GOLF COURSE EXPROPRIATION UPDATE

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 002980

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: DECL: 09/29/2016
TAGS: ECON EINV PGOV VE
SUBJECT: GOLF COURSE EXPROPRIATION UPDATE

REF: A. CARACAS 2656


B. CARACAS 2624

C. CARACAS 2620

Classified By: Economic Counselor Andrew N. Bowen for reason 1.4(d)

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Summary
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1. (C) One month after Caracas Municipal Mayor Barreto's
expropriation decree, the two golf courses affected are
preparing to submit their legal defense. The directors of
the Valle Arriba Golf Club and the Caracas Country Club are
confident the BRV will not move on the decrees until after
the election, due to the immediate public backlash against
the measures. They believe that Barreto's expropriations are
a product of his personal differences with the Baruta and
Chacao mayors, as well as an attempt to ingratiate himself
with President Chavez by tackling the housing issue. Post is
reviewing the effects of the decree on USG-owned properties,
since the future Ambassador's residence and the current DCM's
residence fall within the demarcated areas. End Summary.

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Proposed Legal Action
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2. (SBU) The August 24 expropriation decree (Ref A, B)
affects the entire property of Valle Arriba Golf Club (VAGC)
and a large portion of Caracas Country Club's (CCC) property.
Both clubs are in close contact, but preparing separate
legal defenses. According to Fernando Lozaya, the General
Manager of the CCC, and Horacio Corredores, General Manager
of the VAGC, the decree is poorly written and they are going
to file an injunction in court, as well as a motion to bar
the Mayor from taking any further action on the expropriation
while the injunction is pending (a process they estimate will
take 1.5-3 years). According to Venezuelan Expropriation
Law, the expropriating entity has six months to value the
property and compensate the owner before occupying it.


3. (SBU) Corredores said his strategy is to keep a low
profile, since the BRV "loves to argue." He and Lozaya
believe that due to adverse public reaction to the decree,
the government will hold off any further action until victory
in the December 3 presidential election. Affected private
homeowners in the Valle Arriba area are going to file a joint
claim with VAGC via their neighborhood association. Neither
manager has liaised with affected foreign missions, though
Lozaya spoke with Belgian and Portuguese diplomats and
Corredores asked to be informed if the USG is preparing any
response.

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Immediate and eventual consequences
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4. (SBU) Surprisingly, the immediate consequences of the
decree have been minimal: business is as usual, membership
levels are steady, and there have been no squatters or
National Guard troops. Lozaya said that the Municipal
Registry is not allowing land title transfers for sales of
properties in the Country Club area, based on the decree.
According to Corredores, if the expropriations are carried
out legally (owners are fairly compensated),VAGC
shareholders would receive over four times the current market
value of their shares based on actual property value.
However, Corredores is confident the BRV would never pay,
even if they reached a legal settlement.


5. (SBU) Both managers believe the BRV is more likely to turn

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their greens into parks rather than the housing projects
Barreto proposed. Neither property is suitable for housing
due to terrain quality and lack of urban infrastructure
(roads, sewage, etc.). Corredores said he foresaw the BRV
trying to take nine holes and leave the rest to the Club, but
that the VAGC would fight any type of BRV attempt to
expropriate.

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Mayor drama
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6. (C) Given that the decree was published two days after
Barreto's tirade against opposition mayors Henrique Capriles
(Baruta municipality) and Leopoldo Lopez (Chacao
Municipality) (Ref C),political squabbling may have driven
this expropriation move. Both managers believe that Barreto
targeted their clubs, conveniently located in Baruta and
Chacao, in order to attack his political adversaries. In
addition, he may have sought to ingratiate himself with
President Chavez by tackling the housing issue -- a hot topic
for Chavez' voter base. So far, Lopez has been the only one
to file a court motion against the decree. Corredores spoke
with Capriles directly, who said that he would not file his
own motion for "political reasons." (Note: He still has five
months to do so. End Note.) Press coverage of the issue has
waned, which many have interpreted as a sign that the threat
of actual expropriation has blown over.

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Post's Interest
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7. (SBU) The coordinates outlined in the decree encompass the
entire VAGC and surrounding areas, since they were based on
an outdated 1931 zoning map. Within its boundaries lie the
Ambassador's future residence, the DCM's current residence,
and the Marine House (leased by the USG). Other foreign
missions or residences, including the Mexican Embassy, are
also reportedly included. Though public attention has turned
away from the issue, and high-level BRV officials condemned
Barreto's actions, the fact remains that the decree is
Venezuelan law and expropriation proceedings could continue
at any time (unless barred by a Venezuelan court). Post is
reviewing the legal basis of the decree as it pertains to USG
properties.

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Comment
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8. (C) Though the general managers of the clubs seem fairly
calm about this ordeal, at the same time they are getting
their ducks in a row for what they see as an inevitable push
for expropriation. They have no doubts that a Chavez victory
will come in December, and with it increased radicalization.
Venezuelans will not forego their private property rights
quickly or willingly -- as Lozaya puts it: "most Venezuelans
would rather belong to the Country Club than destroy it."
Many analysts believe that Barreto's actions actually cost
Chavez votes, and that the timing of his announcement
completely backfired -- but the decree has not been repealed
or overturned by a court, only verbally denounced. Though
golf course expropriation may very well be off the BRV's
agenda at least for this moment, the legal basis remains for
the issue to flare up again if political will returns. End
Comment.

BROWNFIELD