US embassy cable - 05CARACAS152

C O N F I D E N T I A L  CARACAS 000152 
 
SIPDIS 
 
STATE FOR WHA/AND 
NSC FOR CBARTON 
TREASURY FOR OASIA-GIANLUCA SIGNORELLI 
HQ USSOUTHCOM FOR POLAD 
BUENOS AIRES FOR TREASURY-MHAARSAGER 
USDA FOR FAS/ITP BRIAN GRUNENFELDER 
USDA FOR FAS/ITP/DA PAT SHEIKH 
USDA FOR FAS/OAA ELLEN TERPSTRA 
USDA FOR FAS/OAA KEN ROBERTS 
 
E.O. 12958: DECL: 01/20/2015 
TAGS: ECON, EFIN, PGOV, VE 
SUBJECT: SHUFFLE OF ECONOMIC MINISTRIES - THE MORE, THE 
MERRIER 
 
REF: A. 04 CARACAS 3536 
     B. 04 CARACAS 3979 
 
Classified By: ECONOMIC COUNSELOR RICHARD M. SANDERS FOR REASON 1.4 D 
 
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SUMMARY 
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1. (C) President Chavez announced on January 9 several 
Ministerial changes.  The Ministry of Production and Commerce 
has been divided, as has been the Ministry of Energy and 
Mines, and there are three new institutions: the Ministry of 
Light Industry and Commerce, the Ministry of Basic Industries 
and Mines, and the Ministry of Tourism.  The former Ministry 
of Energy and Mines is now the Ministry of Energy and 
Petroleum.  In addition, Chavez announced that there would be 
a new Minister of Agriculture and Land.  This continued 
expansion of new Ministries, as when three other Ministries 
were added in September 2004 (ref A), serves no clear 
purpose.  The real effect, besides confusion, may be to 
weaken private sector negotiations in those areas, as they 
will be forced to divide their efforts.  The Agriculture 
Minister change is a strong signal of support for recent land 
interventions (ref B).  END SUMMARY. 
 
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CHANGE IS GOOD - SO LET'S MAKE LOTS OF CHANGES 
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2. (SBU) On January 11, when the new design of the weekly 
"Alo, Presidente" show was unveiled, President Hugo Chavez 
revealed the new design of his Cabinet, increasing the number 
of economic ministries for the second time in four months 
(ref A).  The Ministry of Production and Commerce (MPC) is no 
more, its functions divided among the newly created Ministry 
of Light Industry and Commerce (MLIC), the Ministry of Basic 
Industries and Mines (MIBM), and the Ministry of Tourism. 
Wilmar Castro, who had been Minister of MPC, will head 
Tourism, while Edmee Betancourt, recently the Vice Minister 
of Industry in the MPC was promoted to Minister of MLIC, and 
Victor Alvarez raised to Minister of MIBM from President of 
the state-owned Bank of Foreign Commerce (BANCOEX).  Some of 
the functions of the MIBM had been the responsibility of the 
Ministry of Energy and Mines, which will now be known as the 
Ministry of Energy and Petroleum.  Rafael Ramirez remains as 
that Minister, in addition continuing as President of state 
oil corporation PDVSA.  Finally, Chavez announced that the 
Minister of Agriculture and Land (MAT), Arnoldo Marquez, will 
be replaced by Antonio Albarran, who is presently the 
National Land Institute (INTI) Director in Barinas, Chavez's 
home state. 
 
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BUT WHAT DOES IT MEAN? 
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3. (C) The very creation of new Ministries runs counter to 
what Chavez initially claimed he would do as President.  In 
December 1998, two days after being elected, he said "We have 
the firm determination to reduce the number of ministries; 
with 11, 12 ministries maximum, I aspire to govern Venezuela 
in an efficient manner."  He nearly succeeded in his goal, 
reducing the cabinet from 21 to 13 ministries in his first 
year in office.  Since 2001, he has gone in the opposite 
direction, with the new total at 24 ministries - three more 
than when he assumed the Presidency.  Yet the increase is 
allegedly for the same reason as the decrease - as Chavez 
said on the 9th, "I am always thinking on how to improve the 
team, its efficiency and quality." 
 
4. (C) How these changes can improve efficiency and quality 
is not clear.  Taking the mining sector out of Ramirez's 
portfolio certainly lightens his load, which may have been 
 
 
unmanageable simply because he was doing two jobs.  It could 
also signify the de facto merger of the Ministry and PDVSA. 
However, as none of the new entities were included in the 
recently passed budget, their funding status is unclear. 
CONINDUSTRIA, the association which represents the 
manufacturing sector, has complained that this will negate 
all negotiations that had begun with MPC (as well as BANCOEX, 
perhaps).  CONINDUSTRIA President Lope Mendoza noted that, 
instead of being able to negotiate with the MPC as a bloc, 
the sectors will be divided among the new ministries, thus 
reducing their bargaining ability. 
 
5. (C) The change at MAT brings its own uncertainty, as 
Albarran (according to FAS contacts) is a near unknown in the 
Venezuelan agricultural industry, though he had also managed 
the Cuban-built sugar mill in Barinas state.  However, the 
reasons for his appointment are clearer than the MPC changes. 
 He is thought to be trusted by Chavez, and his background 
shows the direction that MAT will likely be taking in the 
future, and is a key sign of Presidential support for the 
land "interventions" that are taking place (ref B).  Chavez 
hinted at accusations of corruption with the Ministry, saying 
that while "there might be some investigations," the change 
had nothing to do with them. 
 
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COMMENT 
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6. (C) We do not see big changes from the point of view of 
U.S. interests in Venezuela.  The Agriculture Ministry is 
becoming ever less important an interlocutor for us, as key 
functions such as purchasing of food imports for the 
burgeoning MERCAL subsidized marketing program, as well as 
the issuing of import quotas and sanitary certificates are 
drifting to the new, separate Ministry of Food.  As head of a 
new Ministry of Tourism, we expect Wilmar Castro to devote 
his energies principally to trying to get the new state-owned 
air carrier CONVIASA off the ground.  (It is supposed to 
begin operations this month, but with an initial GOV 
investment of only USD 10 million, it is unlikely to have 
more than a symbolic presence for quite some time.)  The 
creation of the new Ministries of Light Industry and Commerce 
and of Basic Industry and Mining may have some positive 
impact.  A U.S.-owned glass company with a large presence 
here reports that is has had a good experience with Edmee 
Betancourt in her role as Industry Vice Minister, where she 
helped it obtain necessary tax exemptions to make a major new 
investment in re-tooling its operations.  Energy Minister 
Ramirez's departure from the mining portfolio could be 
helpful.  A U.S. firm with a diamond mining concession here 
had some of its property confiscated in an apparent shakedown 
attempt orchestrated by an attorney for artisanal miners; the 
company is suspicious that individuals in Ramirez's family 
were behind this action.  Perhaps a new Minister will provide 
an opportunity to revisit this decision. 
McFarland 
 
 
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      2005CARACA00152 - CONFIDENTIAL