Four hotbeds of Venezuelan corruption

The Four Hotbeds of Corruption in Venezuela

By Gustavo Coronel
March 17, 2011

 Hugo Chavez became president of Venezuela in 1998 on the strength of his promises to stamp out corruption. Venezuela had been a democratic showcase for the hemisphere from 1958 to the early 1970’s but after receiving a huge oil income in the mid-1970 the quality of government deteriorated and waste and corruption set in. By 1998 most Venezuelans were deeply disappointed and wanted a radical change. They got it with Hugo Chavez. What they never imagined was that the change would be for the worse.

During the 13 years of Hugo Chavez’s increasingly authoritarian rule, the management of our national wealth has gone from unsatisfactory to chaotic. About one trillion dollars in national income has been largely pilfered in improvised, costly projects, or distributed to Venezuelans in the form of handouts that buy temporary well being (a fish a day but not teaching them to fish) or utilized to buy political influence for Chavez in the hemisphere and in the world at large.

During Chavez’s rule two of the main measures of corruption: (1), incidence (number of cases of corruption) and, (2), intensity (amounts of money and resources involved), have been the worst in Venezuelan history. The Perception of Corruption Index prepared every year by Transparency International shows Venezuela, in 2010, among the twelve most corrupt countries in the world.

The intensity of corruption in Chavez’s Venezuela has had a strong political and social component, in addition to the purely financial. The conversion of democratic Venezuela into a rogue state has been based in systematic violations of the constitution and the laws and in the progressive elimination of administrative and institutional checks and balances. Transparency and accountability have disappeared. Democratic procedures have given way to a system in which one man makes all the decisions and informs the nation afterwards.

Corruption is, arguably, the only component of Chavez’s political system that has become more democratic. In contrast with the dictatorships of the past, where the exercise of corruption was the privilege of an elite, Chavez has allowed a significant mass of followers to participate in various degrees in the “piñata” of national money, land and resources.

Significant amounts of money have been utilized for handouts that have reached large segments of the population. Although this explains Chavez’s continued popularity, such a strategy has only served to increase the number of Venezuelans who are dependent on the paternalistic government, incapable of fending for themselves. Structural solutions to poverty and ignorance are nowhere in sight.

A new and corrupt social class has emerged in replacement of the traditional Venezuelan middle class, made up of government contractors, relatives and friend of people in position of power, armed force officers and the members of government bureaucracy.

Today most corruption is generated in four main hotbeds:

1.The presidential palace of Miraflores, President Chavez’s center of operations

Here the nature of corruption is mostly political although a lot of cash is kept in the premises, to be utilized as necessity dictates. The casual manner in which cash is handled is illustrated by journalist Nelson Bocaranda as follows: “In October 2010 Cuban bodyguards were sent to the Central bank to get five million dollars in cash for a Chavez trip abroad. This money never arrived to Miraflores, located only two blocks away”. It was never recovered.
Miraflores is the place where violations of the constitution are decided and where the president exercises his abuse of power. Electoral regulations are changed to favor the government. This is the place where Cubans control sensitive intelligence matters. Here is where the illegal financing and bribing of friendly leaders in the hemisphere is allocated and alignments are established with brotherly dictatorships in Belarus, Syria, Iran, Libya or Zimbabwe.

2. In La Campiña, the headquarters of Petroleos de Venezuela, PDVSA

The central offices of Petroleos de Venezuela, in the eastern side of Caracas house the board and the main planning and financial officers of the company.
PDVSA is no longer an oil company but an incoherent agglomerate of diverse businesses that range from importing and distributing food to training athletes. Corruption is mostly generated in the form of contracts without bidding that are assigned to friends of the regime. Kickbacks are customary. The government shamelessly ignores PDVSA’s major and minor scandals, such as the contracting of the offshore drilling rig Aban Pearl to a ghost company or the illegal use of the Employees Pension Fund for speculative purposes. The president of the company is a pathological liar who has systematically diverted PDVSA’s funds from the company into the pockets of the executive branch, to be used in activities without accountability.

3. The Defense Ministry and the National Guard.

A report by the U.S. Government Accountability Office, GAO to the U.S. Congress informed of increasing corruption among the Venezuelan military, especially the National Guard. Corruption, said the report, had reached the ministerial level of the government. In particular, the links of the Venezuelan military and the FARC had been clearly established, as proven by the contents of the laptops belonging to deceased FARC leader Raul Reyes.
The corruption of the Venezuelan military led the U.S. government to name three high members of the government as drug kingpins “for providing material support to FARC”. These three persons, Generals Henry Rangel Silva and Hugo Carvajal and former Minister of the Interior Ramon Rodriguez Chacin are still members of the Chavez inner circle. In fact, Rangel Silva was recently promoted to the highest military rank. Venezuela is not only a petrostate but is becoming a narcostate as well.

4. Ministry of Finance.

The management of Venezuelan finances during the Chavez regime has been extremely irregular, to put it mildly. Playing criminally with dual exchange rates, finance ministers officers and associated bankers and brokers have become instantaneous millionaires. Parallel funds operating without accountability outside the laws and regulations of the nation have promoted hyper-corruption. By eliminating the autonomy of the Venezuelan Central Bank, international reserves have been diverted to the hands of the executive branch, in order to be used for political purposes.



Thirteen years and one trillion of dollars later the Hugo Chavez regime has proven to be the worst Venezuelan nightmare. At this point in time we are now, once again, pushing for a change. If we have learned our lesson we should be much more careful this time around.


Gustavo Coronel was author of the Cato Institute study "Corruption, Mismanagement and Abuse of Power in Hugo Chavez''s Venezuela" and was the Venezuelan representative to Transparency International from 1996 to 2000. In 1994, he founded Pro Calidad de Vida, an NGO promoting anti-corruption techniques in government and civic education for children in Venezuela, Panama, Paraguay, Mexico and Nicaragua.
Coronel was President of Puerto Cabello in Venezuela from 2001 to 2002. He was Chief Operations Officer (COO) and acting CEO of the Corporacion Venezolana de Guayana (CVG), the $35 billion Venezuelan government conglomerate designed to exploit and run all of Venezuela's mineral, metal and mining operations, from 1994-1995. He was on the Board of Directors of PDVSA from 1976 to 1979.