(S) JAMAICAN-VENEZUELAN RELATIONS: AN INSIDE VIEW

S E C R E T KINGSTON 000097 SIPDIS SIPDIS DEPT PASS EC CARICOM COLLECTIVE PRIORITY FOR INFO DEPT ALSO PASS CENTRAL AMERICAN CARIBBEAN BASIC COLLECTIVE FOR INFO DEPT FOR WHA/FO (TSHANNON),WHA/FO (KMADISON)WHA/CAR (JTILGHMAN), WHA/EPSC (VDEPIRRO) WHITE HOUSE/NSC FOR DAN FISK TREASURY FOR SARA GRAY SOUTHCOM FOR ADMIRAL STAVRIDIS E.O. 12958: DNG: CO 01/29/2029 TAGS: PREL PINR SOCI ETRD ENRG ECON EINV XL JM SUBJECT: (S) JAMAICAN-VENEZUELAN RELATIONS: AN INSIDE VIEW FROM THE MFAFT (PART II) REF: A. 07 KINGSTON 1793 B. KINGSTON 0095 Classified By: DCM James T. Heg for reasons 1.4 b and d 1. (S) The text below is a continuation of Reftel B from an internal briefing document drafted by the Jamaican Ministry of Foreign Affairs and Foreign Trade (MFAFT)'s Bilateral Relations Department. (see reftel). (BEGIN TEXT PART II) Ideological Endorsement -------------- ¶53. (C) The ideological views proclaimed by President Chavez are both populist and uncompromising. At its heart is an appealing blend of principle, egalitarian belief and opposition to what he views as the failed neo-liberal policies reflected in the so-called 'Washington Consensus'. ¶54. (C) Any expectation that Chavez may have of securing Jamaica's endorsement for his ideology, is probably founded on his belief in the universal appeal of his principles and core beliefs. Chavez espouses principles of mutual aid, solidarity, and respect for self-determination. Allied to this is a strong belief that governments of the world have a moral obligation to improve the lot of all human beings, through pursuing policies that promote friendship, solidarity and peace. His objective of achieving socio-economic development within the framework of Latin American and Caribbean integration provides a seductive proposition, therefore, when allied to the financial and economic support that he is able to render. On top of this has been placed a heavy coating of strident anti-poverty, anti-dependency, anti-social inequality, anti-unilateralism and anti-hegemonic rhetoric. ¶55. (C) It is not difficult to see, therefore, how Chavez might believe that Jamaica and other developing countries of the hemisphere would wish to buy-in to his vision of a united Latin American and Caribbean region. In his world vision, such a unified regional bloc would utilize the approach of South-South co-operation to achieve social objectives such as the eradication of illiteracy, the promotion of social inclusion, the attainment of food security, while collaborating in the areas of energy, communications and infrastructure development. ¶56. (C) In reality, however, the situation is much more complex. Chavez's own expectations of Jamaica's endorsement of his ideology would be tempered if he were to consider that Jamaica has moved away from the developmental strategy he has chosen to adopt, i.e. ¶A. His denunciation of the neo-liberal capitalist system is at odds with JamaicaQ,s liberal market-oriented economic model; ¶B. His criticism of the international financial institutions and the operation of the international systems runs counter to Jamaica's reliance on the international capital market; ¶C. The negative attitude he displays towards foreign investors and multi-national corporations is at variance with Jamaica's welcoming approach to foreign investment; ¶D. His rejection to the FTAA contrasts with JamaicaQ,s commitment to this hemispheric trade integration pact (although prospects for negotiations resuming are remote). Political Analysis -------------- ¶57. (C) There is now sufficient evidence to show that President Chavez is beginning to question what Jamaica and other CARICOM countries stand for. This was clearly articulated by him following the November 2005 Summit of the Americas in Argentina. In relation to CARICOM's position towards the FTAA, which he has said he wishes to see buried, he enquired: "I would like to hear from my CARICOM brothers to see what they have to say about this, to see if they are going to join this blackmail by the mob; silence in the room. " On the ability of small states to compete with large developed ones: " ... that's why I do not understand the positions of the leaders of the Caribbean; today, I asked some of them: What are you defending? I said clearly and I will tell them more clearly each day: What are you defending? Don't you see that they are presenting you with an illusion, a mirage; are they not aware of the grave danger which hangs over them?" In commenting on geopolitical relations within the hemisphere he remarked: "I always tell my friends of the Caribbean to look more towards the South, to look a little more towards the South and they will find reality. " ¶58. (C) An assessment of Jamaica's strategic interests demonstrates that there are indeed significant differences in the perspectives and governing philosophies of the Venezuelan and Jamaican governments. Therefore, it can be expected that the Chavez administration will place increasing pressure on Jamaica and other Caribbean and Latin American recipients of his largesse to subscribe to his ideological tenets, as a condition for receiving continued and expanded economic assistance. ¶59. (C) The most recent evidence of President Chavez's frustration on this issue came during a private meeting he had with Prime Minister Simpson Miller, during the previously referenced visit to Montego Bay on 12th March, 2007. In response to his invitation to join ALBA, Prime Minister Simpson Miller indicated that Jamaica welcomed the opportunity to study the matter in greater detail. There was an awkward silence following the Prime Minister's comments and it is safe to conclude that President Chavez was not impressed by Jamaica's non-committal position, particularly coming after his passionate public appeal for Jamaican support for the ALBA. ¶60. (C) A part of the reason why the relationship has become so one-sided, in terms of the bilateral assistance that is provided, is that there was developed a level of policy incoherence among the various Jamaican Ministries, agencies and other governmental bodies that all rely, to some degree, on gaining assistance from the Government of Venezuela. This lack of policy coherence will need to be addressed as soon as possible. Political Developments in Venezuela -------------- ¶61. (C) Presidential elections in Venezuela took place on 3rd December 2006, and Hugo Chavez Fr!as was again victorious at the polls. In the period immediately following his election to a second six-year term, President Chavez set in motion a process that resulted in him being granted special powers by the Venezuelan Congress to rule by decree. Such powers have given him significant latitude to undertake the nationalization of segments of Venezuelan private industry, which is ostensibly aimed at giving Venezuelans greater control over their country's resources and shoring up Venezuelan sovereignty. ¶62. (C) Among President Chavez's early statements following his re-election was his proposals that the country's main political parties be merged into a single political entity and that the constitution be re-written. Such proposals were in keeping with his intention of advancing the Bolivarian revolution and with his characterization of the guidepost of the country's future as "Fatherland, socialism or death." Such utterances have left many observers with the impression that it was his intention to take the country further along the path towards socialism. ¶63. (C) President Chavez's 28th December 2006 announcement of his decision not to renew the broadcast license for Radio Caracas Television (RCTV),the country's second largest television station, when its license expired on 27th May 2007, sparked domestic and international controversy. The station, which had been created in 1953, had been characterized as 'pro-opposition', particularly in the light of its coverage of the 11th April 2002 coup attempt against President Chavez and the anti-government strikes that took place in its wake. Following the announcement of the non-renewal of RCTV's license, there was widespread protest within the country by those against, as well as those in support of the President's actions. The matter was also accorded much attention in the international media, with several commentators raising questions about the extent to which press freedom was guaranteed in Venezuela. ¶64. (C) Among the more significant international reactions to the RCTV incident was that of OAS Secretary General Jose Miguel Insulza, who issued a communique wherein he condemned the action and raised questions about the extent to which the Government of Venezuela was abiding by democratic principles and practice. In response, President Chavez characterized the Secretary General as "a true idiot" and "a viceroy for the empire". ¶65. (C) In addition to the RCTV matter, the Venezuelan media landscape underwent further changes with the Government's introduction of TELESUR, station that was aimed at counteracting what it characterized as anti-Government political propaganda being broadcast by several networks, particularly those that were privately owned. The station was also geared towards providing coverage of social, cultural and political matters that would serve to promote a greater degree of integration among the countries of the region. With long-term plans for TELESUR to broadcast in Europe and the United States, the station may be regarded as an attempt by Venezuela to provide an alternative to the perspectives of Western media outlets such as CNN. Economic Developments -------------- ¶66. (C) The increases in oil prices for the last two to three years, coupled with growing global demand for the commodity, have placed oil producing countries in an advantageous economic position. As such, Venezuela has seen an increase in its oil revenues which has underwritten President Chavez's particular brand of petro-diplomacy. ¶67. (C) Venezuela's economic fortunes are linked to world oil prices and the country remains highly dependent on the petroleum sector, which accounts for approximately one third of its GDP, 80 percent of export earnings and more than a half of the government's operating revenues. ¶68. (C) In recent years, increased tax collection has resulted in an increase in government revenue. Revenue derived from taxes is the main source of non-oil revenue for the country. Though Venezuela has a rich resource base, possessing significant quantities of coal, iron ore, bauxite and gold, in addition to oil, most Venezuelans live in poverty, in shanty towns throughout the country. The country is also characterised by high rates of unemployment and widespread poverty (although the poverty rate has declined sharply as a result of President Chavez's policies). ¶69. (C) Since his re-election in December 2006, President Chavez has sought to nationalize several of Venezuela's key industries. Among the developments in this regard has been the Government's purchase for USD 1.3 billion of 86.2 percent of the shares in CANTV, the country's largest telecommunications company and its acquisition of 93 percent of the shares in the countryQ,s largest private electric company, for USD 836.9 million. ¶70. (C) Another significant example of this was the recent takeover of the four Orinoco belt heavy oil upgrading projects from the existing multinational operators, worth more than USD 30 billion and responsible for the conversion of approximately 600,000 barrels per day of heavy crude into the more valuable synthetic oil. The transfer of control of the four projects to PDVSA marked what President Chavez described as "the last step" in the government's advance toward full control of Venezuela's hydrocarbons sector. ¶71. (C) The plans for the nationalization of the oil fields were announced in February 2007 and took effect on 1st May 2007, a year to the date that Chavez ally, Bolivian President Evo Morales, ordered that the country's gas fields be nationalized. The companies (US oil firms Chevron, Exxon Mobil, ConocoPhillips, as well as Norway's Statoil and BP of Britain),which were slated to give the Government of Venezuela a 60 percent stake in the projects, all adhered to the decree to transfer operational control to the Government of Venezuela and each negotiated arrangements pertaining to compensation and shareholding. In June 2007, US oil company ConocoPhillips decided not to accept a minority stake in the Venezuelan oil projects and discontinued its operations, in a move that reportedly cost the company USD 4.5 billion. Exxon Mobil was also reported to have been unable to arrive at a mutually satisfactory joint venture agreement with the Government of Venezuela and the two sides remain in discussion on the matter. ¶72. (C) Some analysts anticipate that PVDSA may face production and other problems, with the departure of experienced technical and managerial personnel, in the wake of the takeover. This may be a reason for the 9.2 percent decline in Venezuela's Q2 2007 oil production referenced earlier. Concurrent to the takeover of the oil projects and the consequent circumscribing of the role of several major oil companies in the oil rich Venezuelan economy, President Chavez has undertaken joint ventures with other countries such as Belarus, China and Iran. Venezuela's relations with Iran have been deepening and expanding in recent times, with several high level visits having taken place in the last year, including the April 2007 visit to Venezuela by the Iranian Foreign Minister. ¶73. (C) In recent years, President Chavez has championed the creation of a South Bank as an alternative to the traditional international financial institutions such as the International Monetary Fund (IMF) and the World Bank, which would be run by the countries of South America and partially funded by Venezuela's oil revenue. ¶74. (C) In an action that was indicative of President Chavez's disdain for such institutions and his plans to create an alternative, he announced, on 13th April 2007, that Venezuela would sever its relations with the World Bank and the IMF. This move was in keeping with Chavez's efforts to create a socialist state on the basis of economic policies such as significant increases to the minimum wage and a proposed reduction to the number of hours in the working day, which was anathema to multilateral institutions such as the IMF and the World Bank. While the move was politically significant, analysts argued that it would have no immediate financial implications. Recommendations -------------- ¶75. (C) Given the strength of Jamaica/Venezuela bilateral relations over the past several decades, which have spanned successive political administrations, it will be important for early contact to be made at the highest level with Government in Caracas. The Ministry perceives a need for the new administration to start-off on the right footing by carefully considering the manner in which it undertakes its initial diplomatic approaches towards Venezuela. In this regard, it is recommended that an early visit to Venezuela be undertaken by Foreign Minister Baugh in order to meet with his counterpart, Foreign Minister Nicolas Maduro. Such a visit should be used to stress the importance that the Government of Jamaica continues to attach to the traditionally close relations that have existed between Jamaica and Venezuela. It should also serve as a precursor to a visit by Prime Minister Golding. The scheduling of ministerial visits prior to the initial visits by the Foreign Minister and Prime Minister should be avoided, to the extent possible. ¶76. (C) In tandem with the above, it is recommended that the Venezuelan Ambassador, H.E. Noel Enrique Martinez-Ochoa, be accorded an early audience with the Prime Minister. This would send a strong signal to President Chavez and his government that it is the intention of the new Jamaican administration to continue to strengthen friendly relations, as well as further develop the level of economic cooperation between the two countries. Furthermore, the Prime Minister has already seen fit to meet with the Cuban Vice President, as well as the Ambassadors of the United States and China. ¶77. (C) It should be noted that virtually no decisions on technical and economic cooperation are taken by the Venezuelan government without the issue under consideration receiving the personal imprimatur of Preside Chavez. Therefore, matters such as the renewal and renegotiation, under PetroCaribe, of the commercial Sale/Purchase Agreement between PCJ and PDVSA (which includes outstanding issues related to unutilized quota carry-over) may well need to be addressed at the political, rather than technocratic level. There are other outstanding matters of importance, which have been languishing and that may require political intervention at the highest level. These include the following: ¶A. The outstanding payment by PDVSA of the 49 percent joint venture equity position it has taken in the Petrojam refinery, which is valued at USD 63.7 million; ¶B. The loan request made to BANDES to support the Rural Electrification Programme (REP). ¶78. (C) Effective management of the bilateral relationship with Venezuela requires a coordinated and joined-up approach to be adopted on the part of the GOJ. This is because our relations span across a range of areas and cross-cuts numerous ministries, agencies and departments of government. The GOJ should devote its considered attention to the management of this strategic and valuable partnership, during this period of transition. (END TEXT) JOHNSON