DISCONTENT GROWS IN ONE OF VENEZUELA'S INDUSTRIAL HEARTLANDS

C O N F I D E N T I A L SECTION 01 OF 04 CARACAS 000007

SIPDIS
AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA
AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE
AMEMBASSY BERLIN PASS TO AMCONSUL DUSSELDORF
AMEMBASSY BERLIN PASS TO AMCONSUL LEIPZIG
AMEMBASSY ATHENS PASS TO AMCONSUL THESSALONIKI

E.O. 12958: DECL: 2035/01/06
TAGS: PGOV SOCI ECON EIND VE
SUBJECT: DISCONTENT GROWS IN ONE OF VENEZUELA'S INDUSTRIAL HEARTLANDS

REF: 10 CARACAS 5; 09 CARACAS 1551; 09 CARACAS 1318; 09 CARACAS 1475

CLASSIFIED BY: Robin Meyer, Political Counselor; REASON: 1.4(D)


1. (C) Summary: The Venezuelan government's (GBRV) perceived
mismanagement of recently nationalized basic industries in the
country's Guayana region has engendered resentment among the local
population and led to work stoppages and demonstrations by the
industries' workers. The crisis within the basic industries has
accompanied and in some cases contributed to a marked decline in
the quality of life in the region, including deteriorating
infrastructure, failing public services, and unprecedented levels
of crime. Local observers expressed modest optimism about the
chances of dealing a significant blow to Chavez in the September
2010 National Assembly (AN) elections, but most also assumed Chavez
would use any means necessary to avoid potential losses. End
Summary.




2. (C) This cable draws on meetings conducted by PolOff and
EconOff between December 2-4, 2009, in Ciudad Guayana, located in
the southeastern state of Bolivar in what is commonly identified as
the "Guayana" region of Venezuela. (Note: Two neighboring
municipalities constitute Ciudad Guayana: Puerto Ordaz is home to
most businesses and local industry, while San Felix is where most
of the area's blue-collar workers and poorer residents live. End
Note.) Ref A discussed the precarious economic conditions of the
state-owned mining, steel, aluminum, and hydroelectric industries
in Guayana - commonly referred to as the "basic industries" - as
well as the GBRV's role in, and response to, their deterioration.



Chavez's Vision of Guayana: A "Cradle of Socialism"




3. (SBU) In 2009, President Chavez publicly identified the
conversion of Guayana's economy from capitalism to socialism as a
key priority (ref A). During a May 21 workshop in Ciudad Guayana,
entitled "Towards the Socialist Transformation of the Basic
Industries," Chavez affirmed that the Guayana region would be
converted into a "cradle of socialism." He added: "Each factory is
a school that will produce, as Che [Guevara] said, not only iron
and steel and aluminum, but above all else, the New Man and New
Woman, the New Society, the Socialist Society.... the time has come
for the great socialist transformation in Guayana."



Basic Industry Workers Decry "Ruinous" Government Policies




4. (C) Chavez's rhetoric and the GBRV's actions in Guayana
have engendered increasing resentment and in some instances outrage
among the local population. According to interlocutors, work
stoppages at state-owned industries and accompanying street
demonstrations have plagued Ciudad Guayana in recent months and are
becoming more frequent. The principal complaint among basic
industry workers has been the long-delayed payment of salaries and
bonuses, which in some cases are overdue by several months. At the
time of the EmbOffs' visit, the GBRV was already one-month late in
the payment of highly anticipated year-end bonuses. On December 1,
Minister of Mining Rodolfo Sanz promised that the bonuses would
finally be paid on December 4. At a meeting with EmbOffs in the
late afternoon of December 3, local labor leaders expressed their
intense frustration at the delay, and warned that the workers were
approaching their breaking point. Labor leader and former Bolivar
Governor Andres Velazquez (strictly protect) observed that if the
bonuses were not paid the following day, "anything could happen."
Velazquez confirmed to PolOff the following morning that the
bonuses had been paid as promised and added that the GBRV had
"barely averted" a major crisis.

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5. (C) The economic deterioration of the basic industries has
affected another benefit long enjoyed by the industries' workers.
Pedro Rondon, a labor activist with Venezuela's Sidor steel
industry (strictly protect),lamented the irony of workers "seeking
profit-sharing from companies that are not producing profits." Like
others, Rondon cast blame for the basic industries' decline on the
GBRV, citing the "financial centrifuge" of inflated payrolls,
non-existent budget planning, and the outright pilfering of
industry resources by top-level management. "The government's
conduct with the basic industries has been ruinous for workers."
Chavez's November 29 announcement of his intention to eliminate the
hospitalization, surgery, and maternity (HCM) benefit that public
sector workers use to pay for health care costs at private clinics
(ref B) received similar criticism. Henry Arias (strictly protect),
an employee and labor activist at aluminum producer Alcasa (and a
self-identified "former Chavista"),observed that these workers had
long enjoyed benefits such as HCM, but were now subjected to
Chavez's whims as public sector employees. "The workers are waking
up to the government's agenda, and they will not accept it."




6. (C) Workers have also protested the dearth of investment
in the companies themselves. Journalist Damien Prat (strictly
protect) observed that workers were fully cognizant that the basic
industries had been largely profitable for decades, so the sudden
decline in their financial health was an eye-opener. "The workers
at these companies are not stupid; they see the difference between
how they were run before and how they are run by this government."
Highlighting what he believed to be the GBRV's incompetence as
owner and manager of the basic industries, Prat observed that "it
was a huge strategic mistake for the government to underestimate
the love of the workers and the community for these companies."
Manuel Marquez, a businessman and local industry federation
representative, noted that "our industry here is not like the
petroleum industry, which was developed and built by outsiders. We
built everything here ourselves, so we really care about the
results."



GBRV'S Treatment of Workers Compares Unfavorably to the "Fourth
Republic"




7. (C) The labor movement in Ciudad Guayana has historically
been considered among Venezuela's most powerful and has been
accustomed to having significant influence in negotiations with
previous governments. But labor leaders described the current state
of labor-government relations as "deplorable" and decried the
GBRV's entire approach to the basic industry unions. Former
Governor and labor official Velazquez noted that all of the
approximately forty thousand basic industry workers in the region
were working under expired collective bargaining agreements, in
some cases for years, with no indication that the GBRV intended to
rectify the matter. Velazquez also highlighted the government's
setting up of "factory councils" ("consejos de fabricas") in the
basic industries as a thinly-veiled attempt to undermine the
influence and power of traditional unions, along the lines of the
government-friendly "parallel unions" that have proliferated across
labor sectors in the last several years. "The government's plans
for hurting the unions are the same here as elsewhere in the
country," Velazquez added. In comparing the labor policies of
previous governments with those of the Chavez government, labor
activist Rondon noted: "They may not have always done right by us,
but at least the Fourth Republic governments talked with the
workers. We cannot even get this government to sit down at a table
with us."



Social Workers Confirm the Region's Slide




8. (C) The difficulties faced by the basic industries and
their workers have manifested themselves in a myriad of social
ills, according to local observers. Caritas Regional Director

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Lismarbeth Zamora (strictly protect) said the region had "taken a
huge step backwards in the last decade," pointing to vastly
increased levels of crime, disintegrating families, and a
devastating incidence of alcoholism. Zamora estimated that homicide
rates had increased at more or less the same alarming pace as
national trends, with 20-25 murders on an average weekend in the
San Felix municipality, which has a population of only several
hundred thousand. She criticized the government's social policy as
"asistencialista" - handouts without long-term solutions. Zamora
considered this approach indicative of a government "focused on
political concerns over social ones."




9. (C) The Catholic Bishop for Ciudad Guayana, Mons. Mariano
Parra (strictly protect),echoed these sentiments. He said the
GBRV's social missions, such as Barrio Adentro and Mercal, had
"fallen precipitously" after a promising beginning, and that
numerous centers for both of the two programs had been closed or
abandoned. The delivery of basic services, such as water and
electricity, had also become more erratic, with increasingly
frequent outages of each. While acknowledging this was similar to
Caracas and other parts of the country, he said Ciudad Guayana
residents were especially perplexed since the region enjoys
abundant water resources and produces ample hydroelectric power.
"If the dams in this area create most of the electricity for the
whole country, how is it possible that there is not enough power in
the homes of the dam workers? The people here are right to ask that
question." (Comment: Venezuela has suffered from increasingly
common electricity shortages in recent months, as described in ref

C. The Caracas area is the only part of the country which has had
its flow of electricity "protected" through actions of the GBRV, as
noted in ref D. End Comment.)



Potential Political Ramifications




10. (C) Nearly all interlocutors in Ciudad Guayana expressed the
belief that the right conditions existed to hand Chavez and his
United Socialist Party of Venezuela (PSUV) party a significant
defeat in the planned September 2010 National Assembly (AN)
elections. The publisher of Ciudad Guayana's largest pro-opposition
newspaper, David Natera (strictly protect),argued that the
diminishing tolerance for Chavez and the GBRV among the local
population would inevitably have political consequences. Chavez had
"lost the people," Natera affirmed, especially after Chavez's May
remarks about making Guayana a "socialist example." Banesco
Regional Bank Manager Gabriela Bellizzi (strictly protect) noted
that in Ciudad Guayana, if not elsewhere, "the economic situation
dictates the political situation. And right now, the economic
conditions are terrible." Labor leader and Alcasa employee Carlos
Gonzalez (strictly protect) observed that the various actions of
the government against the basic industries and their workers had
served to strengthen collective resolve: "We are organized and
well-prepared for the electoral fight ahead; we are one hundred
times better prepared than the Chavistas." Velazquez suggested that
the GBRV's perceived assault on workers and their unions had even
encouraged efforts to increase political collaboration between
labor movements in different sectors and different parts of the
country, something heretofore uncommon.




11. (C) Translating the antipathy towards Chavez into electoral
success would be no easy task, according to Velazquez, who lost his
November 2008 gubernatorial bid in Bolivar state because of
opposition disunity. Velazquez acknowledged widespread reticence
among workers about allying themselves with the "traditional"
opposition political parties: "Those parties never invested in
their relationship with the people, so there is not much trust."
But he and others reiterated that the imperative of defeating
Chavez had drawn all sides closer together, and the importance of
the AN elections was evident to all. Regional opposition "unity
table" representative Cesar Ramirez (strictly protect) suggested
the AN elections "are the last chance for democratic change. If
Chavez is not stopped next year, he will not be stopped anytime in

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the future."




12. (C) Other interlocutors pointed out numerous additional
hurdles that lay in the path of Chavez opponents. Caritas Director
Zamora observed that while the population was directing more of its
ire towards the national government for the deteriorating security
and infrastructure situations, that did not necessarily reflect
hostility toward Chavez himself. If anything, she suggested, levels
of abstention in the AN elections would be "extremely high. People
are tired of voting and not seeing any positive effect on their
lives." She also argued that the government's continual propaganda
had had some measurable impact on political opinions, affirming
"the Venezuelan public does not know how to inform itself properly.
People do not necessarily know their rights and how they can
exercise them." Others assumed that despite the widespread
dissatisfaction with the GBRV's performance and particular local
concern about the sustainability of the basic industries, Chavez
would still be able to manage a comfortable majority thanks to the
resources at his disposal and his ability to tilt the playing field
to his advantage. "In a fair fight, we would trounce this guy,"
asserted labor leader Arias. "But we know there won't be a fair
fight." David Natera commented that "Chavez recognizes he
absolutely cannot allow himself to lose the majority in the
Assembly, or his whole Bolivarian project will come to a stop. So
he will do absolutely anything it takes to win. Anything..." Natera
summarized the determination of many local observers by adding:
"And if necessary, so will we."
DUDDY