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IdentifierCreatedClassificationOrigin
06CARACAS1898 2006-06-23 17:58:00 CONFIDENTIAL//NOFORN Embassy Caracas
Cable title:  

MEETING WITH OUSTED FX COMMISSION PRESIDENT AND

Tags:   EFIN ECON PGOV VE 
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					  C O N F I D E N T I A L CARACAS 001898 

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TREASURY FOR KLINGENSMITH AND NGRANT
COMMERCE FOR 4331/MAC/WH/MCAMERON

E.O. 12958: DECL: 06/19/2026
TAGS: EFIN ECON PGOV VE
SUBJECT: MEETING WITH OUSTED FX COMMISSION PRESIDENT AND
VIEWS ON NEW POLICY DIRECTION


Classified By: Andrew N. Bowen, Economic Counselor, for Reason 1.4(b).

-------
SUMMARY
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1. (C) Econoffs met with ousted Foreign Exchange Commission
(CADIVI) President Mary Espinoza de Robles (protect) June 19.
Espinoza said she "resigned" her position June 7 because the
CADIVI Board continued to impose random requirements (not
supported by law or regulation) on foreign currency requests
to pay dividends, royalties, and foreign debt, in order to
slow dollar outflows. She described her successor, Manuel
Barroso, as a low-ranking military officer (major) and Chavez
loyalist, with no background in finance. In the months
ahead, she predicted the BRV would tighten the availability
of foreign currency to the private sector through CADIVI.
She also expected BRV ministries to reduce the list of
authorized imports automatically eligible to receive foreign
exchange (read: import substitution) and to favor selected
companies with special import permissions (read: political
favoritism). End Summary.



--------------------------


HER RESIGNATION


--------------------------





2. (C) Mary Espinoza de Robles told econoffs during a
meeting at the Embassy on June 19 that she resigned her
position as the Foreign Exchange Commission (CADIVI)
President on June 7 because the CADIVI Board of Directors
continued to add new requirements for foreign currency
requests to pay dividends, royalties, and foreign debt that
were not supported by law or regulations. According to
Espinoza, this was an effort to slow capital
outlfows/repatriation and had resulted in the delay of more
than 1,200 pending applications. She argued that the BRV
should change the regulations and apply any new requirement
to applications received after new regulations were adopted.
Espinoza also noted that all foreign exchange request
applications were now being reviewed to ensure that companies
complied with the new labor solvency requirement (a
certification issued by the Labor Ministry that a company has
complied with national labor laws that is valid for one
year), which came into effect in May 2006. This
certification is required if a company wants to access public
funds, government contracts, or CADIVI dollars. (Note:
CADIVI had announced that it would approve pending foreign
exchange requests submitted prior to May 1, 2006, without the
labor solvency certification. However, after May 1, 2006,
CADIVI would withhold authorization to liquidate foreign
exchange, pending receipt of the certification. End Note.)



--------------------------


NEW CADIVI LEADERSHIP


--------------------------





3. (C) Espinoza described the new CADIVI President, Manuel
Barroso, as a low ranking military officer (major) and Chavez
loyalist, with no specialty in finance. That said, Barroso
is currently President of the BRV-owned Bank of the People
(which extends micro-credits) and a Principal Director of the
BRV's Treasury Bank (positions which he apparently will
retain). In the months ahead, she predicted that Barroso
would implement measures to further restrict foreign currency
authorizations. Citing her prior Central Bank (BCV)
experience and describing herself as &always more technical
than political,8 Espinoza speculated that the BRV appointed
Barroso to replace her because he would be easier to manage.
Espinoza said that she "managed with her door open," but that
Barroso would "manage with his door closed." She added that
some senior technical staff had left CADIVI following her
resignation and that Barroso would bring in technical staff
from the Bank of the People.



--------------------------


NEW POLICY DIRECTION


--------------------------





4. (C) Espinoza noted that in 2006, CADIVI approvals had
reached USD 90-100 million daily, of which 80 percent were
for imports (mostly consumables but increasingly intermediate
and capital goods). The day after Espinoza resigned,
President Chavez declared publicly that CADIVI should not
continue to approve dollars for the Venezuelan oligarchy to
import luxury goods, such as whisky, cigarettes, and luxury
cars. Espinoza expected BRV ministries to further limit
imports into Venezuela using their powers to authorize
imports for foreign exchange. She said that BRV ministries,
depending on their area of responsibility, designated 5,991
tariff (lines) codes as "priority (import) items" that
automatically received foreign exchange through CADIVI. The
ministries could also grant import permission for items not
on the authorized list that are in insufficient supply or not
produced in Venezuela. In the months ahead, Espinoza de
Robles believed that the ministries would move to limit the
list of authorized items based on domestic production levels
and possibly grant selected import permissions to specific
companies rather than general permissions. (Note: According
to Espinoza, whisky imports have increased from USD 22
million in 2005 to USD 44 million in the first quarter of


2006. She added that Chavez's statements following her
resignation contradicted a recent agreement between the BRV
and Europe to import more whisky. End Note.)



5. (C) Moving to the topic of import data collection,
Espinoza noted that CADIVI only handled foreign exchange
requests for the private sector. BRV ministries, the
Treasury Bank, other decentralized agencies and the Social
Economic Development Bank (BANDES), among others, obtain
foreign exchange directly from the Central Bank (BCV). She
said that BRV has no good statistics for public sector
imports, which she described as significant. For example,
imports for the BRV-supported supermarket chain Mercal and
its purchasing arm CASA (Agricultural Supply and Security
Corporation) are not registered. (Note: Mercal is a food
distribution network, with 47 percent of the domestic food
market (by volume, 15-20 percent by sales), which reaches
15.2 million people (over 60 percent of the population).
CASA, Mercal's food purchasing enterprise, is responsible for
coordinating both imports and domestic procurements. End
Note.) According to Espinoza, BRV imports bypass CADIVI and
the Venezuelan tax authority (SENIAT) staffs at the ports of
entry that verify merchandise. She had suggested to the
Economic Cabinet that they allow CADIVI to collect statistics
on public imports in the future, but this suggestion was not
well-received.



--------------------------


COMMENT


--------------------------




6. (C) Comment: Espinoza de Robles repeatedly stressed her
technical background and prior BCV experience to
differentiate herself from her successor Barroso. During her
tenure, CADIVI significantly improved the efficiency of its
operations to where it now works in a generally predictable
and transparent manner. (Note: While there are a number of
exceptions, this is true for most priority products and the
number of business complaints brought to Post's attention has
declined substantially over the past several years. End
Note.) She also maintained relatively open relations with
the Embassy, the business chambers, and occasionally worked
to resolve problems in specific cases. There have been
rumors of possible corruption related to Espinoza's husband
that may have also contributed to her departure but we have
no way to substantiate this. Nevertheless, with her
departure, we anticipate less access to her successor, a
CADIVI that is more political and less transparent in its
orientation, and increased challenges for U.S. companies and
those local companies wanting to buy goods and services from

the United States. End Comment.



--------------------------


Additional Bio Data


--------------------------





7. (U) Barroso's previous positions include: Assistant to
the President's Chief of Staff, Assistant to the Vice
President of the Republic, Director General for the
Infrastructure Minister's Office, and Management Director and
Director of the President of the Republic's Office. Barroso
completed a Bachelors degree in Science and Military Arts,
with a specialization in Business Management and completed
three semesters of graduate level work in Labor Management
and Labor Relations.
BROWNFIELD