VENEZUELA: VENAMCHAM SAYS SITUATION WORSENING

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 001110

SIPDIS

NSC FOR RKING
COMMERCE FOR 4332/MAC/WH/JLAO
TREASURY FOR MKACZMAREK
HQ SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 08/18/2019
TAGS: ECON EINV VE
SUBJECT: VENEZUELA: VENAMCHAM SAYS SITUATION WORSENING

REF: CARACAS 1062

Classified By: Economic Counselor Darnall C. Steuart, for reasons 1.4 (
b) and (d)


1. (C) SUMMARY. On August 17, the Ambassador attended the
monthly meeting of the governing Executive Committee of the
Venezuelan American Chamber of Commerce (VenAmCham).
Following their normal business, the Executive Committee
members, all Presidents of leading corporations, briefed the
Ambassador on recent events in their sectors. A leading
economist predicted economic contraction in the second
semester while the President of Cargill de Venezuela said
bluntly that Argentina does not have enough beef or wheat to
meet Venezuelan market demand notwithstanding recently signed
agreements. (see reftel.) VenAmCham's legal counsel touched
on the accelerating pace of legislative change and underlined
that the Urban Land Law, passed in the early morning hours of
August 14, could represent an assault on the basic concept of
private property. A leading pollster characterized the
situation in Venezuela as "very fluid" with rising inflation,
growing food scarcity, insecurity, and a looming breakdown of
the national health system. END SUMMARY.

LEGISLATIVE UPDATE
--------------


2. (C) VenAmCham Legal Counsel Farid Antakly briefed the
Ambassador on the accelerating pace of legislative change.
Touching first on the Electoral Law signed into law on August
12, Antakly underlined that the law will allow gerrymandering
at will by the government. Antakly then turned to the
Education and Urban Land Laws which were passed by the
National Assembly in the early morning hours of August 14.
Antakly underlined that the quick passage of the Education
Law, followed by its ratification by President Chavez in a
public event on Saturday, August 15, and the unprecedented
publication of the law in a Saturday edition of the Official
Gazette, demonstrated careful planning by the government. In
discussing the troubling points in the law, Antakly pointed
particularly to the role assigned to Community Councils
("Consejos Comunales") as well as the vaguely worded articles
touching on the educational role of the public media.
Turning to a discussion of the Urban Land Law (which has
still not been published in the Official Gazette),Antakly
characterized it as a full frontal assault on the concept of
private property which might ultimately affect land
inheritance. Other Committee members commented that the
law's reservation of public spaces to the government could
also signal a coming assault on freedom of assembly.

ECONOMIC UPDATE
--------------


3. (C) Pedro Palma, President of leading economic
consultanting firm Metroeconomia, briefly noted that he
foresees a "complicated" second semester for the Venezuelan
economy. After a decrease in the growth of inflation in the
first half of the year, Palma said it is once again rising.
Palma pointed particularly to increasing food inflation which
will affect the poor. He speculated that food inflation
should be as much as 15 percent higher than the official
number because of the disproportionate weight given by
government statisticians to food purchases from
government-controlled programs such as the Mercal. Palma
added that wages have fallen some eight percent year over
year and that contracting demand will lead to an economic
contraction in the second semester.


4. (C) On the issue of food imports from Argentina, President
of Cargill de Venezuela Robert Moro said shipping time from
Argentina is normally ten days. In certain circumstances, he
said, it could be cheaper to buy from Argentina than
Colombia, because the freight costs could be cheaper for
items shipped in bulk. Moro added emphatically, however,
that Argentina does not have excess beef or wheat supplies to
meet Venezuelan market demand. He speculated that Venezuela
would ultimately have to turn to Brazil or Mexico to replace
Colombian supplies if that remains the GBRV's plan. Nor, he
said, given the experience that Argentine companies have
already had with Venezuela's foreign exchange board CADIVI,
is there any appetite for exporting products to Venezuela for
sale in bolivars. Moro speculated that the two governments
would set up a government-to-government sales mechanism.

CARACAS 00001110 002 OF 002




5. (C) Touching on the banking system, Banco Mercantile
President Gustavo Marturet said that the banking sector is
"calm," but with high liquidity in bolivars. Other observers
pointed to the lack of efficiency in the oil sector as well
as the worsening labor situation in government owned
companies.


6. (C) Finally, Pollster Edmond Saade characterized the
situation in Venezuela as "very fluid" with rising inflation,
growing food scarcity, insecurity, and a looming breakdown of
the national health care network. The government's standing
is being affected by these problems but Saade discounted the
possibility of an effective government rsponse. He noted
that there is little visibility on the part of the
opposition; with many Venezuelans on vacation there has been
no "important" reaction yet to the barrage of legislation
recently passed by the government. Saade commented that he
believes the only possible challenge to Chavez will come out
of the ranks of Chavistas with Lara Governor Henry Falcon as
a possible candidate.

7 (C) COMMENT: VenAmCham Executive Committee members were
eloquent in their description of Venezuela's continued
economic decline. The members also, however, discussed how
the Chamber is reaching out to provide legal assistance to
at-risk members (for instance, to radio stations recently
ordered off the air by the government) and taking initiatives
such as the formation of a Task Force on the Rule of Law.
VenAmCham has reached out to other binational chambers and is
lobbying for joint approaches to the government on issues of
common concern. In sum, the Chamber is working hard to
provide value for its members.


DUDDY