Monday, February 22, 2010

Venezuela - Chavez Deals With His Thieving Friends -at least some of them

Total hilarity in Venezuela as Chavez finally deals with some of the unrestricted corruption and massive theft that have occured under his rule, as pointed out by the New York Times Simon Romero, Purging Loyalists.


The rise of a shadowy group of pro-government tycoons had for years been an embarrassment to Mr. Chávez as he was promoting anti-capitalist values. Included in the Bolibourgeoisie (another name for the so-called Bolivarian moneyed class) were men like Arné Chacón, a former navy lieutenant who took part in Mr. Chávez’s failed 1992 coup attempt.

In newspaper photographs back then, Mr. Chacón, like Mr. Chávez, looked like a skinny idealist. But Mr. Chacón amassed a banking fortune, appearing in newspaper photographs here with more girth and a selection of the more than 40 purebred racehorses he owned.

Now Arné Chacón is just another jailed magnate, joining Mr. Fernández and eight other imprisoned bankers and state regulators as investigations into their activities slowly advance. Mr. Chávez himself announced that officials had seized Mr. Chacón’s properties, including his prized horses. The justification for the imprisonment of Mr. Chacón and other tycoons involved accusations of irregularities in bank acquisitions.

Petro-Kleptocracy - No Transparency

This lack of transparency and increase of corruption has all happened under Chavista rule - or misrule. The Lieutenant-Colonel has total control of the State, and has done away with separation of powers between institutions. the fact that the Legislature and Courts are controlled by one party means little or no checks and balances, and political oversight of what is being done by the executive and state administration. Two-party rule before 1999 at least restrained some of the most blatant corruption, which in Venezuela was pretty bad to begin with. Weakening of independent or autonomous entities (i.e. like a Central Bank or regulatory agencies) within the state means there is little oversight or control.

Chavez has presided over a huge expansion of the state, increasing the payroll and creating many new state enterprises. In many cases paralell institutions and power centers have emerged. Government functions which had been decentralized in the 90's have been brought back under central control. Civilian and military loyalists have been placed at all levels of state administration. Chavez' ideological obsession has also meant that many politicized appointments lack administrative skills necessary, and a de-emphasis on fiscal discipline and competence. Those are considered "capitalistic" or "neo-liberal" criteria. End result, a large cronyistic administration which is poorly run, and wasteful.

Boliburgesia - And Rentism

Add to the incompetence, cronysim and lack of transparency, a parasitic private sector, entwined with the corrupt Chavista ruling class. To some point Chavez tolerates private enterprise, and Venezuelas traditional elite tolerates the government because they can make fortunes by importing all sorts of goods, by speculating on government bonds, or by helping the Boliburgesia export its misgotten gains abroad. Chavez' ideology and poor policies have only driven this parasitism by discouraging private initiative in areas that actually add value to an economy like manufacturing or food production. But act as contractors for the State, set up banks, or import goodies, that any revolutionary businessman can do!

This kind of "friendly" business- has a long history in Venezuela - Venezuelas wealthiest families clustered around Venevision and Grupo Polar emerged out of "friendly" arrangements with the COPEI and AD parties. Chavismo has arguably taken it to a new level. That is because of the oil bonanza that has brought something like 600 billion dollars in revenue, a bonanza unseen in Venezuelas history. You have a perfect storm of opportunity for graft and private gain for some friends of the regime. A mix of statist incompetence and crony capitalism, in a resources boom.

One such friend - the newly imprisoned Ricardo Fernandez Barrueco

Mr. Fernández rose from obscurity to put together a web of 270 companies in industries as diverse as tuna-fishing and banking, amassing a fortune of about $1.6 billion by 2005, according to study by the Caracas affiliate of the KPMG accounting firm. He thrived in rural Venezuela, where Mr. Chávez’s dominance goes largely unchallenged, acquiring an interest in a pro-government newspaper in Barinas, a state that is a Chávez family bastion.

1.6 billion, that is insane!!!!

And not uncommon.
Lets look at one area that has come under scrutiny. The energy crisis in the country is at least partially attributed to lack of investment in upkeep and expansion of the country's hydroelectrical system.. But apparently over 700 million dollars -over the ordinary budget - were allocated by the legislature between 00 and 09. Turns out, less than 200 were spent, and no one knows where the difference went. With this kind of loose control, lack of transparency, and huge budgets it is no surprise there are obscure characters with billion dollar fortunes.

This kind of wild corruption and extravagance seems out of the reign of early 20th century tyrant Juan Vicente Gómez who created an almost perfect example of a rentitst economy. The two-party "pacted democracy" merely continued this type of corruption, and Chavez ironically, was elected in part because he promised to end it. So much for that.

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