September 10, 2013
The Catastrophic Impact of Corruption on a National Economy: The Case of Venezuela
SPEAKER: Gustavo Coronel, Founding Member of the Board of Directors of Petroleos de Venezuela and Former Venezuelan Representative of Transparency International
TIME: 1 – 2pm, Tuesday 10th September 2013
VENUE: Committee Room 13, House of Commons, London, SW1A 0AA
To attend please RSVP to: firstname.lastname@example.orgVenezuela ranked 165th out of 174 countries in the Transparency International’s ‘2012 Corruption Perception Index’. To say that corruption is rife in Venezuela is an understatement. One particular sector that has suffered from this phenomenon is the oil industry that was nationalised in 1976.
All the hope and promise of Hugo Chávez’s “Fifth Republic” movement was mired with the same cronyism and patronage of previous regimes. Petroleos de Venezuela (PdVSA), which has recorded sales of almost $125 billion in 2011, is a huge source of revenue for the government and the petroleum industry accounts for over 50% of GDP.
Interestingly, Chavez used PdVSA itself as a political tool, removing anyone who disagreed with him and now with Maduro’s policy of “Bolivarian socialism”.
In 2006, Rafael Ramírez, the energy minister said, “PdVSA is red, red from top to bottom.” The PdVSA monopolises power over the Venezuelan people, with little regard for them and their future, and the regime’s policy is reminiscent of other rogue states around the world.
By kind invitation of Martin Horwood MP, The Henry Jackson Society is pleased to invite you to a discussion with Gustavo Coronel, Founding Member of the Board of Directors of Petroleos de Venezuela and Former Venezuelan Representative of Transparency International. Drawing upon his intimate knowledge of PdVSA as well as his vast knowledge of the petroleum industry, Mr Coronel will expose the endemic corruption by the Venezuelan regime in the petroleum industry and the ramifications it has on the future of Venezuela and its people.
Gustavo Coronel has led a distinguished career, from being a field geologist to founding member of the Board of Directors for Petróleos de Venezuela (PdVSA), 1976-1979. He has more than thirty-five years of experience in the international petroleum industry and has held leadership positions in industry, state government, academia, and journalism.
Coronel served as President of the Port of Puerto Cabello, Venezuela, the second largest port in South America; was Chief Operating Officer of Corporación Venezolana de Guyana, and Head of Hydrocarbon Projects Evaluation for the Inter-American Development Bank. In 1990 he founded, and led for ten years, Pro Calidad de Vida, a Venezuelan non-governmental organization active in anti-corruption work in Latin America, and was the Venezuelan representative of Transparency International from 1995 to 1998. He was elected to the House of Deputies for the State of Carabobo – the most highly industrialized state in Venezuela, representing Valencia.
Mr. Coronel earned degrees in geology from the University of Tulsa, Oklahoma and from the Central University of Caracas, and a Master’s degree in International Public Policy from Johns Hopkins University. He has been a professor at the Graduate School of Economics at Universidad Central de Venezuela, Caracas, and was a fellow at the Center for International Affairs at Harvard University from 1981-83.
Mr. Coronel is the author of numerous articles and publications on the Venezuelan oil industry, economic development in Venezuela, and curbing corruption in Venezuela.
By Rachelle Ollinger & Andrew FoxallMartin Horwood MP
Welcome, everybody. My name is Martin Horwood. I am the Lib Dem MP for Cheltenham and this is the first Henry Jackson Society event I’ve been in involved in and I’m involved with a little bit of trepidation since when you look up Senator Henry Jackson on the web, the articles tend to include chapters like “His Contribution to Neo-conservatism” and have long quotes from Ronald Reagan. For a modern UK Lib Dem these are kind of career threatening associations, but Scoop Jackson was also, in many ways, a liberal. He was a New Dealer under Roosevelt. He was a liberal interventionist and he believed sometimes you have to fight for Democracy and I actually believe that too and that’s why just a couple of weeks ago I voted with the government, probably a minority in my own party, for military action in Syria and I suspect Jackson would have done so too, but there are different ways in which you can confront evil in this world, and one of them is, the evil of corruption.
We have a very distinguished speaker with us today who is going to shed a lot of light on that. Gustavo Coronel led a distinguished career in business. He was a founding member of the board of directors of Petróleos de Venezuela. He’s had more than thirty-five years of experience in the international petroleum industry, holding leading positions in industry, state government, academia, and journalism. He was the President of the Port of Puerto Cabello, you have to excuse my Spanish pronunciation, second largest port in South American. He was Chief Operating Officer of Corporacion Venezolana de Guayana and Head of Hydrocarbon Projects Evaluation for the Inter-American Development Bank, but his career in 1990 took a slightly different and interesting direction and he led and founded an organization called Pro Calidad de Vida, which I think roughly translates to “For Quality of Life”…
Martin Horwood MP
…If I’m right, this was a Venezuelan NGO active in anti-corruption work across Latin America and he was the Venezuelan representative for Transparency International from 1995 – 1998. He was also elected to the House of Deputies for the state of Carabobo which is the most highly industrialized state in Venezuela, representing Valencia. So, Gustavo, we’ve invited you to talk about the catastrophic impact of corruption on a national economy and to explain exactly how that has impacted Venezuela. So, thank you very much.
Thank you very much for the invitation that allows me to come here, for the first time. I have never been inside British Parliament, so full of history. I am in awe of what I am seeing today, thank you so much for the invitation. I just spent a couple days in Cambridge attending a conference on economic crime that was attended by almost one thousand persons from ninety-one countries, all wanting to exchange experiences on the issue of economic crime and corruption in the world. We had about eighty presentations every day so my brain is over-heated, but they spoke mostly of cases of corruption involving individuals, corporations, and amounts of money ranging anywhere from $10 million to $200 million. When my turn came I told them that what I wanted to share with them was not only economic crime but also political crime involving individuals, corporations and, also, a whole government, in fact the whole country.
The case of Venezuela is one of a whole country immersed in high level corruption. I don’t know if you are familiar with the term “the Dutch disease”. It is not really Dutch, but it was given the name when Holland discovered oil in the North Sea and their economy became somewhat distorted, because of the sudden influx of wealth. The country was in threat of losing their economic diversity and industrial capacity because of this sudden wealth. Holland overcame this “Dutch Disease” but countries like Nigeria and particularly Venezuela have not overcome it. Dutch Disease by itself will not kill a country, will not bankrupt a country. Equally, corruption will do a lot of harm to a country but it might not be fatal by itself. It is when you have a combination of the Dutch Disease and a high level of corruption, when the situation becomes fatal. This is what happens in Venezuela, and has happened for the last fifteen years. I can tell you, without exaggeration, Venezuela today is in economic, and social, and spiritual ruin because of this combination.
Just imagine that we have a received in the last fifteen years about $1.5 trillion in income, a lot of money for a very small country and yet we have managed to increase our national debt by a factor of six. The liquid reserves of Venezuela today, the international liquid reserves, only allow the country two months of imports. So, you can see that,in spite of this enormous income, Venezuela is on the border of bankruptcy – as a result of the combination of the Dutch Disease and high level corruption.
Why the Dutch Disease? Because oil represents 96% of our exports. We don’t export anything else but oil. And this makes Venezuela over-sensitive to oil price fluctuations. Of course, in the last years the price has been very positive for Venezuela. It has been $85 to $110 a barrel, so we should be swimming in money, we should be awash in money, like in these cartoons where you see the uncle of Donald Duck swimming in his vault full of gold coins. We should be doing that and yet we are on the verge of economic and social disaster.
One reason is the Dutch Disease and the other is the high level of corruption. Corruption comes from two main factors: the first factor, is that the oil income in Venezuela, instead of going through the legal channels, namely the Central Bank of Venezuela, to be used in a formal budget approved by the National Assembly, as it’s called, has been diverted into parallel funds that have no transparency, that have no accountability and which are run by four persons in the country. The four persons are the President of the republic, used to be Hugo Chavez until he died, now it’s Nicolás Maduro, although Nicolás Maduro claims the dead president still talks to him, in the form a bird. The second is the Minister of Finance, Mr.Merentes; the third the Minister of Planning, Mr Giordani and the fourth is the Minister of Energy and Petroleum who is also the president of the oil company, Mr Rafael Ramirez. Now these four persons handle all of the money coming into Venezuela with total discretion. I call them the tropical version of the gang of four. You remember the Chinese gang of four, but this gang of four is much worse, I can assure you.
They have used this money basically to consolidate political power. That has been the main objective of this government for the last fifteen years and they have done a very good job of that. They have consolidated political power in two ways – domestically, they have gone into a policy of hand-outs, a massive policy of hand-outs: giving money, direct subsidies, free food, free transport. They have subsidized almost everything to a large segment of the Venezuelan poor.
We have a large amount of poor in Venezuela. Now, these hand-outs are like the antithesis of the Chinese proverb that said, “Don’t give a fish a day, but teach how to fish,” since what this government has been doing is giving fish on a day to day basis until nowadays, fish are becoming more and more scarce. Is the same thing that happens to the diabetics. As long as you keep giving insulin to a diabetic, he is “cured.” The day you stop the insulin he becomes again diabetic.
And right now that is exactly what is happening. With less money to hand out, the poor of Venezuela are again poor. Not only poor, but now more despondent than ever before because they feel they have been abandoned by the big father, the father figure who used to feed money and food to them on a day to day basis. So, this source of political power is crumbling down because it wasn’t based on conviction, it wasn’t based on true love, but based on the desire of the poor receiving the money on a day to day basis.
Abroad they have gone into a massive program of financing political presidential campaigns in other countries in order to have presidents as their ideological friends. That has been the case in Argentina where Cristina Kirchner used to receive bags full of dollars. One of these bags was caught in the airport in Buenos Aires by someone who wasn’t in the know, something like $978,000 and that was only one of the many bags that was caught. Cristina Kirchner is a president because of the financing received by Hugo Chavez at the time. That was the case of Rafael Correa of Ecuador and Daniel Ortega in Nicaragua and certainly the case of Evo Morales in Bolivia who actually received cash from Chavez on television: “ here’s thirty million dollars for your expenses” and so on. He was very cynical, Mr Morales, because when he received the thirty million dollars on national television he asked Mr Chavez, “Is this going to be monthly, Mr President?”
So as you can see then, this combination of hand-outs inside the country and hand-outs outside the country did the trick of consolidating the political power considerably and for a long time Hugo Chavez looked invincible in Venezuela.
The other factor allowing for corruption has to do with the transformation of the oil company into a company that does many things that have nothing to do with oil exploration, production, refining, transporting and selling oil which should be the core business of any company that calls itself a reasonably good company. Now Petróleos de Venezuela imports food and distributes food. They have food distribution centres of chicken.Tons of chicken. They also build houses for the poor, very poor quality, by the way.
They indoctrinate ideologically their employees. You see the employees marching on the weekends with guns and so on, getting ready for what they have been calling, for the last fifteen years, an imminent U.S. invasion. That, of course, will never come. So we see all these guys who should have been doing work related to oil production marching and getting ready for such an invasion. They engage in activities which include raising pigs and sowing vegetables, all kinds of things that have nothing to do with oil.
The oil company, as such, has little money to maintain assets, much less to invest in new plants and equipment. As a result Petróleos de Venezuela has lost about 500,000 barrels of oil of production a day, as compared to 1999. When you consider that you can sell a barrel of oil today for one hundred dollars, that is a significant loss to the Venezuelan nation – not being able to produce half a million barrels of oil a day.
It’s even worse than that because if they had followed the strategic plan that was left to them by the previous management of the company, the previous managers of Petróleos de Venezuela, they should be producing 5.5 million barrels a day. However, they are now only producing 2.6 million. So, the loss is beyond imagination – the loss of income to the nation because of this diversion of Petróleos de Venezuela into activities that have nothing to do with oil.
Just one example, the president of the company is also the minister of the sector. Now in management 101, as they say, that is a cardinal sin: he who supervises should not be the one running the activity. He is supervising himself, so to speak. There is no check and balances in the activity so he does exactly what he wants to do and there is no one that can object to it.
I just want to give you four cases of corruption, because I never thought of corruption as something in abstract. Most people will talk about corruption in abstract. Particularly in the political world they will talk about corruption as a crime, a cancer of society, something that has to be combated, something which is very bad for the country and so on, but they never mention names. Corruption would not exist without the corrupt. In order to fight corruption, you have to name names. And that is what I have been doing for the last ten years except no one listens to me, fortunately because I am still alive. If they don’t answer you is because they just don’t care.
In Venezuela and probably in many other countries, the amount of misinformation, indifference, and lethargy is spectacular. In the middle of a crisis you see people more concerned about the weekend and the beach and the beer, the domino playing with the friends, and so on. Probably they are very wise, because happiness is what happens to you and not what happens to somebody else, but for those who care about the country, this indifference is very frustrating.
But in any case, let me mention the four cases …The first one is one I have been digging into for the last three years with my little laptop in my little apartment, even without taking my pyjamas off. I don’t have to do it. I can spend all morning in my pyjamas, navigating in the web. I have been able to find everything there is to know about this fraud while the government doesn’t seem to know about it having unlimited resources at their disposal. It has to do with a drilling barge offshore, these are enormous pieces of equipment that cost millions of dollars. Petróleos de Venezuela rented one to drill wells offshore, in eastern Venezuela near Trinidad, and they rented this barge to a Singapore company called PetroMarine, that had a capital of about ten thousand dollars and had been incorporated only a month before the contract was signed, so they didn’t have any experience, they didn’t know anything about offshore drilling. The barge was rented to Petróleos de Venezuela for a fee of seven hundred thousand dollars a day because these are very expensive things.
And yet, the owner of the barge, an Indian company called Aban Offshore, obtained three hundred and fifty thousand dollars per day. And the other three under and fifty thousand dollars per day remained in the hands of this small company incorporated in Singapore, a company made up of the friends of the managers of Petróleos de Venezuela. Most likely, I cannot prove it, the money has been shared with managers of Petróleos de Venezuela. You can imagine: three hundred and fifty thousand dollars a day but, fortunately, the barge sank. It was in a very poor condition to begin with and about two weeks after they started drilling the whole thing came crashing down. President Chavez went on national television to say that the barge that was built in Venezuela and managed by Venezuelans unfortunately had drowned, how do you say?
Had sank. Fortunately, Chavez added, without any loss of life, because of the “efficiency of the revolution” and so on and so forth.
If the barge had not sank, the contract would have gone on for four year and that’s about, a back of the envelope calculation, one hundred million dollars a year for these guys. That’s what I call fraud. No one has ever been investigated. I have given the names of the shareholders of the company, Mr Enoc Martinez, living in Maracaibo with a house in Miami and Mr Socorro, his associate, and two or three other names and the names of the people inside Petróleos de Venezuela who are the friends of these people but nothing has ever happened. So, that’s one example.
The second example has to do with the employee fund of Petróleos de Venezuela, which is or was a fund of some five hundred million dollars. The money is not there any longer because some financial advisors of Petróleos de Venezuela created companies of their own and put the money of the employees into their own companies in the United States. These people are in prison, but not in Venezuela where they have not been charged of anything, but in the United States and they are going to be sentenced at any time. By the way, people of good families in Venezuela are involved in this corruption because that’s another thing. The corruption covers all social strata in Venezuela, from the very poor to the very rich. They are all in it, so to speak. It’s a very difficult situation.
The third case has to do with the import of food. As I said, Petróleos de Venezuela imports chickens, tons of chickens. In this case we are dealing with a case of one hundred and fifty thousand tons of food near their expiry date, meaning that by the time the food came out of the docks it was already unusable for consumption. Since the food was rotten already they dug big holes in the ground and buried this rotten food. Some of it went to deposits near the port, of Puerto Cabello, but the smell became terrible and so everybody realized what was going on.
That was a two billion dollar fraud concerning rotten food, of course bought at very low prices because it was half rotten to begin with. Although bought at low prices, it was billed to the government, to the nation, at the high price. The difference went into the pockets of the importers who are members of the management of Petróleos de Venezuela and they haven’t been punished.
And finally, a case in which currently there is a legal action. It is against a contractor of Petróleos de Venezuela called Derwick Associates. Derwick Associates is owned by three of four Venezuelans, belonging to very well-to-do families in Venezuela, between thirty five and forty, who have extremely good contacts with the inside management of Petróleos de Venezuela. And through these contacts they have been able to obtain about twelve no-bid contracts for electrical plants, expensive equipment. What they do is, they get the contract, they call a real company and the real company in the US does the work for them at a portion of the price while they pocket the other half. Well, these three guys are of very good families, they have been buying half of Spain, half of France, they buy castles, they fly in jets, it is an obscene thing and still nothing is happening. a former U.S. diplomat, Otto Reich, sued them because they threatened his consultancy, but the legal documents contains details about how they presumably bribed Petróleos de Venezuela management, including the president of Petróleos de Venezuela.
So, these are the four cases. They are only the tip of the iceberg. I have written two previous papers, one in 2006 for CATO Institute in Washington DC and one in 2009 for CEDICE, which is a think tank in Venezuela, listing what I call systemic cases of corruption, specific cases of corruption. And the whole thing amounts to billions of dollars.
Then you ask yourself, what can we do? What can we do except protest on a single handed basis? The answer is, there is nothing we can do unless the government of Venezuela changes because this government is totally committed to getting the spoils and getting even with the country.
They came from very poor extraction and they nurtured substantial resentment about being excluded. There was exclusion in Venezuela although the democracy in Venezuela was not bad. It became worse progressively, but it was pretty good in the beginning, but in time it started excluding, becoming indifferent to large sectors of the population and these are the ones who are now in power. They now say, “I want to get even. I want to get my share now” because national wealth in Venezuela is not seen by anyone as something that belongs to everyone, but something that I can put my hands in because money that belongs to all, belongs to no one, or so they think.
So, we have to change the government and a new government could go into what I call a three-prong strategy. One in the very short term involving getting the main corrupt to prison and confiscating the enormous amount of money that they have stolen. I have my own list of about two hundred main culprits because if you wanted to put everybody in prison, no prison would be large enough to hold them all. If you go after the big fish and get these two hundred in prison, then you’re setting an example because if you turn the page, as things have been done before in history, the country doesn’t learn. The people will do it again, and again, and again. In the medium term, we have to go into a systematic dismantling of the system of the bureaucratic apparatus they have created because corruption is now permeating in all of the institutions in Venezuela. Everything has a fee, everything. But in the long term the main and real solution for any country, and especially for Venezuela, is to create a society of citizens.
Here in England you have a country of citizens in the sense that you have a critical mass of citizens, people who know their rights, but also know their duties. In Venezuela we are experts on our rights, but we know much less of our duties. The Venezuelan constitution has three hundred and fifty articles and our rights are mentioned sixty five times but duties are mentioned maybe eight times. You can see that our attitude, our collective attitude, has nothing to do with being members of a society that is pulling together to bring the country ahead.
Until we do that, until we convert an inhabitant into a citizen, we are not going anywhere as a country. This conversion is possible. It has been done by countries like Costa Rica, by Uruguay, by Chile, countries which are very small and poorer than Venezuela. They have managed to create a society of citizens. We have to do it. It can be done because I remember the United States, about forty years ago, when everybody smoked. The US was a society of smokers and they decided to go the stop this, so they recruited role models, sportsmen, Hollywood stars, all going on TV saying “I no longer smoke. This is in bad taste,”. They began creating a non-smoking culture which can be as strong as a culture of smokers. The same can happen in Venezuela in a matter of twenty five years. You can transform a country of people into a country of citizens. The only problem is that it has to be done in twenty five years and no politician will be excited about undertaking a job that he will not finish or from which he cannot obtain immediate political benefits.
I used to advise a young governor in Venezuela. I kept telling him to put a lot of money into basic things in the state, like a sewage system. He kept telling me, “Gustavo, nobody sees what is below the ground. I have to do things that people see because that’s what will get me re-elected”. It is going to be difficult for politicians to endorse a long term mission, to accept that someone else will finish this job which he is starting today, but it has to be done.
There is no other way out for the oil industry than a new organizational model. Stop this nonsense about state ownership, about state control, about oil being a basic industry. The current government has said oil is a basic industry and that they have to control it because that’s a matter of sovereignty. I say, “There are no basic industries.” The only basic industries are education and health and probably roads and infrastructure. These are the only basic industries that the government should be involved in…But airplanes, airlines, oil companies, weapon, hotels, forget it. .
In the United States even the weapons are manufactured by the private sector – I would call that a very sensitive industry, almost a basic industry, but in Venezuela, for the ideological people in power, oil is a basic industry. The new model will have to be a private oil model run by a national, regulatory agency, but without the government getting into the operation. We don’t have the money to run the oil industry, the money we have should be used for the education and health of our people, not for drilling wells that might be dry. Let the private sector do it. Brazil has done that. Brazil’s state company used to be as bad as Petróleos de Venezuela is today, but they decided to put thirty percent of their shares in the stock market and now everyone who has a share of Petrobras is keeping an eye open as to what is going on there. If the company is totally owned by the government it will have no critical shareholders.
I want to leave it at this point because I want to get as many questions from you as possible. Thank you very much.
Martin Horwood MP
Thank you. That was a very thought provoking talk and raised some very deep issues. The image of you in your pyjamas will not leave for a long time, I think. I’ll open it up to questions now. Davis, if you’d like to…
If I may just quickly jump in with the privilege of sitting next to the chair. Two things are burning on my mind: the first one is, it always struck me that Venezuela is a, we’ve found a lot of work on this, and the people that you meet in working against some of the abuses by, let’s call it this regime is it Chavez is it not, are always extremely sophisticated, capable, it seems like a society, the problem doesn’t seem to be that there isn’t enough intellectual capital or anything like that. What happened? Why did they get into this situation (in brief terms)?
And more importantly, we do a lot of work on Russia, and Russia has some of the same problems of corruption, of course, and the one of the things that really, really gets to them that really riles them is these laws that are now beginning to take shape in the US and we’re trying here and elsewhere, that stop them from traveling to enjoying their assets in western locales where they can be in the French Riviera and whatever else. What would it be in the case of Venezuela because you say the government has to change, but of course they’ll do everything they can for that not to be the case. So what would it be, what are the pressure points for the people that are the corrupt ones in Venezuela? Are they the same? Would it be that kind of restriction on their ability to enjoy the spoils or what would it be?
Yes, well the second issue. The US is now quite active in freezing deposits of Venezuelans in the US and invalidating the visas of other Venezuelans because of their murky reputation. Four top generals of the Venezuelan Armed Forces have been named by the, I think the Treasury Department, as collaborators of drug traffickers. They are actually allies of the drug traffickers from Colombia – General Carvajal, is one. Ramón Rodriguez Chacín, is another. There are two more that I might remember at any moment. I just became eighty last week and my memory is not what it used to be.
Anyway, four top generals who are still in top level positions in the government and they can’t go into the United States because they are named as collaborators of the drug traffickers. Of course, I have no means to substantiate these accusations. Venezuela is becoming not only a petro-state, because of its dependence on oil, but is also becoming a narco-state. Although Venezuela does not produce drugs, the country has become the main centre or distribution of drugs for Europe and the United States – the main centre. You see a diagram, showing the arrows, it’s amazing the amount of drugs coming out of Venezuela.
Martin Horwood MP
Yes, and I have a suspicion, it is only a suspicion, that if Petróleos de Venezuela is lacking funds generated by the oil industry itself they could be using more and more money from drugs to compensate for the loss of oil income. So, it could be that not only the drug sector is a problem in Venezuela but that the drug sector might be taking over the government of Venezuela.
I think you’re exaggerating. I think that is exaggerating. It’s still principally the oil and gas…
It’s still principally the oil and gas…
Yes, of course. But I see a trend. I don’t mean to say it has actually taken place already. We are going slowly that way.
And you sense that it’s a worse problem than it was in Libya? In Libya at least you’re able to identify the oil and the distribution, and the accounts and known associates, we’re able to name names and freeze the accounts. It’s very difficult then because who puts the money up for tracing of the networks? How does the money move?
This is beginning to be done. The first part of your comment had to do with the amount of cultured, sophisticated Venezuelans…
Yes, how did this happen? How did it end up in this situation?
Well, because, it’s very simple, because the cultured and sophisticated component of the Venezuelan society is very small. They are all in the US and they are all in Europe, that’s why you might feel that there are a lot of them around, but it’s not true. Actually, the tragedy is that a good eighty percent of Venezuelans don’t read newspapers, don’t care what’s going on with the oil industry, they don’t know the difference between an oil well and a camel. Even the most cultured, I remember one day talking to [inaudible]…
Martin Horwood MP
Sorry, just slightly conscious we do need to allow more time for a few more questions.
Oh yes, by all means.
Martin Horwood MP
Even the most self-congratulatory political class in the world can sometimes find itself mired in corruption scandals as I think members of this place discovered just a few years ago. So, those in glass houses. Yes, can a take the gentleman in the back? Can you just introduce yourself as well?
John French, and I was in Venezuela in the 90’s working for Shell. You gave your descriptions in Egypt, short term, long term, how are they supposed to rebuild? It was prefaced by saying first they needed a new government. So it’s an impossible question, of course, but when might there be a new government? We saw the results of the last elections [inaudible]. That’s the one big question.
Martin Horwood MP
Shall I take this gentleman’s question as well and perhaps you can answer them both at once?
I’m wondering whether the investments by the Chinese, particularly in [inaudible].
Question 2 – cont.
The investments by the Chinese including sixteen [inaudible], Arco or Shell, and the tremendously, their infrastructure expenditure, to get consistent power supplies. Is there truth in the rumour that the Maduro is currently having a palace built for himself?
Question 2 – cont.
Oh, I have no idea. [Laughter]
Is that the one [built] in China or [inaudible]?
Question 2 – cont.
It would be Saudi Arabia! [Laughter]
Yes, well, briefly, I keep saying that the change in government in Venezuela is imminent. I’ve been predicting this for the last eight years now. What is going now is that the very same followers of Chavez are losing heart, slowly, but surely, in the sense that there is not enough money going around. The cake going around is smaller and smaller and there is a lot of dissatisfaction among [them]. They are greatly weakened. I feel that we are [on] the verge of a government change in Venezuela.
Through collapse or through election?
Instinctively, I feel it will be a collapse. The people will go on the streets protesting because the country is crumbling down, you can sense it every day. Last week half of the country had a blackout. Half of the country.
Seventy percent. Even worse! So, this cannot go on much longer, really. China has been giving a lot of money to Venezuela. Now the Venezuelans owe China thirty billion, thirty billion dollars, but China is no longer willing to give more money to Venezuela because they suddenly realized that the government is crumbling. So these things are reinforcing the early exit of the Maduro government. The outside support is also decreasing. China is very worried that any new government will challenge the legality of the contracts by which Venezuela has to give China for the next ten years about two hundred thousand or three hundred thousand barrels a day. That is [unconstitutional] in Venezuela. You just cannot do that.
It might be that the new government will play along, pragmatically or it could be that they challenge these contracts and the Chinese will lose their money and they don’t want to do that. In fact I just heard from a person in this conference in Cambridge who is pretty well informed, I cannot guarantee this is true, that the government in Venezuela at this moment is secretly negotiating with the IMF [laughs] in order to get money which would have to be obtained in exchange for fiscal discipline and for the abandonment of all these crazy ideas about revolution, socialist enterprises and so on. It would be really the final nail in the coffin of the government.
Martin Horwood MP
I feel I have to, I mean as a politician of the Left, [inaudible] in this country. For many of us I suppose Chavez and his ideals of social solidarity are very appealing. I just want to ask you if you think there is enough distinction being made in your arguments between those things which may be a foolish use of sovereign wealth and ill-judged management of the economy, or a bad way of running the petroleum company and those things which are literally corrupt which are the diversion of funds into private accounts which are illegal. Do you narrow the appeal of one by linking it inextricably to the other?
Yes, well actually, most people feel that corruption is only stealing national money or someone else’s money. I think corruption is also accepting a job you are not qualified for. There is no money involved in that act, but it is as damaging to a nation as if they physically took the money into their pockets. Hugo Chavez and Maduro are totally incapable. Actually I should not dare to say this in the British Parliament, but Maduro is an illiterate. He is totally incapable of driving a bus, much less running a country. Things like that just don’t happen, should not happen. Your question is very important because when I talk to audiences somebody will always say to me, “Listen, don’t you have anything good to say about the government?” and I wish I did.
Certainly, there is one silver lining, as they say, in the whole Chavez experience: there were many Venezuelans who felt, as I said before, excluded from attention by the government. Chavez came in and he paid attention to very large segments of the population that had felt excluded before, but the way he went about it was terribly wrong. He said, “I have a large bus here. The poor now, you come into the bus. You were not riding in the bus, but now you will. But you middle class citizens in the bus, you have to go out.” By including the very poor, he excluded the middle class. He has actually been an enemy number one of the Venezuelan middle class. There is no country that can prosper without a middle class. We once had a strong middle class in Venezuela.
At one point in time we were on the verge of taking off into the first world due to the middle class and due to the immigration from Italy and from Spain and from Portugal. We had a beautiful country going and yet we lost the way, it was not the fault of Chavez, it was the fault of Carlos Andrés Pérez, Luis Herrera, and Jaime Lusinchi, who mismanaged our income. They prepared the ground for Chavez. Then Hugo Chavez came and said, “Now poor of Venezuela. Come to me. I am your father and I will provide for you. And you middle class, and you rich, and worse, you white…You are the enemies of the country. ”
He did to Venezuela something that had never been done before. He brought advisors from the US, people from the TransAfrica Forum, which is a very influential group in Washington D.C. They went to Venezuela to try to create racial consciousness among the black of Venezuela, but the black of Venezuela have never felt the object of discrimination as a group. We are seventy five or maybe eighty percent mestizos in Venezuela. We may have more coffee or more milk, but we are all mixed. These men, Harry Belafonte, the singer, and Hollywood actor, Danny Glover, who is a very good actor, but a very poor politician, went to Venezuela and tried to create the so called “Afro-Venezuelan consciousness” and what they did was to create racial and social resentment. That’s why I say that maybe Chavez had good intentions. Hugo Chavez wanted to be a Mandela, but somehow he came out a Mugabe [laughter]. This is as far as I can say something positive [Laughter].
Martin Horwood MP
Okay, one last question.
Can I ask a personal question, about your last remark how he turned out to be a Mugabe rather than a Mandela, are you personally secure in Caracas? Are you safe and do you feel threatened? How likely are you to be taken off to prison if you go about speaking as you have for the last ten years?
Well to begin with, I am not living in Caracas. I live in the United States. I don’t go to Caracas because I could go in to Caracas, but I would never be able to leave Caracas. In Venezuela 99.9% of crimes are never investigated. I will be found in a dark alley, you know with tres puñaladas, how do you say? three stabs in my back, and no one will ever know who did it and that is a very sad way to die.
I was born in Caracas, but I will not die in Caracas.
Question 3 – cont.
And probably there will be no news about that event.
[Laughs] No, no news. I feel very safe also because being eighty renders me pretty invulnerable.
It’s like the man who was being taken to be shot and he goes out with his hat. The soldier, the head of the soldiers says to him, “Take your hat off!” And the man says, “No, I will not take my hat off. What are you going to do to me if I don’t? Shoot me?” And I feel the same. I’ve come full circle in my life. I have the compulsion to leave something behind. I think is very normal for people who are my age to feel the need to write a memoir, or poem, or talk about corruption and name names. I can afford to name names. And the legal system in Venezuela helps me, I cannot be taken to prison in Venezuela. Anyone who is over sixty can only go to prison in his own house, but not in a prison as such. I find that very convenient. I could kill somebody – sometimes like that has gone through my mind, but, even then, I wouldn’t be taken to prison [laughs].
Martin Horwood MP
Well on that note. I think that is a positive note. Thank you very much, Gustavo. It has been a thought provoking, political, controversial contribution. Thank you very much for speaking out here, as well as in Venezuela.