When hunger drew tens of thousands of Venezuelans to the streets last summer in protest, President Nicolas Maduro turned to the military to manage the country's diminished food supply, putting generals in charge of everything from butter to rice.
But instead of fighting hunger, the military is making money from it, an Associated Press investigation shows. That's what grocer Jose Campos found when he ran out of pantry staples this year. In the middle of the night, he would travel to an illegal market run by the military to buy corn flour — at 100 times the government-set price.
"The military would be watching over whole bags of money," Campos said. "They always had what I needed."
With much of the oil country on the verge of starvation and malnourished children dying in pediatric wards, food trafficking has become big business in Venezuela. And the military is at the heart of the graft, according to documents and interviews with more than 60 officials, company owners and workers, including five former generals.
As a result, food is not reaching those who most need it.
The U.S. government has taken notice. Prosecutors have opened investigations against senior Venezuelan officials for laundering riches from food contracts through the U.S. financial system, according to several people with direct knowledge of the probes. No charges have been brought.
"Lately, food is a better business than drugs," said retired Gen. Cliver Alcala, who helped oversee border security.
The late President Hugo Chavez created a Food Ministry in 2004. His socialist government nationalized and then neglected farms and factories, and domestic production dried up. When the price of oil collapsed in 2014, the government no longer could afford to import all the country needed.
Hungry Venezuelans began rioting, and so Maduro handed the generals complete power over food. The government now imports nearly all the country's food, and corruption drives prices sky-high, said Werner Gutierrez, agronomy professor at the University of Zulia.
"If Venezuela paid market prices, we'd be able to double our imports," Gutierrez said. "Instead, people are starving."
In large part due to concerns of graft, the three largest global food traders, all based in the U.S., have stopped selling directly to the Venezuelan government.
One South American businessman says he paid millions in kickbacks to Venezuelan officials as the hunger crisis worsened, including $8 million to people who work for the food minister, Gen. Rodolfo Marco Torres. The businessman insisted on speaking anonymously because he did not want to acknowledge participating in corruption.
He explained that vendors like him can afford to pay off officials because they build large profit margins into what they bill the state. A single $52 million contract of his to import yellow corn last year, seen by AP, included a potential overpayment of more than $20 million, compared with market prices at the time.
Marco Torres did not respond to requests for comment by phone, email and hand-delivered letter. In the past, he has said he will not be lured into fights with an unpatriotic opposition.
Some contracts go to companies that have no experience dealing in food or seem to exist only on paper. Financial documents obtained by AP show that Marco Torres did business with Panama-registered Atlas Systems International, which has all the hallmarks of a shell company. Another government food supplier, J.A. Comercio de Generos Alimenticios, lists on its website a nonexistent address in an industrial city near Sao Paulo, Brazil.
The two companies transferred more than $5.5 million in 2012 and 2013 to a Geneva account controlled by the brothers-in-law of the then-food minister, Gen. Carlos Osorio, according to bank and internal company documents seen by AP.
Osorio, recently appointed to oversee transparency in the military, did not respond to requests for comment, but in the past dismissed charges of corruption as personal attacks from the opposition.
The socialist administration says it takes graft seriously.
"The state has an obligation to root out corruption in all levels of public administration," the defense minister, Gen. Vladimir Padrino Lopez, said this fall.
And yet dirty dealing persists from the port to the markets, according to dozens of people working in Puerto Cabello, which handles the majority of imported food. Officials sometimes keep ships waiting at sea until they are paid off, according to a stevedore who spoke anonymously because he feared losing his job.
After the cargo is unloaded, customs officials take their cut, refusing to even start the process of nationalizing goods without a payment, four customs workers said, .
"It's an unbroken chain of bribery from when your ship comes in until the food is driven out in trucks," said Luis Pena, a director at the Caracas-based importer Premier Foods.
If importers try to get through the process without greasing the wheels, food sits and spoils, Pena said. Rotting food is a problem even as 90 percent of Venezuelans say they can't afford enough to eat. The demands for bribes delay shipments, and state officials sometimes neglect to distribute what they import.
Puerto Cabello crane operator Daniel Arteaga watched last winter as state workers buried hundreds of containers of spoiled chicken, meat and beans.
"All these refrigerated containers, and meanwhile people are waiting in food lines each week just to buy a single chicken," Arteaga said.
The corruption doesn't stop once cargo leaves the port, according to truck drivers. The military has set up checkpoints along highways to catch food traffickers, and truck drivers say they have to pay bribes at about half of them.
At the end of the food chain, some soldiers partake in selling food directly to citizens, according to business owners. Bakery owner Jose Ferreira cuts two checks for each purchase of sugar: one for the official price of 2 cents a pound and one for the kickback of 60 cents a pound. He keeps copies of both checks in his books, seen by the AP, in case he is ever audited.
"We have no other option," he said.
Thursday, December 29, 2016
Wednesday, December 28, 2016
When the Cold War ended 25 years ago, the Soviet Union vanished into the ash heap of history. That left the West’s “useful idiots” — Lenin’s term for the ideologues and toadies who could always be relied on to justify or praise whatever Moscow did — in search of other socialist thugs to fawn over. Many found a new heartthrob in Hugo Chavez, the anti-Yanqui rabble-rouser who was elected president of Venezuela in 1998 and in short order had transformed the country from a successful social democracy into a grim and corrupt autocracy.
An avowed Marxist and protégé of Fidel Castro, Chavez gradually seized control of every lever of state power in Venezuela. The constitution was rewritten to strip the legislature and judiciary of their independence, authorize censorship of the press, and allow Chavez to legislate by decree. Before long, the government acquired a stranglehold over the economy, including the huge and profitable energy sector. (Venezuela has the largest oil reserves in the world.)
With petrodollars pouring in, Chavez had free rein to put his statist prescriptions into effect. The so-called Bolivarian revolution over which he — and later his handpicked successor, Nicolas Maduro — presided, was an unfettered, real-world example of anticapitalist socialism in action. Venezuela since at least the 1970s had been Latin America’s most affluent nation. Now it was a showpiece for command-and-control economics: price and currency controls, wealth redistribution, ramped-up government spending, expropriation of land, and the nationalization of private banks, mines, and oil companies.
And the useful idiots ate it up.
In a Salon piece titled “Hugo Chavez’s economic miracle,” David Sirota declared that the Venezuelan ruler, with his “full-throated advocacy of socialism,” had “racked up an economic record that . . . American president[s] could only dream of achieving.” The Guardian offered “Three cheers for Chavez.” Moviemaker Oliver Stone filmed a documentary gushing over “the positive changes that have happened economically in all of South America” because of Venezuela’s socialist government. And when Chavez died in 2013, Jimmy Carter extolled the strongman for “improving the lives of millions of his fellow countrymen.”
In the real world, however, socialism has transformed Venezuela into a Third World dystopia.
Venezuela this Christmas is sunk in misery, as it was last Christmas, and the Christmas before that. Venezuelans, their economy wrecked by statism, face crippling shortages of everything from food and medicine to toilet paper and electricity. Violent crime is out of control. Shoppers are forced to stand in lines for hours outside drugstores and supermarkets — lines that routinely lead to empty shelves, or that break down in fistfights, muggings, and mob looting. Just last week the government deployed 3,000 troops to restore order after frantic rioters rampaged through shops and homes in the southeastern state of Bolivar.
In the beautiful country that used to boast the highest standard of living in Latin America, patients now die in hospitals for lack of basic health care staples: soap, gloves, oxygen, drugs. In some medical wards, there isn’t even water to wash the blood from operating tables.
Socialism invariably kills and impoverishes. Gushing oil revenues amid a global energy boom could temporarily disguise the corrosion caused by a government takeover of market functions. But only temporarily. The Chavez/Maduro “Bolivarian revolution” has been economic poison, just like every other Marxist “revolution” from Lenin’s Russia to Kim Il Sung’s North Korea to the Castros’ Cuba. By shredding property rights, dictating prices, and trying to control supply and demand, socialist regimes eventually make everything worse and virtually everyone poorer. Conversely, when governments protect free markets and allow buyers and sellers to interact freely, prosperity expands.
For three years in a row, Venezuela has ranked No. 1 on the Cato Institute’s “misery index,” which ranks each of the world’s countries according to a formula that adds its unemployment, interest, and inflation rates, then subtracts its annual change in gross domestic product per capita. With Venezuelan currency virtually worthless — hyperinflation this year is estimated at higher than 700 percent — residents have to resort to humiliating workarounds. Reuters reported this month that Venezuelan women have been flocking across the border into Colombia and selling their hair to earn some money with which to buy food, medicine, or diapers.
The government in Caracas, meanwhile, clings tightly to its socialist dogma, blaming the country’s woes on Colombia’s mafia or greedy businessmen. A fortnight ago, government agents raided a toy distributor, confiscating nearly 4 million toys on the grounds that the company was planning to sell them at inflated prices. The regime says it will make the toys available at below-market prices to the poor — thereby ensuring that in Venezuela next Christmas, toys won’t be available at any price. If nothing else, Venezuelan socialism has accomplished this much: It has transformed the Grinch from fiction into reality.
VENEZUELA, WHICH was once Latin America’s richest country, has become an unwilling test site for how much economic and social stress a modern nation can tolerate before it descends into pure anarchy. This month its 31 million people lurched a big step closer to that breaking point, thanks to another senseless decree by its autocratic populist government.
For years Venezuelans have struggled with mounting shortages of food, medicine and other consumer goods, as well as triple-digit inflation that has rendered the national currency, the bolivar, worthless. By this month the 100-bolivar bill, the largest note in circulation, was worth only 2 cents, forcing people to carry piles of them in order to make the most rudimentary purchases. Then came this coup: On Dec. 11, President Nicolás Maduro, an economically illiterate former bus driver, announced that all 6 billion 100-bolivar notes would cease to be legal tender in just 72 hours. He also closed Venezuela’s borders with Colombia and Brazil, on the theory that traders were hoarding currency in those countries.
Almost overnight, millions of Venezuelans — about 40 percent of whom do not have bank accounts in which the currency could be deposited — lost the ability to purchase even those goods still available on the market. The result was predictable: looting and riots in at least eight cities. In the eastern town of Ciudad Bolivar, with a population of some 400,000, hundreds of stores were looted and at least three people were killed in three days of mayhem.
Mr. Maduro was forced to modify his fiat, extending the currency’s validity to Jan. 2 and reopening the borders. The government says it will distribute new bills in larger denominations. Meanwhile, the president is doing his best to blame the United States for the fiasco, claiming that it had somehow been orchestrated by President Obama .
Venezuelans no longer believe such nonsense. A survey released this month by pollster Alfredo Keller showed that only 1 percent said the United States was to blame for the country’s crisis, while 76 percent blamed Mr. Maduro and the regime founded by Hugo Chávez. Three-quarters said they believed children were dying because of a lack of food and medicine, and 98 percent said they had been unable to find essential products. Only 19 percent said they still supported the regime.
That the Maduro government somehow staggers on is due to its refusal to allow a constitutionally permitted presidential recall referendum ; a divided opposition; a military deeply compromised by corruption, including drug trafficking; and the diversion of international pressure — including from the United States — into feckless and futile attempts to promote negotiations between the government and the opposition. Instead of an election-driven political transition or a people-powered revolution, Venezuela is undergoing a comprehensive breakdown of order unlike anything Latin America has seen in decades. That its hemispheric neighbors witness this implosion without using the means they have to bring meaningful pressure to bear on the government renders the failure all the more profound.
Thursday, December 22, 2016
from the Latin American Herald Tribune
CARACAS - A Delaware Uniform Commercial Code (UCC) filing against Citgo parent PDV Holding, Inc. on November 30 reveals that Venezuela has secretly mortgaged their Citgo refineries in the United States to Russia's Rosneft in exchange for cash.
Redd Intelligence uncovered the UCC filing and broke the news.
CITGO - A Strategic Asset?
PDV Holding Inc., owned by Venezuela state oil company Petroleos de Venezuela, S.A. (PDVSA), owns Citgo Holding Inc., which in turn, owns Citgo Petroleum Corporation, which has 3 refineries and pipelines throughout the United States.
The lien means that should Citgo or PDVSA default, Russia's state controlled oil company Rosneft could end up owning strategically important oil refineries in the United States.
Citgo owns oil and gas pipelines throughout the country as well as oil refineries in Corpus Christi, Texas; Lake Charles, Louisiana; and Lemont, Illinois (outside of Chicago). Citgo's refineries can refine 749,000 barrels per day and the Lake Charles refinery is the sixth-largest refining facility in the U.S.
The UCC filing is used to protect creditors. According to the copy obtained by the Latin American Herald Tribune, the UCC "Financing Statement" was filed by "secured creditor" "Rosneft Trading S.A., Place du Lac, 2, Geneva, ZZ 1204" on November 30.
Steven Bodzin, one of the leading investigative reporters on Latin America who uncovered the filing and broke the story for REDD Intelligence, reported that cash-strapped PDVSA mortgaged 49.9% of Citgo to Rosneft for a $1.5 billion loan.
CITGO MORTGAGES 50.1%
In October, in addition to a 20% bonus, PDVSA used 50.1% of Citgo Holding Inc. as collateral to induce $2.8 billion of holders of debt maturing within the year to extend into a new 4 year bond. Should PDVSA default, the holders of the new $3.4 billion PDVSA 8.5% of 2020 would be able to take 50.1% of Citgo Holding Inc.
On October 30, Venezuela's reserves went up $891 million, according to the Venezuela Central Bank, and analysts were unable to account for it. PDVSA was late paying the almost $3 billion in bond debt that it owed in November, with the last $146 million that was due on November 17 being paid 2 weeks late on November 30 and December 1.
Eulogio del Pino, PDVSA head along with Venezuelan Foreign Minister Delcy Rodríguez met on November 20 with the head of Russia’s Rosneft Igor Sechin to "strengthen the cooperation agenda between the two oil companies."
“We continue consolidating strategic alliances between Pdvsa and Rosneft. Important meetings will be held in the next hours,” Del Pino posted on his Twitter account.
Del Pino also met with Rosneft Vice-President Eric Maurice Liron to track joint projects, according to Venezuela's state-run news agency AVN.
Rosneft is a minority shareholder in five joint crude oil-producing companies: Petro Miranda, Petro Victoria, Petro Perijá, Petro Monagas and Boquerón.
RUSSIA'S EXPANDING ENERGY FOOTHOLD
In 2010, Venezuela President Hugo Chavez sold PDVSA's stakes in 4 Ruhr oil refineries in Germany to Rosneft for $1.6 billion, giving Rosneft a key foothold in the European market.
Founded in 1992, Rosenft became the world's biggest oil and gas producer by volume (5.2 million barrels per day) through acquiring others. In 2004, Rosneft took over competitor Yukos after Vladimir Putin jailed Yukos head Mikhail Khodorkovsky, and in 2013 Rosneft took over TNK. BP owns almost 20%.
The Russian government owns 69.5% of Rosneft, and Rosneft head Igor Sechin is a long-time ally of Russian President Vladimir Putin.
In October, Rosneft acquired Indian refiner Essar Oil in a $13 billion deal. The transaction included India's second-largest refinery at Vadinar (400,000 bpd), as well as port terminals, power plants and pumps.
Rosneft also recently took a stake in an Egyptian gas field worth as much as $2.8 billion.
CITGO SUED FOR FRAUDULENT TRANSFER
Citgo is already being sued in Delaware in separate suits by both ConocoPhillips and Crystallex under Delaware's Uniform Fraudulent Transfer Act, alleging that Citgo, PDVSA and Venezuela "fraudulently transferred" $2.8 billion in wealth out of the country to avoid billions of dollars of claims by creditors.
Saturday, December 17, 2016
Saturday, December 10, 2016
Venezuelan authorities have arrested two toy company executives and seized almost four million toys, which they say they will distribute to the poor.
Officials accused the company of hoarding toys and hiking prices in the run-up to Christmas.
Last week, the government issued an order to retailers to reduce prices on a range of goods by 30%.
Business owners say the order is a populist political move, and pushing them towards bankruptcy.
Venezuela's consumer protection agency, Sundde, said toy distributor Kreisel had stockpiled the goods and was reselling them at a margin of up to 50,000%.
"Our children are sacred, we will not let them rob you of Christmas," it said in a tweet, along with photos and video of thousands of boxes of toys.
In total, 3,821,926 toys were seized from two warehouses, and would be sold at low prices, it said.
William Contreras, head of Sundde, said Kreisel had claimed the toys were old or discontinued. The agency also posted photos of the two executives being marched from the premises by a squad of heavily armed soldiers.
This is not the first time Venezuela has ordered price cuts on retailers, or mobilised armed units to enforce it.
In late 2013, the country introduced laws allowing the government to fix prices and dictate profit margins.
The same legislation limited profits to 30% - the amount often discounted in the compulsory "adjustments" enforced by Sundde at hundreds of retailers in the past week.
The same measures have been used to fix the prices of basic products such as flour, meat and bread - but supply is limited in a country where many people go hungry.
A jar of Nutella - a luxury item - can cost half the monthly minimum wage.
The Venezuelan government is becoming increasingly unpopular as the country's economic crisis grows.
The nation is rich in oil, but international oil prices have fallen in recent years.
The International Monetary Fund estimates that inflation - the rate at which prices go up - will hit 2,000% next year.
Venezuela is ready to issue new, higher-value notes to deal with the problem - but rising prices are still squeezing many ordinary citizens.