CHAVEZ PROMOTES TRANSITION TO SOCIALIST ECONOMY, THREATENS

C O N F I D E N T I A L CARACAS 001599 SIPDIS HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK NSC FOR DRESTREPO NSC FOR LROSSELLO USDOC FOR 4332 MAC/ITA/WH/JLAO AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE E.O. 12958: DECL: 2019/12/28 TAGS: ECON KIPR EINV ETRD EIND EINT ECIN CH VE SUBJECT: CHAVEZ PROMOTES TRANSITION TO SOCIALIST ECONOMY, THREATENS FOREIGN AUTOMAKERS CLASSIFIED BY: Richard Yoneoka, A/Economic Counselor, Embassy Caracas, ECON; REASON: 1.4(B),(D) ¶1. (SBU) On December 22, President Chavez inaugurated a chain of government-run retail stores called the Corporation of Socialist Markets (COMERSO). "We're going to defeat speculation. Private individuals can still sell, but they'll have to compete with us and with a people that is now fully aware," Chavez said. The COMERSO chain would consist of 11 subsidiaries, including stores selling household goods, socialist car dealerships, socialist pharmacies, socialist hardware stores, and a network of socialist "areperas," or restaurants that serve a traditional Venezuelan food. The same day, in another speech during the closing ceremonies of the Eighth Venezuela-China Mixed Commission in Caracas, Chavez said that in order to transition from capitalism to a socialist economy Venezuela would have to plan everything from the primary sector to the final consumer. "They'll see what's good. We'll show them what a real market is all about, not those speculative, money-grubbing markets, but a market for the people," Chavez said. ¶2. (SBU) On December 23, during a COMERSO car sale in the Plaza of Caracas, the Venezuelan government (GBRV) sold an allotment of 300 cars, including vehicles manufactured under the mixed Venezuela-Iranian company Veniran and Volkswagens imported tariff-free from Argentina. Commerce Minister Eduardo Saman that the GBRV had entered the automotive sector in order to combat the capitalist speculation that allowed private car distributors to earn profits of 400 percent. "If we don't pay a 40 percent tariff for each vehicle, we can sell cars at a lower price too," an unidentified spokesperson for the automotive industry told the press. ¶3. (SBU) During the event, Chavez threatened Fiat, Ford Motor, Toyota and General Motors, telling the automakers to transfer their technology to local companies or be replaced by Chinese, Belarusian and Russian manufacturers. Chavez also ordered Commerce Minister Eduardo Saman to inspect a Toyota plant after it rejected a GBRV request to manufacture "socialist" SUVs. "If Toyota doesn't want to manufacture (what the GBRV orders),we'll tell them to leave...This is our house...we will take them over, expropriate them, pay them what it's worth, and then call the Chinese," Chavez said. ¶4. (C) COMMENT: Based on Chavez's own comments, the inauguration of COMERSO represents another step in Venezuela's transition to a socialist economy. Chavez's statement that foreign automakers must follow GBRV orders or leave the country reveals an increasing hostility to private companies operating in Venezuela. It also tracks with the recent nullification of two of Bayer's pharmaceutical patents for an antibiotic. After Bayer protested the local production of two generic copies of a Bayer drug, the GBRV rejected Bayer's request for assistance and revoked Bayer's intellectual property rights to the drug in question. These examples suggest that the GBRV considers private sector companies necessary in the short-term, but increasingly expendable as Venezuela moves further down the path to a socialist economy. END COMMENT. DUDDY