US embassy cable - 04CARACAS1313

C O N F I D E N T I A L  CARACAS 001313 
 
SIPDIS 
 
 
NSC FOR CBARTON 
USAID DCHA/OTI FOR RUSSELL PORTER 
 
E.O. 12958: DECL: 03/22/2014 
TAGS: ECON, ETRD, PGOV, VE 
SUBJECT: POLITICIZING VENEZUELA'S ECONOMIC BUREAUCRACY 
 
REF: A. 93 CARACAS 03454 
 
     B. 93 CARACAS 03769 
     C. 93 CARACAS 02745 
     D. CARACAS 00627 
     E. 93 CARACAS 01995 
     F. 93 CARACAS 04002 
 
Classified By: Ambassador Charles S. Shapiro for reasons 1.4 (b) and (d 
). 
 
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SUMMARY 
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1. (C)  Current efforts to ensure loyalty within Venezuelan 
government institutions by using the list of persons who 
signed the recall petition against President Chavez, take 
place against the backdrop of a longer history of politically 
motivated firings and personnel shuffling aimed at cementing 
the administration's control over the bureaucracy.  Emboffs 
have received numerous reports of technicians, particularly 
in the economic and trade ministries, being replaced by 
officials who have closer military, party or personal ties to 
Chavez and/or his top advisors.  This trend, which includes 
the October 2003 appointment of a former military officer as 
Minister of Production and Trade, has already begun to have 
significant effects on Venezuela's foreign as well as 
domestic economic policies.  END SUMMARY. 
 
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GETTING RID OF THE TECHNICIANS 
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2. (C)  Former Air Force Lieutenant Colonel Wilmar Castro, a 
participant in President Hugo Chavez's 1992 coup attempt, 
replaced Minister for Production and Trade Ramon Rosales in 
October 2003 (ref A).    This marked a trend within the 
economic ministries of replacing technically sophisticated 
officials at the ministerial and vice-ministerial level with 
persons whose political connections outweighed their 
experience in their new fields.  (Rosales, an academic 
specialist on international trade was a rabid opponent of 
"globalization" but was regarded by business as a 
knowledgeable and somewhat sympathetic interlocutor in 
specific issues.)  Since then, we have received other reports 
of politically motivated personnel shifts, reaching 
considerably further down into the ranks of civil servants. 
In December 2003, Eduardo Porcarelli, former Director for the 
Office of Foreign Trade in the Ministry of Production and 
Trade (MPC), told econoffs he had resigned from his position 
in September 2003 because he had been increasingly 
marginalized within the Ministry.  Roberto Arias, a trade 
specialist in the same MPC office, also described his 
transfer to a different government job as politically 
motivated and illegal.  Arias told econoff that four people 
in the office had been transferred or resigned within a two 
month period. 
 
3. (C)  Arias and Porcarelli noted the importance of their 
former office to the development and promotion of Chavez's 
international economic policies.  Their replacements, who are 
for the most part, political appointees with little 
international trade experience, are now managing preparations 
for WTO negotiations and Venezuela's upcoming association 
with MERCOSUR (ref B).  Porcarelli and Arias confirmed the 
accounts of others in MPC, the Ministry of Agriculture and 
Lands, and the Ministry of Planning and Development, that 
technical experts are being sidelined on critical issues. 
 
4. (C)  Jorge Szeplaki, Superintendent of Venezuela's 
anti-trust agency (PROCOMPETENCIA), told econoffs his 
organization had been stripped of its traditional role as one 
of the technical advisors in the preparations for FTAA 
negotiations.  According to Szeplaki, the Presidential 
Commission now managing Venezuelan FTAA policy is made up of 
ideologues who have close relationships with Chavez.  The 
President of the Commission, former Vice Minister of 
Industry, and now a board member of Petroleos de Venezuela 
(PDVSA), Victor Alvarez, told econcouns in August 2003 that 
the GOV would lobby to postpone FTAA negotiations until all 
the countries involved had reached "economic parity" (ref C). 
 Alvarez is a self-proclaimed opponent of laissez-faire 
economics and the government's chief proponent of a Latin 
American-led regional alternative to the FTAA.  The Ministry 
of Foreign Affairs, according to Amb. Oscar Hernandez, 
 
Director for International Economic Affairs and former 
permrep to the WTO in Geneva, is completely sidelined on 
international trade negotiations. 
 
5. (C)  Jose Fermin, a career civil servant and former top 
legal advisor in the Venezuelan Patent and Copyright Agency 
(SAPI), told econoffs in January he was one of many dismissed 
from the agency for political reasons.  Fermin said his 
January 2004 removal was ordered by SAPI director Eduardo 
Saman because he refused to fall in with Saman's politically 
influenced policies.  Industry contacts confirm that several 
career civil servants with significant technical expertise 
have been dismissed from SAPI as a result of which patent 
applications have been stalled.  Saman is on record as an 
opponent of expanded IPR protection for international 
pharmaceuticals which he views as potentially detrimental to 
Venezuela's health care system (ref D).  (Note: When Fermin 
met with econoffs, Saman was in Cuba to discuss the 
implementation of part of the 2000 Venezuela-Cuba Agreement 
(ref E) which calls for cooperation on IPR issues.) 
 
6. (C)  Under Saman's influence, SAPI has decreased the 
number of new patents awarded to pharmaceutical products, the 
GOV has instituted a policy of approving domestic copies of 
internationally patented pharmaceutical products for sale in 
Venezuela, and the National Assembly is considering changes 
to the new Industrial Property Bill which would worsen the 
legal framework for protection of intellectual property. 
(Comment: Saman was himself briefly removed from office last 
year by former Minister of Production and Trade Rosales, but 
was returned to his position once Rosales was removed. 
Industry sources say Saman's close relationship to Chavez 
facilitated his quick return to SAPI and Rosales' ouster.) 
 
7. (SBU)  The technical experts in the food sector also 
appear to be targets.  Ministry of Agriculture and Lands 
(MAT) sources tell emboffs that former Vice Minister Oswaldo 
Carnevalli, a respected figure in the industry, was fired in 
June 2003 because he publicly noted the need to raise food 
prices, a realistic assessment which was perceived by his 
superiors as "counter-revolutionary."  His position was 
filled by General Rafael Oropeza.  Former MAT Director of 
Marketing Carlos Abello told emboffs he was pressured to 
resign because he would no longer manipulate the issuance of 
import licenses.  Abello was ultimately replaced by an 
unknown, Irahil Mendez.  Industry sources say costs per ton 
for corn import licenses have recently increased and at least 
one U.S.-affiliated company has not been able to get licenses 
since September 2003. 
 
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CHANGING THE RULES OF THE GAME 
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8. (C)  Current MPC Assistant Director of Foreign Trade Nilsa 
Mujica told econoffs the trend of transferring and dismissing 
civil servants could be justified under Venezuela's November 
2001 Public Authority Law, which provides the legal framework 
for hiring and firing government employees.  In her words, 
"the new law makes it easier to remove unproductive personnel 
and decreases labor liability".  Article 98 of the law 
provides for dismissal of career civil servants if 
administrative changes, office closures, or personnel 
downsizing are required and previously approved by the office 
of the President.  "Participating in strikes that do not meet 
legal requirements" is another reason for dismissal of public 
servants under the law. 
 
9. (C)  Mujica complained to econoff that the 2001 law had 
revoked previous safeguards for career employees making them 
almost as vulnerable to abrupt dismissal as political 
appointees.  The situation for public servants was worsened 
by the October 2003 dismantling of Venezuela's First Court 
for Contentious Administrative Matters.  The Supreme Court 
called this action necessary to deal more efficiently with a 
high case load, however, the court has yet to be replaced 
with an equivalent court.  The First Court heard cases 
dealing with alleged illegal government actions and acted as 
a court of appeals for illegally dismissed public employees 
(ref F).  According to Mujica, the court almost always found 
in favor of employees in those cases.  She suggested to 
econoff that the absence of any avenue for appeal has had a 
chilling effect on employees who might have considered 
protesting what they see as a trend of politically motivated 
transfers and firings in the economic ministries. 
 
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COMMENT 
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10. (C)  Politically motivated firings and harassment within 
the public sector have become more visible as the GOV targets 
people who signed the recall petition against President 
Chavez.  A longer pattern of replacing non-partisan figures 
in the economic ministries with Chavez loyalists exists.  As 
Chavez seeks to keep his approval ratings up, the importance 
of the ministries that oversee significant domestic 
"development" funds as well as overall economic policy, also 
increases.  The GOV is likely to continue to pursue a 
strategy which gives the President more control over the 
bureaucracy and more secure access to funds that could boost 
his popularity. 
SHAPIRO 
 
 
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      2004CARACA01313 - CONFIDENTIAL