US embassy cable - 04CARACAS2668

C O N F I D E N T I A L  CARACAS 002668 
 
SIPDIS 
 
 
NSC FOR SHANNON/BARTON 
STATE PASS AID FOR DCHA/OTI - RPORTER 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 08/19/2014 
TAGS: ECON, PGOV, VE 
SUBJECT: VENEZUELAN BUSINESS ADJUSTS TO CHAVEZ'S VICTORY 
 
REF: A. CARACAS 2643 
 
     B. CARACAS 2505 
 
Classified By: Economic Counselor Richard M. Sanders.  Reason: 1.4(d). 
 
------- 
Summary 
------- 
 
1.  (C)  Venezuela's business community has absorbed the 
unpleasant news of Chavez's referendum victory.  Albis Munoz, 
President of umbrella business confederation FEDECAMARAS, 
made a relatively conciliatory public statement (even as the 
opposition Democratic Coordinating Committee, with which it 
is linked, continued to charge fraud); she subsequently told 
econcouns that while her group would oppose Chavez's 
anti-business policies, it would look to rebuild lines of 
communication.  Antonio Herrera, executive director of the 
U.S.-Venezuela Chamber of Commerce (VENAMCHAM), stated that 
his group needed to re-establish the access it traditionally 
had at the highest levels of government even if that meant 
being viewed as "collaborationist."  The oil sector has 
already made clear its desire to work with GOV, and a 
pro-Chavez agri-business leader insisted that the business 
sector must keep "its seat at the table."  We expect that 
that over time some minimal relationship can be 
re-established between business and government.  End Summary. 
 
--------------------------- 
FEDECAMARAS Grits Its Teeth 
--------------------------- 
 
2.  (U)  On August 17, Albis Munoz, President of the 
Venezuelan Federation of Chambers of Commerce and Industry 
(FEDECAMARAS), the umbrella group representing Venezuela's 
various sectorial business groups, held a press conference at 
which she called for reconciliation after the referendum, and 
the re-establishment of "friendly environments for national 
survival and reconstruction," While not formally recognizing 
Chavez's victory and urging that the National Electoral 
Council resolve doubts about its validity, she stressed that 
Venezuela "cannot remain in confrontation," and urged that 
the GOV undertake policy changes to improve the business 
climate such as moderating its threatening tone, modifying 
price and exchange controls, and improving "juridical 
security" and respect for private property. 
 
3.  (C)  In an August 18 meeting with econcouns, Munoz 
characterized her remarks as a response to Chavez's victory 
speech, which had both conciliatory and confrontational 
elements, and suggested that they were comparable to those of 
the Catholic Church (ref a).  FEDECAMARAS executive director 
Mario Tepedino separately told econcouns that they had been 
badly received within the Democratic Coordinating Committee, 
which is still pursuing the effort to prove fraud in the 
referendum vote counting; however, Munoz had felt she had no 
choice, given the pressures that Venezuelan businessmen face 
now that they have to continue to live with Chavez.  Munoz 
said that while FEDECAMARAS has been "progressively 
distancing itself" from a direct political role, it would not 
break from its institutional linkage to the Democratic 
Coordinating Committee, and that she would not shrink from 
telling Chavez that she opposes him "as long as he keeps 
opposing the business community." 
 
4.  (C)  That said, FEDECAMARAS would look for vehicles to 
achieve some measure of normality in its relations with the 
GOV.  She did not see herself meeting with Chavez in the near 
future, but she planned to write to him, forwarding him a 
copy of her organization's plan for economic recovery, which 
had been adopted at the group's July annual conference.  She 
said that FEDECAMARAS would be pursuing initiatives to revive 
the tourism and construction section, where it could 
conceivably have common ground with the GOV.  It is working 
on outreach to labor, including the pro-Chavez UNT labor 
central as well as the anti-Chavez CTV, its traditional 
counterpart, perhaps through an event sponsored by the 
Central University.  While FEDECAMARAS would largely stick to 
economic issues in its public statements, there were lines 
that the GOV could not cross without the organization feeling 
impelled to speak out -- in particular arrests of opposition 
political figures. 
 
------------------------ 
VENAMCHAM Turns the Page 
------------------------ 
 
5.  (C)  Even more so than FEDECAMARAS, the U.S.-Venezuelan 
Chamber of Commerce and Industry (VENAMCHAM), the entity 
which represents not only major U.S. firms investing here, 
but a range of local firms with some U.S. connection 
(agents/distributors, large purchasers of U.S. inputs, etc.) 
also appears to be looking to re-position itself to deal with 
the continuation of the Chavez government.  (Note:  While 
VENAMCHAM, traditionally a higher profile organization than 
most American chambers in Latin America, had avoided 
officially supporting Chavez's temporary ouster in April 2002 
or the December 2002-February 2003 general strike, it has 
been seen by the GOV as largely oppositionist and, as such as 
been denied normal access to senior officials.  End note.) 
 
6.  (C)  VENAMCHAM executive director Antonio Herrera told 
econcouns on August 17, following a meeting of the 
organization's board of directors, that, even if it meant 
being seen as "collaborationist," working relations would 
have to be re-established with the GOV.  He noted that the 
chamber had worked with authoritarian governments before and 
showed a tribute to dictator Marcos Perez Jimenez in an old 
copy of its magazine.  VENAMCHAM, which is "in for the long 
haul," would concentrate on business issues, leaving politics 
to the politicians.  If the National Assembly passes the 
draft law regulating the media, VENAMCHAM will criticize it 
only if it affects its the business interests of its 
media-owner members which include Venezuela's principal 
television stations and newspapers.  The freedom of speech 
question is one for political leaders and human rights 
groups, he insisted. 
 
7.  (C)  VENMAMCHAM was still considering ways in which to 
recover its relationship with the GOV.  Herrera said he was 
heartened by the fact that even before the referendum Capt. 
Jose Vielma Mora, head of customs and tax authority SENIAT 
had met with VENAMCHAM, which has a number of pending issues 
ranging from difficulties with pre-shipment inspection of 
goods entering the country to arbitrary tax inspections of 
multinational firms.  He noted that Finance Minister Nobrega 
has also agreed to a meeting.  He did not rule out that once 
the dust settles on the issue of the referendum fraud, 
VENAMCHAM might write to Chavez congratulating him and 
raising its range of business concerns.  Herrera said that a 
"charm offensive" on Chavez's part to the USG and American 
business was a distinct possibility and advantage should be 
taken of any opening.  (Comment:  Herrera, who can be 
intentionally provocative in his discourse, was probably 
exaggerating a bit for effect.  We expect that VENAMCHAM will 
be quite cautious in its efforts to re-establish 
relationships with the Chavez government.  End comment.) 
 
------------------------ 
Sticking with the Winner 
------------------------ 
 
8.  (C)  Some businesses had already placed their bets with 
Chavez ahead of the referendum.  International oil companies, 
although fully cognizant of the limitations of Venezuela's 
hydrocarbons regime and the political minefield involved in 
working with a leftist, "anti-imperialist" government, had 
worked long and hard to cultivate the GOV.  In the immediate 
aftermath of the referendum outcome, Ali Mosheri, 
locally-based head of ChevronTexaco's Latin American upstream 
operations, told energy officer that his greatest concern was 
that the USG not make any statement (i.e. supporting the 
charges of fraud) which would provoke an adverse reaction 
from Chavez.  And even before the referendum Luis Xavier 
Grissanti, executive director of the Venezuelan Hydrocarbons 
Association (AVHI), the industry association of foreign oil 
producers, made clear in a briefing for visiting U.S. 
Representative C.L. Otter that the oil sector was not waiting 
for any change in government but was engaged in a long-term 
campaign to persuade Chavez and state oil company PDVSA to 
improve the climate for foreign oil investment (ref B).  AVHI 
was willing to accommodate Chavez to the point of 
participating in a round of public fora with businessmen 
which he held prior to the referendum, despite its evident 
 
electoral intent. 
 
9.  (C)  One of the organizers of Chavez's series of public 
business fora was agri-businessman Alberto Cudemus, head of 
the Venezuelan Federation of Pork Producers (FEDEPORCINA). 
He had unsuccessfully run against Albis Munoz's predecessor 
as head of FEDECAMARAS, Carlos Fernandez (currently in Miami, 
to which he fled after the failed general strike led to his 
prosecution).  Cudemus, who confidently predicted a wide 
Chavez victory in conversation with econcouns on August 13, 
said that on economic issues, Chavez listens to a range of 
opinions, and that if the private sector (and the USG) did 
not remain "at the table," their positions would be filled by 
others with more radical voices.  When it was suggested that 
some actions such as arrests of political opponents might 
make dialogue impossible, Cudemus said that under the right 
circumstance such matters could be "negotiable" for Chavez. 
(Note:  Cudemus has used his connections with the Chavez 
administration to evident advantage, most notably in 
frustrating the entry of U.S. pork into Venezuela.  End 
note.) 
 
---------------------------- 
Comment - Taking a Write-Off 
---------------------------- 
 
10.  (C)  Venezuela's businessmen have read the numbers and 
written off the prospects for Chavez's departure any time 
within their planning horizon.  (Both Munoz and Herrera were 
clearly unwilling to tie their associations' fortunes to the 
possibility that the opposition's effort to prove fraud at 
the referendum will be successful.)  Under those 
circumstances, they have little choice but to find some 
accommodation with him if they are to get any help on 
specific issues and contain any surge towards more radical 
policies.  Given the tools the GOV has at its disposal to 
reward or punish businesses (such as granting or withholding 
foreign exchange or contracts with state industrial giants 
PDVSA and CVG), their decision is understandable.  The pain 
of approaching the Chavez government, which remains 
authoritarian, corrupt, and ideologically biased, is somewhat 
lessened by the fact that many businesses which have survived 
the economic turmoil of recent years enjoy oligopolies, now 
that weaker competitors have failed, and with an oil boom 
kicking in, there is money to be made.  But Chavez, whose 
preference has always been to deal with individual, 
hand-picked businessmen rather than industry groups, and who 
owes the organized business community nothing, is likely to 
insist that the terms of any reconciliation be highly 
favorable to him. 
Shapiro 
 
 
NNNN 
      2004CARACA02668 - CONFIDENTIAL