A Tolerance Worn Thin: Corruption in the Age of Austerity

September 25, 2007

The impeachment of Venezuelan President Carlos Andr6s P6rez has made it clear that free-market neoliberalism has not served as a corrective to corruption. If anything, it has opened new avenues for unscrupulous and illicit behavior. When Carlos Andr6s Perez, Venezuela's president from 1974 to 1979, was elected to a second term in office in 1988, he was an unlikely candidate to lead a national campaign against corruption. Less than 10 years earlier, he had been censured by Congress for negligence in financial dealings and was spared condemnation on moral grounds by just one congres- sional vote. Nevertheless, when he took office in 1989, P6rez pledged to eliminate graft, and insisted that the 2 neoliberal model he embraced was a corrective to corruption in high places. By extricating the state from the eco- nomic life of the nation, he argued, the o new laissez-faire approach would Impeached Preside eliminate opportunities to steal from happier days: camF the public coffers. 1988. But as P6rez' second term--without P6rez-grinds to an unhappy close, it is obvious that neoliberalism has not served as the corrective it was touted to be. If anything, the sale of public enterprises and the dis- mantling of federal regulations-both hallmarks of neoliberalism-have opened new avenues for unscrupulous and illicit behavior. Venezuelans are now questioning the undervaluation of assets in recent privatization sales: 40% of the state-owned telephone company CANTV to the U.S. telecommunications giant GTE, the national airline VIASA to the Spanish Iberia, and several large hotels to a wide variety of international private interests. 1 And after P6rez' indictment and suspension from office this year for the Steve Ellner is the author of Organized Labor in Venezuela, 1958-1991: Behavior and Concerns in a Democratic Setting (Scholarly Resources, 1993) and the co-editor of The Latin American Left: From the Fall of Allende to Perestroika (Westview, 1993). misappropriation of public funds, fol- lowing two attempted military coups staged by "anti-corruption" officers last year, the issue of corruption is aboil like never before on the front burner of Venezuelan politics. Perez was indicted by the Supreme Court on May 20. The following day, the Senate decided unanimously to lift his presidential immunity, thus automat- ically suspending him from office. On August 31, after the probe into P6rez' misdeeds had yielded increasingly incriminating evidence, Congress voted to remove him permanently. P6rez is accused of misappropriating 250 million bolivares (the national currency) from a nt Pdrez in secret fund earmarked for national secu- paigning in rity. Back in the 1960s, the fund for secret operations had helped finance a special police apparatus to combat Venezuela's guer- rilla insurgency. Even though the armed struggle sub- sided by the late 1960s and the country achieved politi- cal stability for the next two decades, large sums of money continued to be assigned to the secret fund of various ministries. P6rez allegedly transferred the 250 million bolivares from the Ministry of the Interior to the Secretariat of the Presidency, which is not autho- rized by law to handle such funds. Shortly thereafter, the bolivares were illegally converted into 17.2 million dollars at a special exchange rate. Both Perez' minis- ter of the interior, Alejandro Izaguirre, and his secre- tary of the presidency, Reinaldo Figueredo, are stand- ing trial as well. Investigative journalists have played an important role in the campaign against corruption in recent years. What has brought the issue to such prominence, however, has been the continuous expression of public discontent in local elections, demonstrations, sponta- VOL XXVII, No 3 Nov/DEc 1993 13 VOL XXVII, NO 3 Nov/DEC 1993 13REPORT ON CORRUPTION neous unruly protests, and even quiet support for the two abortive coups, whose banner was opposition to corruption in the government and the armed forces. It was public discontent that forced the reshaping of the Supreme Court last year, an outcome that had a direct effect on P6rez' fate. The Court found itself greatly discredited because of its refusal to act on charges of corruption against former president Jaime Lusinchi (1984-1989) and others. Six of the Supreme Court's 15 justices stepped down in the face of a national campaign calling for the resignation of the entire Court. Under considerable pressure during the process of selecting their replacements, Congress dis- carded the traditional practice of choosing judges closely identified with Venezuela's two largest parties, Acci6n Democritica (AD) and the social Christian Copei, on the basis of informal agree- ments. Congress committed itself to selecting independents, and even accepted nominations from lawyers' associations and law schools throughout the country. "Although most of the judges we chose," says Copei's national con- gressman Luis Guevara Le6n, "were really not 'independent'-that is difficult to be here in Venezuela-they were for the first time rela- tively independent of their respective parties." 2 Five of these six new judges voted in favor of P6rez' indictment. In August, all six voted to press charges against Lusinchi, after the court had sat on the request for his indictment for two years. The same zeal to clean up govern- Anti-P ment led the Attorney General in July to pro- succes pose a plan which places the secret fund for national security under greater scrutiny, independent of the executive branch. Investigations into corruption have provoked a dead- ly backlash. In mid-July, the two Supreme Court judges most identified as favoring P6rez' indictment received envelopes containing explosives, while anoth- er explosive device went off in the Supreme Court building, permanently injuring a court employee. Sub- sequently, bombs have exploded in strategic areas of Caracas, including the national headquarters of the main business organization, Fedecimaras. The two principal suspects in the court bombings, a functionary and ex-functionary of the Direcci6n de Servicios de Inteligencia y Prevenci6n del Estado (DISIP), the Inte- rior Ministry's secret police force, were apprehended in August. Both claimed they received orders from Henry L6pez Sisco, the former head of the DISIP who is closely linked to former president Jaime Lusinchi. At the time, the Supreme Court was handling not only the case against Perez but also similar charges against his predecessor, Lusinchi, for the illegal use of money assigned to the same secret funds. he two journalists who blew the whistle on P6rez have put forward two distinct interpreta- tions of his persistent misappropriation of pub- lic funds. One alleges that P6rez was simply in it for the money, amassing a personal fortune from all his illicit dealings. The other views him as a political megalomaniac, who illegally used public money to extend his influence throughout the continent and harass his enemies at home. The first interpretation is put forward by a former P6rez supporter, Andr6s Galdo, a columnist for one of Venezuela's leading dailies, El Nacional. Galdo claims that the $17.2 million is just a drop in the buck- et for P6rez who is one of the richest men in Latin America. According to Galdo, P6rez operates in the erez graffitti in the city of Mbrida: "when strength is unified, s belongs to all." style of Ferdinand Marcos-siphoning off dollars in the name of intermediaries, and investing in or buying up enterprises abroad without ever appearing as an investor or owner. 3 As time goes on, Galdo's version of Pdrez' venal motivations has gained credibility. In mid-July, Sena- tor Crist6bal Fernandez Dal6 of the left-wing party Movimiento al Socialismo (MAS) handed over to the Attorney General's Office photocopies of bank trans- actions in accounts opened by P6rez and his long-time mistress Cecilia Matos in New York, Paris, Geneva, Buenos Aires, the Philippines and Hong Kong. The photocopies show transfers of hundreds of thousands of dollars among the various accounts, as well as checks and deposits in the name of other Venezuelans also accused of corrupt dealings. The disclosure puts the lie to the president's flat denial that he has bank accounts abroad, and Matos' statement that her only source of income has been the series of modest-paying jobs she has held over the years. Fernandez Dal6 has petitioned the Supreme Court to admit his documents as part of the case against P6rez, especially since they 14NACL& REPORT ON THE AMERICAS NACIA REPORT ON THE AMERICAS 14REPORT ON CORRUPTION show that Cecilia Matos made several deposits of $100,000 shortly after the purported misappropriation of the $17.2 million. The frequency with which Perez' money criss- crossed the world leaves the impression that a main bank account exists which feeds these smaller ones. Fernmndez Dal6 thinks the funds he has uncovered so far represent mere pocket money. "Following the leads of the data I have presented," says Dal6, "will allow us to arrive at the fortune accumulated in the Swiss accounts of P6rez and Mrs. Matos." 4 A different explanation of Perez' motivation comes from the second major journalist in the corruption scandal, the three-time socialist presidential candidate Jos6 Vicente Rangel. The Supreme Court called P rez has always used public money to enhance his influence, which he in turn converts into personal gain. Rangel as its first witness in the suspended presi- dent's trial. His testimo- ny was confirmed and amplified by Freddy Bernal, head of the Spe- cial Tactical Support Command (CETA), the now defunct special police squad which par- ticipated in the second attempted coup last year. Bernal's declaration was subsequently admitted as court evidence. Accord- ing to Rangel and Bernal, some of the $17.2 million helped pay off debts incurred in P6rez' 1988 campaign. The lion's share, however, went to the president's political allies in Central America and the Caribbean, bankrolling such (sometimes laudable) activities as the travels of deposed Haitian president Jean-Bertrand Aristide and the security protection of Nicaraguan president Viole- ta Chamorro. More disturbing is Rangel's allegation that some of the money financed a campaign against P6rez' Venezuelan adversaries. Rangel claims Salvadoran mercenaries were hired whose hit list included Galdo, Rangel himself, and Attorney General Ram6n Esco- bar Salom, who had recommended proceedings against P6rez. Military officers are especially sensi- tive about the mercenary issue. In the November 1992 coup attempt, rebels targeted the purported locations of Cuban mercenaries in the service of Venezuelan security forces. Rangel has received veiled threats in the past from shady political and military figures closely linked to P6rez. He fears that the "dirty war"-ranging from slander to physical aggression-will continue, a process which he termed "Perecismo without P6rez." 5 Actually, Galdo's explanation regarding P6rez' super-rich status and Rangel's regarding the presi- dent's political schemes are not at odds. Freddy Mufioz, secretary general of MAS, points out the rela- tionship between P6rez the millionaire and P6rez the politician: P6rez has always used Venezuelan money to enhance his international influence which he in turn converts into personal gain. During his first term, he aided Felipe Gonzdlez in his bid...for the presidency. Subsequently in Spain, the state-controlled Galerfas Preciados was sold to [the Venezuelan economic group] Cisneros at a price lower than that offered by a Colombian magnate....This deal became a national scandal in Spain. 6 s in the case of Watergate, the origin of the information used by Rangel, Galdo, Fernmindez Dal6 and others who have denounced corrup- tion has been the subject of considerable speculation. One theory, put forward by the magazine Zeta, is that rival factions of the governing AD party, headed by P6rez and Lusinchi, provided much of the evidence. According to this version, confidants of P6rez leaked clues in the case of Lusinchi in 1989 in an attempt to discredit the former president by attributing the nation's economic woes to his irresponsible fiscal policies. The P6rez camp argued that massive govern- ment intervention, in the form of business subsidies and support, lent itself to the rampant corruption of the Lusinchi years. They used this argument to justify the shift to the neoliberal model, which became the official creed in 1989. Lusinchi, according to Zeta's thesis, avenged himself by playing the role of Deep Throat in the case of the $17.2 million. 7 Indeed, one of Venezuela's principal muckrakers, MAS national deputy Orlando Fernandez, stated that much of his information in the corruption case origi- nated from "one or another Lusinchista annoyed at Carlos Andr6s P6rez." 8 Nevertheless, Zeta's theory, while correct in stressing the intense internal rivalry in AD, may overestimate the role of Lusinchismo and Perecismo as a source of information. "Both P6rez and Lusinchi want people to believe that they are vic- tims of personal animosities and rivalries, thus taking the focus off what they really did," says Tarek Williams Saab, a leading member of Venezuela's Foundation for Human Rights. "To blame P6rez' predicament on Lusinchi, or ascribe it to envy, as P6rez is prone to do, is simply absurd." 9 Another likely source of information is the murky world of competing interest groups. Josd Vicente Rangel, in his TV program "Jos6 Vicente Hoy," asked Fernmndez Dal6 if his informants may be linked to Vol XXVII, No 3 NOVIDEc 199315 VOL XXVII, No 3 Nov/DEC 1993 15REPORT ON CORRUPTION firms interested in undermining business rivals which received government contracts of dubious legality. Fernindez Dal6, apparently uncomfortable with the question, admitted to the possibility. Ironically, sever- al years ago, President Lusinchi used the same argu- ment to dismiss Rangel's exposure of overpriced mili- tary contracts. Some discount the significance of whether or not informants have vested interests in the information they provide. "We need not examine the motivation of those who provide anonymous information," says MAS' Mufioz. "After all, police detectives work with data supplied by criminal elements all the time in their investigations, and this is valid. What is important is the reliability of the information, not the motives of those who supply it."10 Mufioz' position, however, is not shared by others who fear that reliance on such sources of information may involve ill-conceived deals, such as the conceal- ment of the illegal activity of a competing group. The issue was heatedly debated within MAS as a result of the disclosure that party member Carlos Tablante, presently the governor of the northern state of Aragua, had worked hand in glove with the Interior Ministry's police force, DISIP, during his investigation of cor- ruption under the Lusinchi Administration in the 1980s. Tablante, who was then vice-president of the Chamber of Deputies, received material favors from the DISIP in the form of paid personnel. MAS' ethics commission voted to censure Tablante, although the resolution did not impede his nomination as the party's gubernatorial candidate and his electoral tri- umph in December, 1992. P6rez claims that he is being tried for his political behavior and not for any wrongdoing. There is an element of truth in his argument. In fact, the notion of a personalist campaign designed to malign P6rez predates the case of the $17.2 million. P6rez' development minister Mois6s Naim described the popular clamor for Perez' resignation, set in motion by the February coup attempt, as a "lynching mood." The president, said Naim, was being scapegoated for the nation's pressing economic problems." This idea was taken up by AD leaders, who called P6rez' sus- pension a "political lynching." One of the nine Supreme Court judges who voted to indict the president said in a confidential interview that he and his eight colleagues were responding not only to legal arguments against P6rez but also to the general chorus-70% of the population, according to surveys-favoring the president's exit from power. "The anti-P6rez sentiment," he said, "goes beyond the issue of corruption; it is a repudiation of P6rez the politician."12 The statements of diverse sectors of the Venezuelan public at the time of the Supreme Court's decision strengthen the view that the judges were swayed by political considerations. Ex-President Rafael Caldera, for instance, one of the key voices calling for P6rez' ouster after the first abortive coup, congratulated the Supreme Court for grasping the prevailing popular mood. The Left (which had been calling for a referen- dum on Perez' presidency ever since that coup attempt), various leaders of Copei, and even represen- tatives of the Catholic Church and the business com- munity hailed the Court's indictment of P6rez. They all agreed that P6rez' suspension would put an end to the short-term political crisis-in which the corrup- tion debacle was just one component-and would thus make it easier to restore domestic stability. The clamor against P6rez following the first coup attempt showed how much Venezuela has changed over recent years. 1 3 The economic crisis of the 1980s had taken its toll on Venezuela as it had on the rest of Latin America, but the contrast with the oil-boom period of the 1970s meant that the shock was all the greater. P6rez' 1988 campaign was up-beat as he promised to reimplement the interventionist policies of his first administration which he claimed had made the prosperity of those years possible. Upon assuming office, P6rez surprised Venezuelans by announcing IMF-style austerity measures, which he baptized "el gran viraje" (the great turnabout). Obviously, P6rez felt his personal charisma could pull the wool over the eyes of the entire nation. But P6rez' image and style, which had worked like a charm in the 1970s, now seemed to be out of tune with the times. His militant position as a Third World spokesman, which involved constant travel abroad, was a source of pride for many Venezuelans in the 1970s. The same role, however, even in a toned-down form, appeared bombastic and a waste of time in the context of the 1990s, when Third Worldism had lost much of its luster, and internal economic problems absorbed the nation's attention. The major scandal of P6rez' first administration-a case of venal private interests feeding at the public trough--involved the government's overpriced pur- chase of a refrigerated container ship, the Sierra Nevada. In the face of accusations which nearly led to judicial proceedings against him, P6rez never lost his composure. Flushed by the prospect of continuous economic expansion, many Venezuelans were willing to condone his unethical behavior. Some may have even admired his audacity and "machismo." But 14 years and an economic collapse later, such behavior is no longer acceptable. 1 4 With the greed of a few politi- cians magnifying the economic woes of the nation, the people's tolerance has finally reached a limit. A Tolerance Worn Thin: Corruption in the Age of Austerity 1. Diccionario de la Corrupci6n, Vol. 3, 1984-1992 (Caracas: Consorcio de Capriles, 1993). 2. Luis Guevara Le6n, personal interview, June 12, 1993, Barcelona. 3. El Nacional, May 24, 1993, p. D-3; May 26, 1993, p. D-3. 4. Cecilia Matos, following the initial investigations into her financial operations, ordered the Republic National Bank of New York to transfer her deposits to a new account whose checks would not have her name and address printed on them. El Nacional, June 30, 1993, p. D-1; Diario de Caracas, July 13, 1993, pp. 26-27. 5. El Nacional, June 8, 1993, p. D-2. 6. Freddy Muhoz, personal interview, July 15, 1993, Barcelona. 7. Alexis Rosas, "Las vueltas de un mundo de 250 millones," Zeta, No. 947, p. 22. 8. Nelson Chitty La Roche (president of the congressional commis- sion that investigated the P6rez case), 250 millones: La historia secreta (Caracas: Editorial Pomaire, 1993), p. 67. 9. Tarek Williams Saab, personal interview, July 2, 1993, Caracas. 10. Freddy Muhoz, personal interview, July 15, 1993, Barcelona. 11. Mois6s Naim, "The Political Management of Radical Economic Change," in Joseph S. Tulchin, ed., Venezuela in the Wake of Radical Reform (Boulder, CO: Woodrow Wilson Center and Lynne Rienner Publishers, 1993). This book, which is a strong defense of Perez' neoliberal policies, consists of edited tran- scripts of presentations at a Wilson Center conference. 12. Confidential interview, Urbaneja, Anzo6tegui, June 11, 1993. 13. In Organized Labor in Venezuela, 1958-1991: Behavior and Con- cerns in a Democratic Setting (Wilmington, DE: Scholarly Resources Inc., 1993), I argue that Venezuela's relative social stability until the mid-1980s was due to transitory factors, including the unpopularity of the guerrilla struggle of the 1960s, the oil boom of the 1970s, and the false expectation that the economic crisis of the 1980s would be short-lived. When these short-term developments ran their course, the disillusionment and sense of frustration among Venezuelans were particularly felt. For an additional account of the late 1980s, see Daniel C. Hellinger, Venezuela: Tarnished Democracy (Boulder CO: West- view Press, 1991), pp. 155-198. 14. Growing concern over the issue of corruption is reflected in a number of well-documented books on the topic. Among the most valuable are: Jose Guillermo Andueza, Jos6 Ignacio Arrieta, Tello Benitez, et al, La Corrupcibn en Venezuela (Valencia: Vadell Hermanos Editores, 1985); Hector Malav6 Mata, Los extravios de poder (Caracas: Universidad Central de Venezuela, 1987); Jos6 Agustin CatalI, ed., Blanca lbalhez y las miserias del poder (Caracas: Ediciones Centauro, 1991); Angel Rodriguez-Vald6s, La otra muerte de CAP (Caracas: Alfadil Ediciones, 1993).

Tags: neoliberalism, corruption, Venezuela, Carlos Andres Perez


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