CARACAS BRIDGE CLOSURE: WEEK SIX

UNCLAS SECTION 01 OF 02 CARACAS 000459

SIPDIS

SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
USOFFICE FRC FT LAUDERDALE FOR CLAMBERT

E.O. 12958: N/A
TAGS: ECON ELTN EAIR ETRD KDEM PGOV ASECVE VE
SUBJECT: CARACAS BRIDGE CLOSURE: WEEK SIX

REF: A. CARACAS 00043

B. CARACAS 000126

This message is sensitive but unclassified, please treat
accordingly.

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SUMMARY
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1. (SBU) Six weeks after the Caracas-La Guaira bridge
closure, transportation remains cumbersome and important
sectors of the greater Caracas-area economy continue to be
affected. BRV plans for a February 26 opening of the bypass
road will not restore pre-closure traffic volume. U.S.
airlines have cancelled some flights and port traffic has
flowed away from La Guaira. The closure is expected to
continue to be a drag on GDP growth and increase inflationary
pressures. The coastal state of Vargas has suffered the
most, and the BRV has responded by enacting tax breaks and
subsidies for truckers and Vargas businesses. Post continues
to require Embassy personnel and dependents to use Embassy
armored vehicle shuttles to travel to/from the coast. So
far, the prior lack of BRV attention to infrastructure
problems has had minimal negative impact on President Chavez
himself. End Comment.

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BYPASS ROAD NOT PANACEA
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2. (SBU) The BRV has stood firm on its February 26 deadline
to open the bypass road, a two-lane highway skirting the
mountainside along the bridge. Currently, the primary
alternate route continues to be the "Old Highway," with a
travel time averaging between two and seven hours and heavy
cargo restrictions. The secondary alternate route over the
Avila Mountain and through Galipan has an average travel time
of 1.5 hrs, though it can only be utilized in daylight hours
and with four-wheel-drive vehicles. The Ministry of
Infrastructure (MINFRA) has plans for a new parallel bridge
by March 2007, six months earlier than originally announced.
(Note: We remain highly dubious about the March 2007 date.
End note).


3. (SBU) According to MINFRA, the 2.5 km bypass road will be
open to all traffic at all hours. Engineering groups,
however, estimate the road will only support 30 percent of
prior bridge highway traffic volume. The Venezuelan
Engineering Association expressed doubts about the quality of
this hastily-built road, as it lies on the same parts of the
mountain whose shifting led to irreparable cracks on the
bridge. Moreover, the rainy season, which starts in April,
will likely cause mudslides and road damage. MINFRA
blueprints of the road show up to a 7 percent grade on some
stretches, which is very steep for cargo trucks, as well as
multiple tight turns difficult for trucks to maneuver.
MINFRA has not addressed this issue publicly, yet poor truck
maintenance and the slow speed of required travel could pose
significant bottlenecks.

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AIRLINES AND PORTS SHRINK OPERATIONS
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4. (SBU) In the first three weeks following the closure, U.S.
airlines reported modest cancellations, since most travelers
were using previously-booked holiday tickets. However, by
Jan 26, American Airlines cancelled half of its Miami-Caracas
flights, Continental changed flight times for Houston and
Newark routes. Delta's schedule remained unchanged. Airline
representatives met with the Ambassador and expressed
concerns about decreasing demand if the situation didn't
improve. Aeropostal, the major Venezuelan airline, reported
a 43 percent drop in January sales. European airlines, who
mostly use Caracas as a regional hub, have reportedly
experienced less of a demand decrease.


5. (SBU) The effect of the bridge closure on the Port of La
Guaira is unclear. SENIAT, the customs and internal revenue

CARACAS 00000459 002 OF 002


agency, reported that the port is 100 percent operational,
though the president of the National Association of (Port)
Agents said that 50 percent of the cargo has been diverted to
nearby Puerto Cabello. Lending credence to lower volume, the
La Guaira Port Authority announced on January 22 that it
would keep old tax rates as an incentive to retain business.

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ECONOMIC IMPACT
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6. (SBU) According to a study by the economic consulting
firm, MetroEconomica, the closure of the bridge will cause an
estimated 2 percentage point contraction in GDP growth. The
Caracas-Vargas region generates about 24 percent of
Venezuela's non-oil GDP, and 20 percent of total GDP, which
makes it a significant artery of economic activity for the
country. MetroEconomica, as well as the Venezuelan-American
Chamber of Commerce (VenAmCham) estimate that inflation will
rise by 1.5 percentage points, mainly due to a reported 400
percent increase in transportation costs. Both organizations
recognize that the opening of the bypass road will mitigate
these pressures.

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VARGAS IS HIT HARDEST
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7. (SBU) Since the closure of the bridge, Vargas' tourism
has decreased 70 percent and nearly all businesses have felt
the impact of the closure. Hospitals report critical staff
shortages due to long commute times, and grocery stores
report interruptions in supply of products from the interior.
The BRV has pledged USD 63 million in assistance, which
includes subsidies for airline jet fuel, gasoline subsidies
for truckers and public transportation, sales and port tax
exemptions, fare subsidies for taxi and bus drivers, and
salary guarantees.

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CONTINUED IMPACT ON POST OPERATIONS
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8. (SBU) Post continues to operate armored vehicle shuttles
twice daily on the "Old Highway" and has authorized travel on
the Galipan route for official offroad vehicles during the
daytime. Long travel times continue to hamper Embassy
operations and increase costs, as Embassy employees and
TDYers must now plan an entire day to travel back and forth
from the airport. As expected, this has affected morale and
has decreased official and recreational travel. When the
bypass road opens, Post will re-evaluate travel restrictions
and transport costs.

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COMMENT
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9. (SBU) We expect the bypass road will somewhat alleviate
problems caused by bridge closure, however, bottlenecks will
likely slow traffic and continue to make traveling to/from
the coast a production. (Note: An estimated 2,000
tractor-trailers traveled the highway before the collapse,
and now only 800 make the trip on the "Old Highway." End
Note.) The bridge incident has proved embarrassing for the
BRV, highlighting the lack of attention by Chavez on what was
widely recognized as a pressing problem. Suprisingly, the
BRV has yet to pay a political cost for the bridge collapse,
despite efforts by the media and opposition groups to
highlight the issue. Until the government provides a
solution that restores the prior traffic flow, travel will
continue to be burdensome and the sectors of the economy,
particularly in Vargas, will continue to suffer. End Comment.
BROWNFIELD