Venezuela News Summary #78

Venezuela News Summary #78 (March 17- March 24, 2008)

I. Brazil’s Lula Says U.S. Should Improve Relationship with Venezuela and Latin America
During a meeting in Washington, D.C. in mid March Brazilian President Luiz Inacio Lula da Silva urged U.S. President Barack Obama to “approach” Venezuela, Bolivia, and Cuba, despite ideological differences. Venezuela, Cuba, and Bolivia are among the more left-leaning Latin American countries. Venezuela and Bolivia both expelled the U.S. ambassadors from their countries last September for allegedly conspiring with separatist movements in resource-rich provinces. President Obama has accused the Venezuelan government of “impeding progress in the region” and supporting “terrorist” guerrilla groups in Colombia. Venezuelan President Hugo Chávez has repeatedly expressed his desire to improve relations with the U.S. while insisting that the United States stop intervening in Latin America, and end its military occupations and its embargo against Cuba. Lula’s administration has governed closer to the political center, and positioned itself as Latin America’s ambassador to the United States. http://www.venezuelanalysis.com/news/4299

II. Venezuela and Colombia Deepen Diplomatic and Economic Ties
Venezuelan Foreign Relations Minister Nicolás Maduro and his Colombian counterpart Jaime Bermúdez met in Caracas last week to discuss commercial relations and anti-drug policy. The meeting was the first effort at reconciliation between the two countries since a heated exchange early this month over Colombia’s justification of cross-border raids on guerrilla rebels. During the meeting, the ministers discussed their policies on biofuels, electricity, and the environmental impact of energy production and consumption. They also moved forward on plans to build an oil pipeline from Venezuela’s Orinoco Oil Belt to Colombia, and exchanged ideas about how to better organize cross-border gasoline trade. Maduro and Bermúdez also spoke about the automobile industry, including the potential expansion of import- export quotas and a technology sharing agreement to promote the conversion of cars to dual gasoline-natural gas engines. An agricultural stimulus package and a joint investment fund of $200 million were also on the agenda, but the ministers said they plan to consult with their respective presidents before making any final decisions. http://www.venezuelanalysis.com/news/4307

III. Venezuelans more Satisfied with Life, According to Inter-American Development Bank
According to a recent study by the Inter-American Development Bank, Venezuelans are more Satisfied with their Lives than the citizens of any other South American country. 40,000 people were interviewed in the study, which took place from 2005 through late 2007 to determine which economic and social factors most affect individual perceptions about their lives. According to the study, satisfaction with life is higher in Latin America than in Europe and Asia, and Venezuelans, were found to be amongst the most satisfied. Venezuela ranked first for overall satisfaction in South America, and fourth in Latin America, behind Costa Rica, Panama and Mexico. Haiti was the least overall satisfied. Venezuela was ranked second in Latin America in education satisfaction, third in employment satisfaction, third in health satisfaction and fourth in Latin America for housing satisfaction. http://www.venezuelanalysis.com/news/4304

IV. Venezuela Raises Sales Tax and Internal Debt, Maintains Social Spending, to Cope with Oil Price Decline
President Hugo Chavez announced last Saturday that Venezuela will raise taxes, increase internal debt, and cut unnecessary government spending, in order to keep social spending intact in its effort to endure the global financial crisis. The crisis has specifically hurt Venezuela by lowering the demand and price of oil, Venezuela’s principal export. Chavez announced the measure in a highly anticipated national broadcast. In contrast to last week’s widespread speculation in the oppositional media, Chávez announced there will be no increase in the domestic price of Venezuela’s highly-subsidized gasoline, and no devaluation of Venezuela’s currency, the Bolivar. Chávez promised to increase the minimum wage by 20% in 2009, in order to adjust to inflation. The president also reiterated his administration’s commitment to its extensive social programs that have cut poverty in half over the past decade. Venezuela planned its 2009 national budget based on an average price of $60 per barrel of oil, but the growing financial crisis brought prices down to between $30 and $45 dollars a barrel. The 2009 national budget has now been adjusted to an average of $40 barrel, reducing the previous budget by 7%. The budgetary adjustments will presumably be voted into law this week by the largely pro-Chavez National Assembly. http://www.venezuelanalysis.com/news/4312

V. Venezuelan Government Reiterates Commitment to Social Spending
Chavez’s announcements came on the heels of a recent report in the Venezuelan daily El Nacional that the Venezuelan economy is headed for a crisis similar to that of the late 1980s, and that the Chávez administration is preparing severe budgetary cutbacks of the magnitude of a “classic economic package of the [International Monetary Fund] IMF.” Last week, Chávez responded saying the policies of his government contrast starkly with those of past Venezuelan presidents and the IMF. “We are constructing a socialist economy,” he said. Chávez explained that the IMF typically recommends de-regulating prices, freezing the minimum wage, and privatizing state-run sectors of the economy. The Venezuelan government, in contrast, continues to regulate prices and sanction or nationalize businesses that do not comply. The Venezuelan government increased the minimum wage last year, and has nationalized or purchased the majority share of strategic industries such as electricity, cement, oil, telecommunications, and steel. http://www.venezuelanalysis.com/news/4305

VI. Venezuela Dismantles Seven Drug Labs Near Colombia Border
Two weeks ago, the Venezuelan government announced that it had dismantled seven drug labs near the Colombian border, seizing 420 kilos of cocaine and coca paste. Minister of Interior Tarek El Aissami said that no one was arrested in the operation because the labs were less than a 1000 feet from the Colombian border, which allowed the occupants to escape. According to the Minister, the authorities also confiscated a large quantity of chemicals used in transforming coca into cocaine. El Aissami said that the operation proves recent U.S. State Department reports false, which accuse Venezuela of not cooperating in the war on drugs. http://www.venezuelanalysis.com/newsbrief/4285

VII. Venezuela Bans Controversial “Trawl” Fishing
Small-scale Venezuelan fisherman rejoiced a week and a half ago, as a Venezuelan government ban on trawling, or drag fishing, went into effect. The measure is intended to protect coastal biodiversity and increase production by small fishermen, who have petitioned governments to outlaw the practice for decades. President Hugo Chavez pointed out that small-scale fishermen provide 70 percent of the country’s fish, while the trawlers mostly caught shrimp for export. Chavez announced that the government will invest $ 32 million dollars to convert or decommission trawling boats, and to develop fish processing plants. Chavez said that 30 trawling ships will be expropriated due to their owners’ refusal to cooperate with the plans to adapt the boats to alternative uses compliant with the new fishing regulations. Francisco Arias, representative from the UN Food and Agriculture Organization applauded Venezuela’s efforts, noting that the ban on trawling falls under their ‘code of responsible fishing’, but that it may be one of the most difficult alternatives for governments to make. Arias suggested that the FAO might help study the impact of the new law, which he believed will be economically positive for the fishing industry. http://www.venezuelanalysis.com/news/4302

VIII. Venezuelan Mayor Replaces Coca-Cola Plant with Socialist Commune
Last week, the mayor of Caracas’ Libertador municipality, Jorge Rodriguez, signed an agreement with Coca-Cola to take over its land located in the lower-class suburb of Catia, and use it for public housing. After ten days of negotiations, Coca-Cola agreed to relocate a distribution center, which is next to the Fabricio Ojeda Endogenous Development Nucleus, one of many new “socialist” community development projects supported by the Venezuelan government. Coca-Cola will hand over the two and a half acre plot to the Libertador municipality, which will use it to construct 450 housing units. The project is part of the “Socialist Caracas” plan, which is being promoted by the local and national government. The plan is expected to benefit 40,000 local families, and includes the nucleus, various worker run collectives, a subsidized food market, Mercal, subsidized medicine pharmacy, sports courts, communal councils, land and water committees, cultural workshops and social missions. The Coca-Cola distribution centre has been running since 1992, and employs 300 workers. According to the agreement, it will have three months to find land of the same size in order to continue operating. The municipality will assist with the necessary procedures for buying that land and constructing the warehouses. http://www.venezuelanalysis.com/news/4310

IX. Prosecutor Requests Arrest Warrant for Opposition Mayor on Corruption Charges
Venezuelan prosecutor Katuiska Plaza has asked the Attorney General’s office to issue an arrest warrant for Manuel Rosales, on charges of illicit self-enrichment with public funds. Rosales was the opposition presidential candidate who ran against Chavez in 2006. He is also the former governor of Zulia state, and was recently elected mayor of Zulia state capital, Maracaibo. A special investigative commission led by National Assembly Legislator Mario Isea presented evidence to the Attorney General’s office last December that Rosales channeled public funds into private bank accounts, hoarded land in the name of front persons, and granted public contracts to fraudulent companies. Prosecutor Plaza announced quote, “In accordance with the evidence presented to the Attorney General’s office we are soliciting the arrest warrant, and now the Supreme Court will decide whether or not to approve the warrant.” Plaza said Rosales’s preliminary hearing is scheduled to take place by mid April, and that Rosales could face between three and ten years in prison if convicted of violating a pair of articles of the Anti-Corruption Law on 26 accounts. The investigation of Rosales is perhaps the highest profile anti-corruption case to date. Rosales participated in the two-day 2002 coup against President Hugo Chávez by signing the decree that dissolved the Constitution. In a press conference last week Rosales accused the Chávez administration of attempting to “crush political dissent” by arbitrarily targeting him for arrest. Rosales said quote, “This is not an act of the Attorney General, this is an order from Chávez. We all know that the separation of powers does not work in Venezuela.” Rosales also called Chávez a “coward” and said he and his lawyers plan to quote, “confront [Chávez] on all terrains.” The announcement of the arrest warrant has caused a backlash from opposition supporters in Zulia. As a result, Venezuelan Attorney General Luisa Ortega Díaz announced late last week that Rosales’s trial may by moved to a court outside of Zulia state. The political climate in the state also intensified recently after the National Assembly reformed the Law on Decentralization to allow the national government to take control of the ports, airports, and highways from state governments. In response, the Zulia state legislature declared itself in a state of emergency this week and vowed not to allow the national government to take over Maracaibo Port. While campaigning for local candidates last November, Chávez had warned of a festering secessionist movement led by opposition forces in Zulia, the state which produces more than a third of Venezuela’s daily oil exports. http://www.venezuelanalysis.com/news/4308