US embassy cable - 04CARACAS2003

C O N F I D E N T I A L  CARACAS 002003 
 
SIPDIS 
 
 
STATE PASS USAID FOR DCHA/OTI - PORTER 
NSC FOR SHANNON/BARTON 
 
E.O. 12958: DECL: 06/15/2014 
TAGS: ECON, PGOV, SOCI, VE 
SUBJECT: NO PROGRESS ON POVERTY UNDER CHAVEZ - UNDP 
 
 
Classified By: ECONOMIC COUNSELOR RICHARD M. SANDERS 
 
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Summary 
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1.  (SBU)  The Chavez government appears to have made little 
progress on its alleged "flagship" issue - that of 
alleviating poverty, according to the United Nations 
Development Program (UNDP) office in Caracas.  There is no 
mechanism in place to track the results of its various ad hoc 
social welfare "missions" which in any event are only a year 
old for the most part.  Some of its programs, notably the 
"Bolivarian Schools" initiative, may indeed have value. 
Venezuela's slippage in terms of meeting the UN's Millenium 
Development Goals puts it in the "high priority" category. 
Even GOV poverty figures indicate deterioration, although the 
rate varies depending on what methodology is used.  The UNDP 
has briefed President Chavez on its findings; he reportedly 
expressed surprise and concern over the lack of good news, 
but we do not expect any policy change in the near future. 
End summary. 
 
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Lots of Programs, Results Hard to Track 
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2.  (SBU)  On June 10, econcouns met with Claudia Jiminez_, 
Coordinator for Human Development at the Caracas office of 
United Nations Development Program (UNDP).  Asked for her 
opinion of the range of "missions" (ad-hoc programs aimed at 
specific areas of social need, such as basic medical care, 
primary, secondary, and tertiary education, and unemployment) 
that the Chavez government has created, she was skeptical. 
Most of these projects have been mounted within the last 
year, and it is too soon to tell what there results are.  In 
any event, she added, such statistics as the GOV provides 
tend to be descriptive of the programs' scope  -- how many 
students graduated, etc.  -- with little more information 
provided.  For example, with regard to the GOV's basic 
literacy campaign, "Mision Robinson,"  there is no way of 
knowing what the real level of literacy achieved for most of 
its graduate is.  For "Mision Barrio Adentro" ("Inside the 
Slums"), its medical care program using Cuban doctors, there 
is no monitoring of the overall health of the recipients of 
the services. 
 
3.  (SBU)  Jiminez_ was more positive about some of the GOV's 
education programs, particularly its "Bolivarian Schools" 
program, one of the Chavez government's first initiatives, 
which provides funding for certain designated schools to 
provide full (as opposed to half) day teaching schedules and 
makes school lunches available.  This program was in fact a 
reconstitution of earlier educational initiatives of the 
1960's which had been abandoned as Venezuela's economy 
declined and resources dried up.  Other more recent 
initiatives, such as such as "Mission Rivas" and "Mision 
Sucre," high school and university scholarship programs, were 
more dubious.  She shared our impression that for the most 
part they were little more than transfer payments with little 
or no genuine study requirements.  However, she added, the 
GOV's own new "Bolivarian University," established in an 
office complex belonging to state oil company PDVSA, however, 
appears to be real, with classes getting underway. 
 
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A Crisis of "High Priority" 
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4.  (SBU)  Asked whether the UNDP's own statistics showed any 
important improvements in the living conditions of 
Venezuelans' since Chavez took office in 1998, Jiminez_ said 
that the UNDP had been working directly with various 
ministries to obtain data regarding Venezuela's progress 
towards meeting the UN's "Millenium Development Goals." 
(These goals, first identified in 1990, call for significant 
progress by 2015 in a range of areas including eradicating 
hunger and extreme poverty, reducing infant mortality, 
improving maternal health, combating HIV/AIDS and malaria, 
and guaranteeing environmental sustainability.)  The UNDP, 
she said, considered Venezuela to be to be a "high priority" 
country, which meant that it was either moving extremely 
slowly towards fulfilling these goals (or indeed moving 
backwards).  Decaying performance on poverty, nutrition, and 
education were Venezuela's principal weak points.  The high 
level of income inequality was considered to be an 
 
aggravating factor in Venezuela's poor performance. 
 
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Not Much Better by the GOV's Numbers 
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5. (SBU)  Jiminez_ provided econcouns with a statistical 
summary entitled "Poverty Indicators, 2003," which had been 
briefed to her by Elias Eljuri, head of the GOV's National 
Statistical Institute (INE).  INE uses two ways to calculate 
poverty:  one simply based on purchasing power, and an 
alternative, basedon "unmet basic needs."  By the former 
method, pverty had been on a slow decline from the first 
alf of 1998 through to the second half of 2001, when it rose 
again, through the first half of 2003 (the latest period for 
which figures are given), presumably as the economic crisis 
began to bite. 
 
% Population in Poverty     % in Extreme Poverty 
 
H1  1998      49.0           21.0 
H2  1998      43.9           17.1 
H1  1999      42.8           16.6 
H2  1999      42.0           16.9 
H1  2000      41.6           16.7 
H2  2000      40.4           14.9 
H1  2001      39.1           14.2 
H2  2001      39.0           14.0 
H1  2002      41.5           16.6 
H2  2002      48.6           21.0 
H1  2003      54.0           25.1 
 
6.  (SBU) By the GOV's own figures, therefore, the poverty 
rate in Venezuela has ended up somewhat worse than when it 
started when viewed in terms of income.  However, according 
to Jiminez_, the GOV gives more weight to measuring poverty in 
terms of "unmet basic needs."  This looks at measures such as 
number of children between seven and twelve years of age who 
do not attend school, number of persons sharing bedrooms, 
adequacy of housing, number of households, the head of which 
has less than three years of schooling, and access to water 
and sewage.  By this measure the situation is a bit more 
stable (and comes in at lower levels), but again the trend 
shows no improvement. 
 
% Population in Poverty     % in Extreme Poverty 
 
1998         28.9          10.8 
1999         29.3           9.9 
2000         30.1          10.5 
2001         27.8           9.3 
2002         31.2          13.0 
2003(H1)     30.5          12.7 
 
7.  (SBU)  Jiminez_ suggested that the GOV preferred this 
latter series because (in addition to providing an overall 
lower rate), it was less sensitive to the damage done to the 
economy in 2002 and 2003.  This was the case because some of 
the indicators, such as availability of plumbing and sewage 
lines do not change quickly over time.  In Jiminez_' view, 
however, the most pressing problem facing Venezuela's poor 
was their decreased purchasing power, which was captured by 
the first time series.  She noted that while for most of 
Chavez's term in office, the minimum wage kept pace with the 
increase in the price of a basic basket of foods, starting in 
the first half of 2002, a gap opened up, and by the second 
half of 2003, the minimum wage was 210,000 bolivars, while 
the food basket cost 255,000 bolivars. 
 
8.  (SBU)  It is worth noting that the Andres Bello Catholic 
University, which has a long-standing research program on 
poverty in Venezuela, using a methodology based on purchasing 
power, comes up with numbers that suggest an even more 
dramatic decay in living standards: 
 
% Population in Poverty       % in Extreme Poverty 
 
1998          56.5            21.4 
1999          57.2            22.0 
2000          57.1            21.2 
2001          55.6            20.9 
2002          68.5            33.2 
2003          74.2            40.4 
 
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Telling the Bad News to Hugo 
 
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9.  (C)  In early May, Antonio Molpeceres, head of the UNDP 
office in Venezuela, briefed President Chavez and his "social 
cabinet"  (Ministers of Planning, Health, Labor, Education, 
and Environment) on their findings.  As he recounted the 
meeting to the Ambassador, Chavez was very attentive, and 
seemingly surprised to find the persistently poor 
performance.  Cabinet members rushed to blame the problems on 
opposition "sabotage" of the economy in the December 
2002-January 2003 general strike.  However, Chavez cut them 
short, noting that the figures indicated deterioration which 
predated those events.  In her discussion with econcouns, 
Jiminez_ said that her impression was that the different 
ministries took seriously UNDP's analysis and valued their 
relationship with it and United Nations system organizations 
generally, but she could not point to any specific course 
corrections that were contemplated.  Molpeceres (who has 
departed to take up a new posting in La Paz) told the 
Ambassador that President Chavez simply does not understand 
the positive correlation between the general health of the 
economy and social indicators. 
 
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Comment 
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10.  (C)  The decline in Venezuela's social indicators under 
Chavez is a continuation of a long-term decline, which his 
government has failed to reverse.  Three of the six years 
1998-2003 were marked by shrinkage in the economy. 
Inflation, which ran at 29.9 pct in 1998, was running at 27.1 
pct in 2003.  Unemployment, 11.0 pct in 1998, ran at 16.8 pct 
in 2003, while underemployment, which ran at 49.8 pct in 
1998, ran at 52.7 in 2003.  An index of basic food 
consumption (giving 1995 as 100) came in at 84 pct in 1998, 
and dropped to 75 pct for 2003.  In fairness to Chavez, the 
general strike made 2003 an especially dismal year; 2004 is 
going to see a (statistically at least) important rebound. 
Exchange controls which keep interest rates low and money 
inside the country, combined with wide open fiscal policy are 
likely to increase the "feel good" factor.  The various 
social welfare "missions" will continue to be relentlessly 
publicized, whatever their real world impact may be.  But for 
Venezuela's millions of poor people, life is harder than it 
was when Chavez took office.  As Chavez heads into the 
referendum on his tenure in office, the UNDP's briefing 
cannot have been be very comforting for him. 
SHAPIRO 
 
 
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      2004CARACA02003 - CONFIDENTIAL