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. CARACAS 00000007 002 OF 004 ¶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 CARACAS 00000007 003 OF 004 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 CARACAS 00000007 004 OF 004 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