036
TAGS: ECON PGOV VE
SUBJECT: GIVING MONEY DIRECTLY TO THE PEOPLE: CHAVEZ'
COMMUNITY COUNCILS

Classified By: ECONOMIC COUNSELOR ANDREW N. BOWEN FOR REASON
1.4(D)

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Summary
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1. (C) On April 8, the National Assembly passed the Law on
Community Councils (Ley de Consejos Comunales),significantly
modifying the allocation of municipal government funds by
placing Community Councils at the center of municipal
governance. The measure effectively reduces the clout of
mayors and existing community organizations. The law also
transforms what is currently a decentralized local system of
governance into one that is central government-dependent as
it creates Presidential Commissions to oversee community
projects and council membership. Chavez has announced over
USD 1.1 billion in additional direct funds for the councils,
USD 223 million to be disbursed via new micro-banks
("Community Banks"). Detractors say the law will breed
corruption and follows the centralized Cuban model.
Opposition leaders say that it's an election-year strategy to
buy votes. The emphasis that Chavez has placed on these
Community Councils in his public statements underscores the
perhaps distinctive importance of the move for his broader
political agenda. End Summary.

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Municipal Government 101
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2. (C) When the largely pro-Chavez constitutional convention
re-drafted the constitution in 1999, it included the concept
of "Councils for Public Planning" at the state and municipal
level, including Local Councils (CLPP). The CLPPs are part
of a multi-layered municipal government structure, which
encompasses both elected government structures and planning
councils. CLPPs were intended to promote decentralization
and ensure public participation in the state and local
governments' investment and implementation strategies. A
Federal Planning Council was also mandated that would employ
a similar function at the national level. The councils were
to have wide membership of state, local, and parochial
elected officials, ministry representatives, and members of
the "organized community." Funding controls, however, were
left in the hands of the elected officials, and very few of
the councils were formed. The Federal Council met only as a
concession stemming from the April 2002 crisis and, with the
subsequent political tensions, never assumed its intended
functions. Community Councils (smaller, less defined
community groups) were not mentioned specifically in the
Constitution.


3. (C) Before this new law, CLPPs were the main mechanisms
whereby communities presented, voted on, administered
projects and received funding. Currently, Mayors chair CLPPs
(whose membership includes elected Municipal Council members
(concejales),chairs of Parochial Councils (Parroquia is a
term for a sub-municipal area, not a religious parish),
neighborhood unions, and representatives from Community
Councils). Governors and mayors, though currently nearly all
Chavez supporters, have been accused in recent years of
choking off funding to locally-developed public projects.
For example, CLPPs have "Technical Committees" (Salas
Tecnicas) that review and approve projects but often, mayors
do not adequately fund projects approved by these committees.
Whatever funds are not spent on projects are rolled over
into general mayoral funds. Funding for CLPPs came from the
municipal budget, partly funded by FIDES (Intergovernmental
Decentralization Fund) and LAEE (Law on Special Economic
Allotments).

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New law on Community Councils
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4. (C) The National Assembly passed the Law on Community
Councils on April 8. Prior to the law, and after President

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Chavez' urging over the past several months, some 9,000
Councils were established -- the stated goal is of reaching
50,000 Councils nationwide, according to press reports.
President Chavez described the effect they would have on the
communities as a "positive atomic explosion" and began
promoting the Community Council as a new mechanism for
directly funding community-proposed projects.


5. (C) However, Community Councils are vaguely defined, with
no mandated statutes, elected membership, bylaws or
methodology for approving projects. According to the
President of the National Assembly (AN) Finance Commission,
Rodrigo Cabezas, the law defines Community Councils as groups
of 200 families for urban areas (20 for rural areas),that
will be elected via Citizen Assemblies (an ad hoc local
decision-making mechanism vaguely mentioned in the Bolivarian
Constitution). To participate in a Community Council,
members must have lived in the "community" for six months and
be at least 15 yrs old. The councils are charged with
electing spokespeople and creating working groups on
employment, urban land, water, health, energy, safety,
culture, education, and nutrition. However, the law leaves
it to each community to decide the size of the district the
council will cover (there are no provisos for overlap),the
number of spokespeople for each council, and the details of
Citizen Assembly operations and project selection.


6. (C) The new law shifts Community Councils to the
epicenter of "participatory democracy," effectively
displacing most other existing mechanisms for incorporating
public input into development projects, and subordinating
them to the National Presidential Commission for Popular
Power. Mayors do not have mandated participation in
Community Councils, so they are also shut out. Chavez
publicly called for the Community Councils not to compete
with established organizations (states and mayors) and one AN
deputy said they may do away with Parochial Councils if there
is duplicity of functions. (Note: Such warnings hint at the
types of friction this law could create. The AN is also
considering reforming the laws on planning councils to
reconcile with the new Community Councils. End Note.)


7. (C) De facto, the law replaces autonomous decision-making
at the municipal level with a central government-dependent
structure, as the Presidential Commission (with
sub-commissions at the regional and local level) would
approve projects and oversee membership in the councils.
Chavez made it clear in his April 9 Alo Presidente speech who
would benefit from council funding -- all the members of the
first six Community Councils showcased on the program were
wearing red shirts. (Note: many existing associations, such
as water and land committees, are simply renaming themselves
"Community Councils" to obtain their slice of the pie
(Septel). End Note.)

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Show me the money!
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8. (C) Chavez has already announced USD 1.1 billion
additional funds for the Community Councils -- half from a
Ministry of Finance fund (Fondo Nacional para el Autogobierno
Comunal) and half from a BRV-created company (Empresa Fondo
Nacional para el Gobierno Popular). The money, according to
a local analyst, comes directly from FIDES and LAEE (given
some regulatory changes to these funds for this purpose),and
also from PDVSA. This allocation is in addition to regular
FIDES state funds, which under the old law mandates 40
percent allocation to municipalities -- 20 percent of which
goes to CLPPs (which had Community Council representation).
Before this law, Community Councils received no direct
funding. Under the new law, FIDES state funds will be
allocated: 60 percent for both state and municipality, 20
percent to Parochial Councils, and 20 percent directly to
Community Councils. By 2007, Cabezas announced that half of
any extra FIDES income will also go to the Community
Councils.


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9. (C) Detractors of the law believe Community Councils will
become a breeding ground for corruption, as the only fiscal
oversight mechanism for the funds is tasked to the councils
themselves. Regardless, the Minister of Popular
Participation and Development, Jorge Garcia Carneiro,
maintained that "the money is safer in the hands of the
people than anywhere else." To administer the initial USD
223 million of Community Council funds, Chavez has announced
the creation of 800 "Community Banks" (Bancos Comunales),to
be established and operated by the councils. (Note: FIDES
President, Richard Canan, has upped this number to 1,000.
End Note.) However, before the law was passed by the
National Assembly, the AN Finance Committee had already
approved USD 67 million for the creation of 200 Community
Banks by the Ministry of Popular Economy. The AN banking
subcommittee is looking to amend the Banking Law to include
special provisions for Community Banks, and already the BRV
has announced a USD 297,000 line of credit for each bank.


10. (C) Micro-lending ventures have a poor history in
Venezuela. Two existing micro-banks, the Banco del Pueblo
Soberano (Bank of the Sovereign People) and the Banco de la
Mujer (Women's Bank),both hailed by Chavez, do not publish
financial statements (experts suspect high loan default
rates). The Municipal Institute of Popular Credit (IMCP),a
micro-lending institution, has a default rate of 66 percent.

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Following the Cuban model
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11. (C) Law 91 regulating community councils in Cuba is
similar to the newly-assed Venezuelan legislation. Both
have neighbohood assemblies to determine membership and are
eared toward citizen participation and project cretion to
benefit the community. Of course, the Cuban model goes much
further in one sense, using te Community Councils as
political "base organizaions" charged with supporting
"participatory demcracy." Cuban councils, which as a
practical mater and in the face of repression of independent
civil society, are entirely dominated by the regime help
select "candidates" for Cuban-style "electons." The one
additional clear overlap between uba and Venezuela is that
in both cases the counils will consist of regime supporters:
in Cuba because independent civil society is crushed, in
Vnezuela because only Chavistas will be allowed to
participate

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The "Bolivarianization" of Local Goverment?
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12. (C) Many see the money given to CommunityCouncils as
election year handouts for votes. Oposition and government
officials have hinted tous that the missions have peaked as
far as partiipation and the ability to absorb cash transfers
go. Aside from the councils, Chavez is still playig to his
lower-class voter base through the creaion of new missions
and continued support for ol ones. On March 30, he
announced the new MisionMadres del Barrio (mothers of the
poor neighborhoods),which will give monthly financial aid
(equivalent to 80 percent of minimum wage) to an estimated
41,000 impoverished mothers, many of whom are single and
heads of household. One recipient said that "with the money
Chavez gave me, I will feed my children," and thanked the
president effusively during the mission's opening ceremony.
Chavez has similar public events scheduled for the hand-over
of the first Community Council checks and in his April 9 Alo
Presidente speech, he announced the intitiative as the next
big hallmark of his presidency. (Comment: The Community
Councils combine the traditional missions with a new form of
local self-government, making this a more transcendental
initiative than simply another "mission." End Comment.)

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Comment
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13. (C) The Community Council legislation is a major event
in the Chavez election year agenda and will feed large
amounts of money directly to his voter base. Since
presidential commissions approve the projects, the allotment
of the money will be directed at those whom the executive
wishes. The BRV has played off weaknesses in the existing
system (between the CLPPs and mayor, for example) to offer a
"solution" for the people. It has also drowned out one of
the few decentralized government mechanisms left, replacing
it with a diffuse and uncoordinated (yet monitored)
substitute. This empowerment will likely have mixed real
results, since technical capacity is lacking at the municipal
level regardless of organizational structure. However,
perception is everything, and as long as the voter base sees
money coming their way, Chavez is sure to reap the benefits
in the ballot box.


14. (C) Despite their apparent disorganization, and not
discounting the thesis that the councils are an election year
tactical mechanism designed to funnel cash to sectors loyal
to the regime, the BRV may have a strategic political agenda
here: creating Cuban-style base organizations to control
resources and political power from the bottom up. This will
push authority and money to the unelected councils totally
loyal to Mr. Chavez, and will squeeze out authentically
independent civil society. Taking the next step -- using the
councils, Castro-style, to control the identification and
promotion of political leadership at the base level -- would
further increase the dominance of the BRV and Chavez' Fifth
Republic Movement. To be sure, there are a number of steps
that would have to be taken in the interim. Venezuela is not
Cuba. Independent civil society and independent media still
exist, even if harassed and occasionally cornered by the
Chavez regime. It will not be a simple task to replicate the
institutions of the mature totalitarian Cuban security state.
But in the case of the new Community Councils, it certainly
appears that they are trying to do just that.
BROWNFIELD