US embassy cable - 04CARACAS2807

C O N F I D E N T I A L  CARACAS 002807 
 
SIPDIS 
 
 
STATE PASS USAID FOR DCHA/OTI - PORTER 
NSC FOR SHANNON/BARTON 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 09/07/2014 
TAGS: ECON, PGOV, VE 
SUBJECT: ROCKY START TO BUSINESS-GOVERNMENT DIALOGUE 
 
REF: CARACAS 2668 
 
Classified By: Economic Counselor Richard M. Sanders.  Reason:  1.4 (b) 
 and (d). 
 
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Summary 
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1.  (C)  The GOV rejected talks with umbrella private sector 
organization FEDECAMARAS after the latter issued a "Business 
Manifesto" which cast doubts on the results of the recent 
referendum on President Chavez's tenure in office and sharply 
criticized other GOV policies.  Interior Minister Chacon 
stated that the GOV would not engage in dialogue "under 
conditions" and would talk directly to other business 
organizations and leaders.  The GOV backed off somewhat when 
FEDECAMARAS President Albis Munoz insisted that no conditions 
were being demanded.  Nonetheless, it remains unclear if, 
when, and under what circumstances such dialogue will take 
place.  The business community's accommodation to Chavez 
continues, with the departure under pressure of Rafael 
Alfonzo, one of the hardest-line anti-Chavez industry 
leaders, from the presidency of the Food Industry Chamber. 
The U.S.-Venezuelan Chamber of Commerce (VENAMCHAM), which 
held useful meeting with the Finance Minister and the 
Chairman of the National Assembly's Finance Committee, is 
nonetheless leery of a GOV effort to set it up it as a 
counterweight to FEDECAMARAS.  Both the GOV and the business 
community have an interest in maintaining dialogue, but the 
GOV aims to manipulate the private sector into definitively 
accepting its place in the Chavista revolution.  End summary. 
 
 
--------------------------------- 
Offers, Rejection, Clarifications 
--------------------------------- 
 
2.  (C)  Following Chavez's referendum victory, Albis Munoz, 
President of the Federation of Chambers of Commerce and 
Industry of Venezuela (FEDECAMARAS) offered to enter into 
dialogue with the GOV, calling for the creation of "friendly 
environments for national... reconstruction.  Her comments, 
well publicized nationally, caused considerable dissension 
within her organization, which led it, after lengthy 
close-door debate, to issue on August 30 a "manifesto" with a 
distinctly political tinge.  It led off by noting the 
persistence of "doubts regarding the transparency and 
veracity" of the August 15 referendum results.  It denounced 
the effort to "impose laws which limit freedom of expression 
and foment the non-recognition of private property."  Noting 
that "communication is the ideal mechanism for 
understanding," it called for "businessmen, workers, 
consumers and government to close ranks in a common effort to 
put Venezuela on the path of full economic and social 
development, under democracy and with the values which define 
our people." 
 
3.  (C)  Interior Minister Jesse Chacon responded by saying 
that the manifesto represented the views of the "extreme 
right wing" of the business community.  The GOV, he added, 
was already undertaking discussions with various sectorial 
chambers, and would work with businessmen to create a 
"strategic agreement," but that FEDECAMARAS would not be 
participating:  "We do not dialogue under conditions." 
Munoz subsequently clarified that the manifesto, while 
reflecting the views of FEDECAMARAS' members, did not 
constitute any effort to impose any pre-conditions on 
dialogue with the GOV.  GOV Executive Vice President Jose 
Rangel, in turn, responded by calling this "an interesting 
signal," adding that the GOV was "prepared to dialogue with 
FEDECAMARAS and any other sector, but based upon the 
constitution." 
 
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One GOV View 
------------ 
 
4.  (C)  On September 2, econcouns met with Francisco Natera, 
a former FEDECAMARAS President who currently serves in the 
GOV in the low profile post of "Minister of State for Special 
Economic Zones."  Natera's principal task has been to 
maintain liaison with the private sector, most notably 
through the staging of a series of public "encounters" Chavez 
held with businessmen in Caracas, Maracaibo, Valencia and 
 
Puerto La Cruz prior to the referendum.  Natera asserted that 
FEDECAMARAS had lost an opportunity to repair relations with 
the GOV.  Chavez, he said, had placed a telephone call to 
Munoz after his referendum victory.  Munoz, closeted with her 
advisors, neither took the call nor returned it later.  This 
discourtesy, according to Natera, together with the 
manifesto's outlining of purely political issues as 
FEDECAMARAS priorities, made the GOV's hostile response 
inevitable. 
 
5.  (C)  Natera suggested that despite the apparent failure 
thus far to re-establish normal relations between the GOV and 
FEDECAMARAS, all was not lost.  He thought that after "five 
or six months" it could be renewed, noting that Chavez is 
quite capable of changing his positions if it suits his 
interest.  He suggested that a change in FEDECAMARAS 
leadership might be needed first.  In the meantime, he added, 
dialogue was taking place at other levels.  Several important 
sectorial organizations, such as the Banking Association and 
the Chamber of Construction had either met or would shortly 
meet with President Chavez.  (Note:  The Banking Association 
met with Chavez on September 3.  End note.)   He also praised 
the U.S. Venezuelan-Chamber of Commerce's (VENAMCHAM) highly 
publicized meeting with Finance Minister Nobrega (See para. 
9).  He suggested that these various initial approaches would 
be followed up by the formal creation of working groups at 
the ministerial or sub-ministerial level. 
 
6.  (C)  Natera denied any contradiction between Chavez's 
asserted policy of outreach to the private sector and his 
announcement of a new land reform initiative, including a 
threat to expropriate idle land if owners did not negotiate 
its sale.  Chavez, he said, is a politician who must play to 
different constituencies, and the rural poor are one of the 
most important voting blocs whose support he will need ahead 
of the regional elections.  There are, he insisted, large 
stretches of land not worked by their owners, who in many 
cases do not even have good title.  The extent of the problem 
is well known, and landowners outside of these well-defined 
situations have nothing to fear.  He suggested that 
implementation of land reform could be a subject for 
business-government dialogue. 
 
------------------------------------- 
A Hard-Liner Moves On, Under Pressure 
------------------------------------- 
 
7.  (C)  As the status of the business-government dialogue 
remains murky, one leading player in the organized business 
community is leaving the scene, at least for now.  Rafael 
Alfonzo, head of a large, family-owned grain milling and food 
importing business, announced his resignation from the 
presidency of Venezuelan Food Industry Chamber (CAVIDEA). 
Alfonso had been the private sector representative in the OAS 
and Carter Center-sponsored negotiations leading to the June 
2003 agreement which set the stage for the petition drive and 
referendum on Chavez's tenure in office.  One of the highest 
profile business sector figures within the opposition, he had 
publicly cast doubt on the validity of Chavez's August 15 
victory.  Alfonzo reportedly had strongly opposed within 
FEDECAMARAS any effort to re-start dialogue with Chavez.  He 
attributed his departure to health concerns, but admitted 
that given that his actions could be "misinterpreted" and 
affect the interests of CAVIDEA's members, it was time to go. 
 
8.  (C)  Alfonzo's departure followed a meeting of the 
National Cereals Board, a GOV-industry consultative entity on 
issues such as price controls and import permits on key 
commodities, at which, according to industry sources, Vice 
Minister of Agriculture Garzon specifically raised Alfonzo's 
allegations of electoral fraud, saying that as long as 
institutions such as CAVIDEA (and also farmers' association 
FEDEAGRO) did not recognize the legitimacy of the government, 
they would not be considered "valid interlocutors."  He also 
said that public declarations questioning the referendum 
results or calling for revision of the Land Law were 
unacceptable, since "losers don't place conditions." 
Implicit in his comments, according to one participant, was a 
threat that import permits and price increases (the latter 
being crucial in Venezuela's high inflation economy), would 
not be forthcoming without personnel and policy changes at 
major industry associations.  We have also heard from an 
industry insider that food and beverage giant Polar was 
instrumental in Alfonzo's departure. 
 
-------------------------- 
VENAMCHAM Moves Cautiously 
-------------------------- 
 
9.  (C)  In an introductory call on the Ambassador on 
September 3, Imelda Cisneros, President of the U.S.-Venezuela 
Chamber of Commerce (VENAMCHAM), discussed the August 26 
meeting which her organization had held with Finance Minister 
Tobias Nobrega and National Assembly Finance Committee 
Chairman Rodrigo Cabezas.  Cisneros, while satisfied 
substantively with the results, was irked by the massive 
publicity which Cabezas in particular had generated both 
before and after the event.  She saw an effort on the GOV's 
part to set up a dichotomy between a "good" VENAMCHAM and a 
"bad" FEDECAMARAS.  Venezuelan Ambassador to the U.S. 
Bernardo Alvarez_ had subsequently telephoned her to suggest 
that his Embassy and VENAMCHAM jointly host a major 
investment promotion event in Washington.  She told the 
Ambassador that she would be very careful about such 
approaches, while trying to engage a very difficult 
government on the range of substantive concerns which 
VENAMCHAM had. 
 
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Comment:  No Dialogue of Equals 
------------------------------- 
 
10.  (C)  Despite the difficult beginning, we may yet see 
FEDECAMARAS participating in formal dialogue with the GOV. 
From its own institutional perspective FEDECAMARAS must find 
a way to be able to talk to Chavez and his ministers or be 
doomed to impotence and irrelevance at least through the 2006 
elections.  The business community as a whole also has an 
interest in speaking with a unified voice, given that 
Chavez's efforts to deal with individual chambers and 
businesses reflect a "divide and conquer" strategy.  For the 
GOV the need for dialogue with FEDECAMARAS is less pressing. 
Nonetheless, given the role of the business organization's 
leadership in both Chavez's temporary ouster in April 2002 
and in the December 2002-February 2003 general strike, its 
reconciliation with the GOV, should it occur, would add to 
the perception of Chavez's long-term invincibility. 
 
11.  (C)  Chavez's vision of what the business-government 
relationship should be probably entails smiling business 
leaders publicly approving various economic development 
schemes being financed with oil revenues, and some private 
dickering over specific problems.  One long-time observer 
even suggested that the stability of Chavez's government 
could benefit from the added communication that formal links 
to the business community could provide, especially outside 
of Caracas, as an alternative to misinformation from corrupt 
and sycophantic politicians at the state and local level. 
But to judge by the initial sparring, if the business 
community acts as if it has the right to criticize core 
political interests of the Bolivarian revolution such as its 
management of the electoral process and the courts, its 
planned law regulating the press, and possibly (despite 
Natera's comments) land reform, it will get the back of 
Chavez's hand. 
Brownfield 
 
 
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      2004CARACA02807 - CONFIDENTIAL