november 27, 2006 ● no. 2

Corruption, Mismanagement, and Abuse of Power in Hugo Chávez’s by Gustavo Coronel

Executive Summary

orruption has existed in Venezuela since at least financial institutions, whose operations are also opaque, C 1821, when it gained independence. In the 19th and that spend funds at the discretion of the executive. 20th centuries, the level of fluctuated, Corruption now permeates all levels of Venezuelan society. depending on the government in power. During the govern- Bureaucrats now rarely follow existing bidding regulations, and ment of President Hugo Chávez, however, corruption has ordinary citizens must pay bribes to accomplish bureaucratic exploded to unprecedented levels. Billions of dollars are being transactions and have to suffer rampant neglect of basic gov- stolen or are otherwise unaccounted for, squandering ernment services. All this has been encouraged by a general envi- Venezuelan resources and enriching high-level officials and ronment of impunity: officers implicated in major corruption their cronies. scandals have sometimes been removed from their posts, but The windfall of oil revenues has encouraged the rise in they have not otherwise been held legally accountable. corruption. In the approximately eight years Chávez has The dramatic rise in corruption under Chávez is ironic been in power, his government has received between $175 since he came to power largely on an anti-corruption cam- billion and $225 billion from oil and new debt. Along with paign platform. To truly fight corruption, the government the increase in revenues has come a simultaneous reduc- needs to increase the transparency of its institutions and tion in transparency. For example, the state-owned oil com- reduce its extensive involvement in the economy, something pany ceased publishing its consolidated annual financial that has placed Venezuela among the least economically free statements in 2003, and Chávez has created new state-run countries in the world. Gustavo Coronel was a member of the Board of Directors of Petróleos de Venezuela (1976–79) and, as president of Agrupación Pro Calidad de Vida, was the Venezuelan representative to Transparency International (1996–2000).

the 1000 Massachusetts Avenue, N.W., Washington D.C. 20001-5403 www.cato.org Phone (202) 842-0200 Fax (202) 842-3490 The history of Background dencies of Rómulo Betancourt and the Venezuela during famous novelist Rómulo Gallegos. In 1948 In 1813 Simón Bolivar, while fully the young military officers who had support- the last 180 years engaged in the war of independence against ed Acción Democrática three years earlier has been charac- Spain, issued a decree stipulating the death overthrew Gallegos. The leader of the coup, terized by the penalty for corruption in the first Venezuelan Marcos Pérez Jiménez, established a military republic. He issued a second decree in 1824 dictatorship that lasted 10 years. Corruption persistent and and still a third one in 1826, defining cor- during the following decade was high but intense presence ruption as “the violation of the public inter- mostly limited, as in the years of Gómez, to est,” establishing the death penalty for “all the immediate circle of the dictator, and it of corruption. public officers guilty of stealing ten pesos or was essentially related to commissions more.” The second article of the 1824 decree obtained through contracting of public read: “Those judges who disobey the disposi- works. Venezuelan infrastructure received a tions of this decree will be condemned to the vigorous boost with the construction of same [death] penalty.”1 Yet the history of roads, hospitals, universities, and public Venezuela during the last 180 years has been buildings. characterized by the persistent and intense The increasing discontent of army officers presence of corruption in public administra- who were excluded from access to tion. In 1875 the Venezuelan Ministry of Venezuelan public funds promoted a popu- Finance under the regime of dictator lar revolt in 1958 that successfully expelled Antonio Guzmán Blanco would confess: Pérez Jiménez from power. After that, “Venezuela does not know how much or to Venezuela would not witness another mili- whom it owes money. Our books are 20 years tary coup or coup attempt until 1992, when behind. . . . ” One hundred years later the Hugo Chávez tried unsuccessfully to over- Venezuelan general comptroller during the throw the elected president Carlos Andrés presidency of Luis Herrera would describe Pérez. From 1958 to 1999 Venezuela changed Venezuelan public administration in almost democratically elected presidents 10 times. identical terms, as “a system totally out of During the first half of that period, from control.”2 1958 to about 1975, the country experienced The dictatorship of Juan Vicente Gómez, a succession of democratic governments from 1909 to 1935, was a period in which the together with a satisfactory level of trans- exercise of corruption was limited to the dic- parency in the management of national tator’s immediate collaborators and his assets. Presidents Rómulo Betancourt, Raúl extended family, since Gómez did not need Leoni, Rafael Caldera, and, for about half of elections to stay in power, running Venezuela his first term, Carlos Andrés Pérez, can be as his personal hacienda. The 10 years that credited with the consolidation of followed Gómez’s death constituted the first Venezuelan democracy and the promotion of decade of real democracy and transparency in a society characterized by a strong emerging the Venezuelan public sector, thanks to his middle class. During those years Venezuelan successors, army generals E. López Contreras democracy became the political model to be and I. Medina Angarita, who were deeply imitated in and was compared democratic leaders in spite of their military favorably by political analysts with the dicta- training in Gómez’s army. torships of the left and the right still present Gen. Medina Angarita was deposed in in the hemisphere. 1945 by a coup led by the Acción In the mid-1970s the management of Democrática party supported by young army Venezuelan national assets started to deterio- officers. From 1945 to 1948 Acción rate dramatically. Political events in the Democrática conducted a rather transparent triggered an abrupt increase in three-year government under the brief presi- global oil prices, and, as a result, Venezuelan

2 oil income tripled. The ordinary men in solidate their political positions rather charge of the Venezuelan government were than lead the country toward stable exposed to extraordinary financial tempta- prosperity through hard work and tions. Faced with a windfall, President Pérez social discipline. Those leaders per- structured a program that he called “The suaded Venezuelans that oil money Great Venezuela.” Under that plan, a tropical “belonged” to the government and that version of Mao’s “Great Leap Forward,” the some of it could be handed out to the government poured close to two billion dol- people in exchange for political loyalty. lars into industrial projects in southern Because of that belief, the use of Venezuela, which were designed to triple steel national assets for personal benefit, production within five years and to build sev- among both the political elite and the eral new aluminum plants. At one point more population at large, lost much of its than 300 state-owned companies existed in pejorative meaning. the country, none of which was profitable. During the second half of Pérez’s term, as a The benevolent view of corruption that result of the torrential influx of oil money, cor- prevailed in those decades can be illustrated ruption spun out of control—it became by a legal decision in a 1982 case of corrup- “democratic.” Up to that moment, graft had tion at the Venezuelan Ministry of From 1975 to been essentially restricted to the ruling clique, Agriculture. The tribunal considering the 1998 Venezuelan but now many Venezuelans started to partici- case dismissed it claiming that “the amount corruption levels pate, directly and indirectly, in the abuse and involved [some $20,000] was too small in misuse of public funds. At the end of Pérez’s relation to the total budget of the Ministry.”4 generally presidency, and in spite of the oil income In 1997 Pro Calidad de Vida, a Venezuelan increased and windfall, Venezuela had managed to fall into nongovernmental organization (NGO) stayed high. debt to the international banks. doing anti-corruption work, estimated that From 1975 to 1998 Venezuelan corruption some $100 billion in oil income had been levels generally increased and stayed high. wasted or stolen during the last 25 years.5 Particularly grave was the period of , 1984 to 1994. In her research on cor- ruption, sociologist Ruth Capriles Méndez of Enter Hugo Chávez the Universidad Católica Andres Bello estimates that some $36 billion was subject to misuse and As the 20th century came to an end, dishonest handling during that presidency,3 Venezuela was ripe for significant political especially through the foreign exchange con- change. The December 1998 presidential trols program called RECADI (Régimen de elections gave victory to Hugo Chávez. Both Cambios Diferenciales). Several factors con- Chávez and his main adversary, Henrique tributed to soaring corruption: Salas Romer, had promised a radical depar- ture from existing politics, which was still • Weak political and social institutions. based on a two-party system alternating in • Lack of adequate administrative norms power and maintaining high levels of and controls. bureaucratic inefficiency and corruption. • Large volumes of income coming from The Chávez campaign platform consisted of petroleum production, a wealth essen- three main proposals: convening a con- tially not earned by the work of the stituent assembly to write a new constitu- majority of the population but generat- tion, eliminating government corruption, ed by a small group of oil industry tech- and fighting against social exclusion and nical staff. poverty. His adversary, Salas Romer, attacked • Populist political leaders willing to the call for a new constitution as populist. In promote a welfare state in order to con- spite of his excellent performance as gover-

3 nor of the state of Carabobo, Salas Romer Conocimiento Económico (CEDICE), a was perceived as a conventional political think tank, during a seminar on reformer, while Chávez came across as a “Economy and Corruption,” held in spokesman for the poor, oppressed majori- Caracas.10 In that speech Rangel put forward ties. There is little doubt that, in a country what was taken to be the official position of with 60 percent poverty and 30 percent the new government on corruption, which extreme poverty at the moment of the elec- can be summarized as follows: tions, Chávez’s promises to eliminate govern- ment corruption and fight poverty were deci- 1. We recognize the existence of a sys- sive factors in his victory.6 temic culture of corruption in Chávez had promised to focus on the Venezuela. political issues before tackling the social and 2. The citizens have come to identify it economic issues. In his inaugural speech,7 whenever they see that hospitals lack Chávez called for a “political revolution” and essential equipment or drugs because started a process that would lead, during of the theft of the funds that should 1999, to the progressive elimination of most have been dedicated to the acquisi- existing political institutions, including tion of those supplies. Congress, the Supreme Court of Justice, and 3. From now on ethics will play a promi- the Electoral Council. In late 1999 those nent role in the life of our society. institutions were dissolved and replaced with 4. Corruption appears equally under new ones staffed by Chávez’s followers. In a authoritarian and democratic gov- letter to the Supreme Court of Justice in ernments and is more perverse in a April 1999, Chávez had threatened the jus- democracy, since it requires the com- tices with retaliation by the populace if they plicity of many. did not rule in line with his wishes.8 He 5. Corruption has had an enormous cost added in this letter that “only the president in Venezuela. It works fundamentally has exclusive authority on the management through the contracting of public of state affairs,” thus appearing to place him- works. Venezuelans have sent more self above the law. Also during that year he than $100 billion abroad. The cost of started violating the existing constitution. In corruption during the last 20 years, July 1999 he promoted 33 army officers over according the NGO Pro Calidad De the decision of the Senate, which had the Vida, is on the order of $100 billion. authority to authorize the promotions, The spiritual and social costs of cor- according to article 150 of the constitution. ruption have been even greater. That violation was openly denounced by 6. February 4, 1992 (the date of As the Congressman Jorge Olavarría in a speech Chávez’s attempted coup) has an given before the president, his cabinet, and essentially ethical meaning. The coup Venezuelan state the diplomatic corps on Independence Day.9 was an expression of popular protest has swept up In his speech Olavarría called for Chávez’s against Venezuelan corruption. impeachment, but, predictably, no action 7. To fight corruption we must fight more and more was taken. against confidentiality and lack of resources, its information from banks, financial management of corporations, and the judicial system. The New Government 8. The fight against corruption should those resources Speaks Out on Corruption involve all of society and all citizens; the has become organizations of the state; academic In November 1999 the new minister of institutions; the media; religious institu- less and less foreign affairs, José Vicente Rangel, gave a tions; and political, business, and labor transparent. speech at the Centro de Divulgación del associations, in order to reverse the

4 effects of corruption and allow for the billion. The wide range of the estimates is due The elimination rebirth of our moral and ethical values. to the lack of reliable information on of corruption in 9. We are on the threshold of change, Venezuelan oil production and income since and one of the main objectives of this 2001. Petróleos de Venezuela, the government- government was new government is to eliminate cor- owned oil corporation, ceased publishing its one of the three ruption. This is the only way to rein- consolidated annual financial statements in main electoral state democracy in our country. The 2003 and sent a last filing to the U.S. Securities main risk this government faces is and Exchange Commission in 2005—two promises made not conducting this fight with audac- years late, since the figures corresponded to by Hugo Chávez. ity and decision, since old corruption 2003. During Chávez’s tenure, Venezuela’s tends to be immediately replaced national debt, both domestic and foreign, has with new corruption. gone from $21 billion in 1998 to some $41 bil- 10. If we want to be a lawful state, we lion in 2005. In addition, the government has need a judicial system we can trust. announced during 2006 a new issue of bonds Without trustworthy justice, there is for up to $4 billion.11 no possibility of waging an efficient From oil and new indebtness, therefore, fight against corruption. the Chávez government has received, up to 11. As a sign of our determination to com- the third quarter of 2006, between $175 bil- bat corruption, we have incorporated lion and $225 billion. That figure does not in our project of a new constitution a include all other sources of revenue, such as body known as the Civic Power, made income taxes. The approved national budget up of the comptroller, the attorney for 2006 amounts to $40.1 billion, with 47 general, and the ombudsman, with percent of the revenue coming from oil sales full authority to investigate and con- and the rest from income tax and other trol the functioning of the state and sources (including new debt and an extraor- the use of public assets. dinary windfall of some $5 billion due to the 12. We will not be dealing in empty seizure of foreign reserves from the rhetoric any longer but in concrete Venezuelan Central Bank). ways to make institutions work. As the Venezuelan state has swept up more and more resources, its management of Almost eight years have passed since José those resources has become less and less Vicente Rangel, still the second most influen- transparent. Both Petróleos de Venezuela tial person in the government of Hugo and the Venezuelan Central Bank have had Chávez, made that speech. That has given us to transfer significant amounts of money more than enough time to evaluate the directly to FONDEN, a “development fund” Chávez regime’s performance in relation to created in 2005 by presidential decree, and to one of its primary objectives, that of elimi- BANDES, a development bank created in nating corruption. 2001, both of which are accountable only to Chávez. In parallel with this irregular man- agement of public funds, the Chávez govern- Financial Performance of ment dismantled the Macro Stabilization Hugo Chávez’s Government: Economic Fund, created by the Venezuelan An Overview government in 1998 to serve as a cushion to protect the stability of Venezuelan public In the eight years since Hugo Chávez came finances in times of low oil prices. In addi- to power, an estimated $130 billion of net oil tion, during 2001–05 the Chávez govern- income (after costs of oil production are ment withdrew the fund’s assets, in excess of deducted) has entered the national treasury, $3 billion, for ordinary spending. Some of although the figure could be as high as $180 the main irregularities in the management of

5 public funds by the Chávez government are normal budgetary channels. The lack of discussed next. financial controls and the diversion of inter- national monetary reserves for ordinary pub- Dollar Transfers Abroad Made by the lic spending have spurred inflation and erod- Government ed the confidence of international investors According to the Venezuelan Central Bank, in the financial stability of the country. about $22.5 billion has been transferred to accounts abroad by the Chávez government The Creation of a Development Bank, a since 2004. About $12 billion of that amount Treasury Bank, and a Development Fund remains unaccounted for.12 Financial analyst That Operate without Transparency or and former Venezuelan Central Bank officer Undermine the Central Bank’s José Guerra, interviewed for this report, stated Independence that some of that money has been used by the In 2001, by executive decree, the government Chávez government “to buy political loyalties created BANDES, a development bank annexed in the region in order to consolidate his politi- to the Ministry of Finance, and in 2005 the cal project and some has been donated to Chávez-controlled National Assembly created a and , among other countries.” He added development fund, FONDEN, to spend “excess” Oil income that a more detailed analysis, if made, might international reserves. Both institutions are should have been indicate that the amounts transferred abroad under the complete control of the Chávez gov- a blessing, but it are far greater, since accounts receivable from ernment without any independent oversight or oil sales to politically friendly countries also checks whatsoever. The fund was to have up to $6 became a curse. remain unaccounted for. billion, to be used at the discretion of the execu- tive. However, by mid-2005 the fund already had Gold Reserves Likely Removed from the $7.5 billion coming from unspecified sources, Venezuelan Central Bank probably Petróleos de Venezuela and the Reports by the group Militares Democráticos, Venezuelan Central Bank, the only institutions a group of former or retired army officers that that could have such a significant amount of generally opposes the government of Hugo money in their systems. The money, according to Chávez, claim that the government of Hugo Finance Minister Nelson Merentes, would be Chávez ordered the transport of a substantial used for “infrastructure” and social projects. The amount of the country’s gold reserves from the truth is that the money in this fund has become a Central Bank to Fuerte Tiuna,13 the military gar- parallel budget and is being used without any rison that has become Chávez’s stronghold. One transparency or need for legislative approval. This report quotes Gen. Jorge Luis García Carneiro as is a situation that leads, almost inevitably, to alleging that the gold was transferred “under the large-scale corruption. The Ministry of Finance direct orders of Hugo Chávez.” If confirmed, this targeted the fund to accumulate as much as $17 would raise questions about transparency. billion by the end of 2006. In addition, a new Banco del Tesoro The Seizure of $5 Billion in International (Treasury Bank) was created in 2005 to collect Monetary Reserves some of the taxes and customs duties that In June 2005 the Chávez-controlled would normally have gone into the Central National Assembly changed the law regulat- Bank or the national treasury, or both. The ing the Central Bank of Venezuela so that the decision to create this bank, reports Manuel Chávez government could seize what it Suárez-Mier, in a note from the Bank of defined as “excess reserves.”14 Under the pro- America, dated August 12, 2005, “virtually visions of this arbitrary change in the law, guarantees that any resemblance of an inde- about $5 billion was transferred from the pendent central bank in Venezuela will vanish Venezuelan Central Bank to the executive, to and represents the additional erosion of the be used for government programs outside country’s institutional landscape.”15

6 Losses and Bankruptcy at the Venezuelan Cato Institute adjunct scholar and journalist Central Bank. Carlos Ball estimated that the favorite banks of BBO Weekly financial news editor Miguel the government could make up to $607 million Octavio estimates that the total losses of the in profits if they bought the $2.4 billion in Venezuelan Central Bank for 2006 alone are Argentinean bonds from the Venezuelan gov- nearly $2 billion, the result of financing credit ernment and resold them, because of the differ- operations to reduce monetary liquidity. This ence between the official exchange rate and the liquidity, claims Octavio, was created “on the free market rate of the bolivar. basis of reserves which are no longer in the hands of the Central Bank. Thus, the Bank Where Is This Performance Leading the does not receive sufficient cash flow from its Venezuelan Financial Sector? investments to pay for all the interest due on These and other irregularities in the man- these instruments.”16 Caracas banker Oscar agement of public finances by the Chávez gov- García Mendoza has denounced the withdraw- ernment have led José Alejandro Rojas, minis- al of 6 billion bolivars by the government from ter of finance during the first years of the the Venezuelan Central Bank, alleging that Chávez presidency, to make very grave predic- that action has put the bank in technical bank- tions about the immediate future of the ruptcy. The government has not replaced that Venezuelan economy. According to Rojas: withdrawal, and it is unlikely to do so in the “The financial crisis might not come due to a future. García Mendoza has filed suit against drought but to an excess of liquidity. It would the government in the Supreme Tribunal of seem that the way [for the Venezuelan govern- Justice demanding that the central govern- ment] to go from a market economy to a cen- ment compensate the bank for the withdrawal. tralized economy is through the destruction But he fears that the government will solve this of the existing financial system.” Rojas adds: situation by conducting a major devaluation “The monetary policy [of Chávez] is one of of the bolivar. If so, he says, “This would be rob- progressive controls: exchange controls, total bery . . . to devalue is to steal.”17 control over the use of public funds, parallel budgets and an increasing state control of the Favorable Deals for Friendly Banks in the economy, all of which is creating an exaggerat- Acquisition of Latin American Bonds ed increase of liquidity. As liquidity increases According to the Financial Times, a select without a real growth of the economy, the cur- group of Venezuelan private banks is profiting rency becomes progressively devalued. The from the acquisition of Argentinean bonds by loss of autonomy of the Venezuelan Central the Venezuelan government, at the expense of Bank and the disorder in the management of the national treasury.18 The Financial Times the financial resources on the part of the gov- spoke to U.S. financial analysts who said that ernment are leading to a significant financial “although the benefits for [the seller] crisis that could eliminate private banking and Generation of are clear, they are less so for the Venezuelan gov- justify state intervention.”21 wealth by the ernment, since the profits are not being accu- many, the main mulated by the government but by a few private banks.” According to reports, the two banks at Corruption Flourishes in characteristic of issue are the Banco Occidental de Descuento the Revolution developed soci- and the Fondo Común owned by Victor Vargas eties, took a back and Victor Gil, members of the new wealthy The elimination of corruption in govern- class emerging under the umbrella of the revo- ment was one of the three main electoral seat to the distri- lution.19 Neither responded to requests by the promises made by Hugo Chávez and probably bution of oil Financial Times for comment. In reselling $100 the one that was most decisive in his victory. million worth of bonds, the banks would prof- The two-party system that had held power in wealth by the it by up to $17 million. In the Daily Journal,20 the country for four decades had allowed cor- government.

7 Wealth redistri- ruption to become systemic and “democratic,” accepted by the country. The resulting back- bution has been in the sense that large sectors of the population lash opened the way for Chávez’s attempted were engaged in it. In interacting with the gov- coup and, later, for his electoral victory. a constant of the ernment bureaucracy there was little that an Chávez has chosen to take the path of least Chávez presiden- average Venezuelan citizen could do without resistance. He saw what had happened to cy, as has a total having to bribe someone. Intolerable delays President Pérez and his attempts to reform. He took place if there was no bribe. Corruption was not prepared to follow that route for two neglect of the had become a way of life in Venezuelan society. reasons: one, because he knew it would not be creation of new Abundant oil income and democracy, two fac- popular and, two, because he did not believe it tors that should be positive, had combined to was the correct path. In 1992 Chávez had wealth. produce a highly damaging mixture, destroy- rebelled violently against Pérez’s attempts to ing the work ethic of a great portion of the introduce austerity measures. Therefore, he Venezuelan population. brought to his presidency ideas shared by mil- Oil income should have been a blessing, lions of Venezuelans, who strongly believe that but it became a curse, given how rapidly it Venezuela is a very rich country and that pover- surged from the 1970s on. Democracy ty exists only because oil wealth has remained should have led to progress but not in the in the hands of the few. If only the oil wealth populist, paternalistic manner fostered by were better distributed, Chávez felt, Venezuela Venezuelan political leaders during the last would experience a true revolution. 40 years of the 20th century. The combina- Wealth redistribution has been a constant tion of abundant oil rent and populism led of the Chávez presidency, as has a total to increasing dependence of citizens on the neglect of the creation of new wealth. Chávez welfare state. Generation of wealth by the has been taking away from the haves, the rich many, the main characteristic of developed and the middle class, in order to give hand- societies, took a back seat to the distribution outs to the have-nots. That has led to the pro- of oil wealth by the government, with the sec- gressive impoverishment of the average tors of society friendliest to government get- Venezuelan, even as it has increased the level ting the largest segments of the oil pie. of corruption in Venezuelan society. At first, the oil wealth was so large in com- parison with the relatively small population Defining Government Corruption that, for many years, government had In its broadest sense, government corrup- enough money to keep most Venezuelans tion can be defined as the violation of the happy. As time went by and population public interest for personal or partisan gain. increased without a corresponding increase That broad definition clearly goes beyond in oil income, popular dissatisfaction started simple graft and the stealing of public funds. to intensify. With less pie to go around, more It involves the use and abuse of political and more of the population was excluded power to consolidate that power in order to from the distribution of the oil wealth. By the obtain higher status and material wealth. It 1990s governments realized that a change in also includes actions that erode the ethical social values and attitudes had to take place standards of the society being governed, even in the country and that oil income alone if no material loss takes place. would not be enough to drive the country Under that definition, the eight-year period forward. By his second term (1989–93), of Chávez’s government has been hypercor- President Pérez clearly understood this, but rupt, surpassing all preceding governments in when he tried to introduce limited economic both incidence and intensity of corruption. reforms leading to less government paternal- The main causes of this hypercorruption are ism, he ran into a violent popular reaction. (a) the record oil income obtained by Chávez’s Withdrawal symptoms from government government during his eight years in power; (b) dependence proved to be too strong to be the very mediocre management team that

8 Chávez has put together; (c) the ideological • Violations of the Constitution of 1961 predilections of Chávez, which have led him to in order to convene a Constituent neglect his duties as president of all Assembly with supraconstitutional Venezuelans to try to play a messianic role in powers. This resulted in the dissolution of world affairs; and (d) Chávez’s belief that the the democratically elected National path to follow in Venezuela was that of oil Congress and of other democratic institu- income distribution in the form of direct tions. Although elected in democratic elec- handouts, rather than a more long-term policy tions in 1999, Chávez went on to disman- of structural solutions to reduce Venezuelan tle the main democratic institutions in the poverty and improve health and education. country, with the complicity of the majori- ty of the members of the existing Supreme Typology of Government Corruption Court of Justice. A Constituent Assembly, under Chávez stacked with his followers and given supra- For the purposes of this discussion, it is constitutional powers, unconstitutionally useful to classify corruption in the Chávez dissolved Congress and most other exist- government under three main categories: ing democratic institutions during 1999 grand corruption, bureaucratic corruption, and replaced them with institutions and systemic corruption. staffed by people loyal to Chávez. This was Bureaucratic Grand Corruption. This category covers cor- a clear case of and a corruption has ruption derived from major policy decisions progressive coup d’état that ended with all exploded during by the highest decisionmaking levels of gov- Venezuelan political institutions under the ernment, in this case the president, and control of the government and eliminated the Chávez includes the following: effective checks and balances. From that government. moment on, for all practical purposes, • Chávez’s acceptance of foreign con- Venezuela ceased to be a democracy. tributions for his presidential cam- • Expenditures of up to $17 billion in paign and during his presidency. the last four years, mostly to buy During 1998 and 1999 at least one for- weapons and political loyalties eign bank, Spain’s BBVA, allegedly con- around the world. During the last tributed substantial amounts of four years Hugo Chávez has been on a money to Chávez’s presidential cam- $4 billion shopping spree for weapons paign and, later, to his presidency. The in Russia, Spain, and other countries former president of the bank, Emilio and has been promising or actually dis- Ibarra, admitted authorizing two bursing significant amounts of money deposits, one for $525,000 in 1998, to Latin American and made to the Curacao-based Maduro countries in exchange for promises of and Curiel’s Bank NV, for a company political loyalty and support for called Concertina NV (a company set Chávez’s objective of obtaining a seat up by Luis Miquilena, Chávez’s cam- on the Security Council of the United paign manager) and the other for Nations. On January 27, 2006, I pub- $1,000,000 made after Chávez had lished an estimate of these expendi- been elected, for the purpose of financ- tures, based on data from the Center of ing Chávez’s followers’ campaigns for Economic Research in Caracas, the Constituent Assembly.22 Partly amounting to $17 billion,23 directly because of these alleged violations, controlled by Chávez. The spending Ibarra was to be tried in Spain at the has included plans to build refineries start of 2006, with the prosecution in several Latin American countries seeking a two-year prison term. The and donations to politically friendly current status of the case is unknown. governments, such as the $30 million

9 Chávez gave Bolivian president-elect percent of all known public contracts are Evo Morales on the occasion of his awarded without bidding.24 January 2006 visit to Caracas. This In the state of Carabobo alone, current huge disbursement was made without governor Luis Acosta Carlez has openly consulting the people of Venezuela. admitted to 800 cases of no-bid contracts, involving tens of millions of dollars.25 The Bureaucratic Corruption. This category governor declared, in every case, emergency includes violations of laws, norms, and regu- conditions of questionable validity or that lations by government employees or non- were not defined as such by the proper government accomplices. This type of cor- authorities, as stipulated by law. ruption can involve extortion, , the What is happening in the state of stealing of public funds, abuse of political Carabobo is also happening all over the power, , and many other varieties of country and in all sectors of the govern- illegal or unethical use of public assets for ment. The complete disregard for proper private gain. Given the enormous amount of administrative procedures is due to two oil income during the last eight years and the main factors: indifference toward, or igno- almost total absence of proper government rance of, the law on the part of bureau- controls, bureaucratic corruption has crats and the knowledge that they will not exploded during the Chávez government. be punished. Although it is impossible to Some of the most remarkable manifestations quantify the financial damage to the are described below. nation attributable to these disorderly procedures, there is no doubt that the • Government contracting is mostly level of corruption associated with this being done directly, without following approach to contracting is extremely high. existing bidding regulations. The law • The social programs run by the mili- that regulates the acquisition of goods tary in 2000–02. Soon after he came to and services by the Venezuelan govern- power, Chávez established a program called ment says that all contracting should fol- Bolívar 2000, run by the armed forces, low proper bidding procedures, except in designed to do social work. Conceptually it cases of national emergency, which can was sound. It had to do with the fact that be declared only by the Executive Cabinet Venezuela had a large—and largely idle— or by the General Comptroller’s Office. military force, seemingly active only during Faulty bidding procedures and the lack the military parades of the July 5 and 24 of any bidding at all have been identified every year. Why shouldn’t the military be by Transparency International as the put to work on social programs to improve main causes of corruption in Third the social situation of the Venezuelan poor? World countries. Multilateral organiza- To most Venezuelans that sounded like a tions such as the World Bank and the good idea. Inter-American Development Bank have According to journalist Agustín Beroes, established stringent procedures to guar- however, the execution of the program was antee that all projects in which they par- not good.26 The Bolivar 2000 program was Venezuela is giv- ticipate as lenders are conducted accord- run by Army Commander Victor Cruz ing Cuba a sub- ing to proper bidding procedures. Weffer and was assigned about $300 mil- However, the Venezuelan government, lion. After only one year, the program was sidy on the order especially during the last three to four terminated because of uncontrollable of $2.2 billion to years, has practically done away with bid- waste and corruption in which an estimat- ding in public-sector contracting. ed $150 million went unaccounted for. $2.3 billion According to the Venezuelan chapter of The most frequent mechanisms of corrup- per year. Transparency International, today 95 tion operating in this program included

10 false invoicing and the signing of contracts members of the armed forces involved in The Electoral with nonexistent suppliers. When General the project were sent to the criminal Registry is deeply Comptroller Eduardo Roche tried to inves- courts. The Venezuelan National tigate in earnest, he was replaced by Assembly has accused the group of taking corrupted. Clodobaldo Russian, who remains at his about $1.3 million from the accounts of job five years later. Parallel to this failed the sugar-processing plant run with the program another was initiated, the so- help of Cuban advisers.28 The case has not called Fondo Único Social (Central Social yet been decided. According to another Fund), led by Commander William source, the 62nd Army Engineers Unit has Fariñas, another one of Chávez’s fellow been accused of squandering $1.5 billion conspirators during the unsuccessful 1992 of the $2.6 billion appropriated for the coup. This program received about $400 complex.29 This too has not been resolved. million from the government and was ori- Minister Albarrán admitted to malfeas- ented toward health services, housing, and ance for not revealing these facts when he educational subsidies. In essence, FUS was became aware of them on September 23, a typical direct subsidy program conduct- 2005. By his own admission, he withheld ed without careful planning. FUS gave the information because, he claimed, the $500,000 to an organization run by the country was in the midst of parliamentary wife of Commander Fariña’s driver, elections and his revelation would have Horácio Pérez. Beroes estimates that the created a scandal damaging to the Chávez irregularities connected with this program government. have cost some $30 million. • Corruption at the Supreme Tribunal • The acquisition of the presidential of Justice. In early 200630 a scandal airplane. During a 2001 trip to the involving the Supreme Tribunal of Justice Middle East, Chávez had the opportuni- held the attention of the nation for a brief ty to travel in an Airbus 319 owned by a period of time (no corruption scandal member of the royal family of Qatar. lasts more than one or two weeks in the After returning to Venezuela, he declared Venezuelan press, as it is quickly super- that he wanted one just like it. In clear seded by a new one). The minister of the violation of article 314 of the Venezuelan interior, Jesse Chacón, accused one of the constitution and of the law regulating leading members of the tribunal, Luis government expenditures, the plane, an Velásquez Alvaray, of corruption. Some A319-133X, was acquired at a cost of people saw this accusation as a political more than $65 million, without proper maneuver designed to eliminate a promi- budgetary provisions.27 nent member of one government faction. • “Sweet” corruption at the agro-indus- Chacón accused Velásquez Alvaray of trial complex Ezequiel Zamora. A pocketing significant amounts of money prominent case of corruption has taken from commissions and overpricing in the place since 2004 in the Ezequiel Zamora acquisition of real estate for the tribunal. agro-industrial complex, located in the Surprisingly, Velásquez Alvaray counter- state of Barinas, Chávez’s home state. The attacked, accusing Vice-President Rangel, National Assembly took the unusual step Minister Chacón, and National Assembly of investigating it after a public accusation president Nicolás Maduro of being at the by journalist Eleazar Díaz Rangel, who is head of an extensive criminal judicial group otherwise sympathetic to the Chávez gov- called the “Gang of the Dwarfs.” According ernment. As a result of the investigation, to Velásquez Alvaray, this group acted princi- Minister of Agriculture Antonio Albarrán, pally in the protection of drug traffickers. In the director of the Sugar Mill complex, addition to pointing a finger at these three Army General Delfín Gómez, and 17 high government officers, Velásquez Alvaray

11 also accused the brother of Minister Chacón, enormous amount, sorely required by bank owner Arne Chacón, of pressuring him Venezuela for the improvement of the to get the judicial system to deposit its funds quality of life of its citizens. in Arne Chacón’s bank. He also accused • Corruption at the National Electoral some of his colleagues at the Supreme Council. The performance of the Tribunal of Justice of being connected with Venezuelan National Electoral Council, drug trafficking. These allegations remain under the political control of Chávez, has unresolved. Velásquez Alvaray is said to be in led to widespread distrust of it among Madrid, Spain. Venezuelans. As a result of this distrust, in • The oil supply agreement signed with December 2005, 75 percent of eligible vot- Cuba, a gigantic loss for the nation. One ers, according to official figures, abstained of the most damaging examples of the from voting for the election of members of Chávez government’s political and eco- the National Assembly. The figures given nomic corruption is the oil supply agree- by the opposition placed abstention at 85 ment with Cuba.31 Fidel Castro and percent. The reasons for this widespread Hugo Chávez signed this “integral coop- distrust are several: First, the members of eration agreement” in Havana in the council are all Chávez followers, with The Chávez October 2000. The agreement pledges one exception. That means that the deci- government has Venezuela to supply Cuba for 15 years sions made by this body have always generated two with volumes of Venezuelan hydrocar- favored the interests of the government. bons, starting at 53,000 barrels per day. Until several months ago, the president of lists of voters to In December 2004 this volume was the council, Jorge Rodríguez, was also the retaliate against. increased to 90,000 barrels per day. adviser of Peruvian candidate Ollanta Several characteristics of this oil supply Humala, while still president of the agreement are irregular and highly damag- Venezuelan Electoral Council. Second, the ing to the Venezuelan nation: First, the naming of these members has not been form of payment, including 15-year financ- done according to proper constitutional ing at 2 percent interest of 25 percent of the procedures. volume, is a gift to Cuba that can be esti- Third, reports by international mated at some $400 million per year at cur- observers (the Organization of American rent oil prices; second, Cuban delays in pay- States, the , and Spanish ing or outright refusal to pay should have Congress) during the last two electoral triggered an interruption of supply, which events, in 2004 and 2005, found that the has not taken place. This is bureaucratic NEC’s activities lack transparency. negligence on the part of the Venezuelan Fourth, the Electoral Registry is deeply government and means that some $1.3 bil- corrupted. It includes, according to the lion per year is not being collected, either in council, almost 17 million voters, a sta- a timely fashion or at all; Finally, Cuba’s tistical improbability since Venezuela has real consumption of hydrocarbons is prob- a population of 26 million, 60 percent or ably lower than claimed. There are indica- more of whom are too young to register. tions that Cuba is reexporting some of the It is presumed, therefore, that millions of petroleum supplied by Venezuela, possibly foreigners have been given Venezuelan as much as 25,000 barrels per day. At cur- papers in a very short time in order to rent prices that would represent a further swell the registry, which has grown 8 to loss of some $500 million per year for the 10 times faster than normal in the last Venezuelan nation. two years. Gustavo Adolfo Fabregat, a 57- In total, therefore, Venezuela is giving year-old Uruguayan information system Cuba a subsidy on the order of $2.2 bil- expert who resides in South Carolina, lion to $2.3 billion per year. This is an has made an analysis of the Venezuelan

12 electoral roll and describes some of the tion. On several occasions, Chávez went many irregularities, such as the existence on TV to threaten citizens who had voted of 39,000 voters over one hundred years against him in the referendum and old.32 This is a number equal to that of allowed the use of the lists to dismiss the same age group in the , many Venezuelans from their jobs, to where the population is 10 times greater. refuse them identity papers, and, in gen- Of these 39,000 people, 17,000 were born eral, to treat them as second-class citi- in the 19th century, and one is 175 years zens. This practice of “apartheid” is still old and still working! Nineteen thou- in force in Venezuela, and many sand voters were born the same day and Venezuelans have emigrated after being year in the state of Zulia. There are thou- persecuted because of their political sands of people sharing the same beliefs. In April 2006 a Venezuelan mag- address. This would make hilarious read- istrate of the Supreme Tribunal of Justice ing if it were not so tragic. came to the United States on a tour of Fifth, the voting machines used by the half a dozen cities to talk about the government belong to a company alleged “wonderful” revolution of Hugo Chávez. to have had connections to the govern- During his talk in Washington, at the ment until the Herald denounced School of Law of American University, he this perceived conflict of interest.33 The spoke of how the revolutionary govern- company that owns the machines, ment of Chávez had included all Smartmatic, was created in 2000. Reports Venezuelans. He was immediately chal- have linked its owners to Chávez and other lenged by several young Venezuelans in members of his government.34 But the audience, including a lawyer who had Smartmatic and the Venezuelan govern- been dismissed from her job in ment deny the company has ever had any Venezuela for signing the petition to type of relationship with the Chávez hold the presidential referendum.36 administration. This company received a • Corruption in the state-owned petro- no-bid government contract for $100 mil- leum company, Petróleos de Venezuela. lion in 2004, just a few months before the Corruption in the most important August 2004 Venezuelan presidential ref- Venezuelan state-owned corporation takes erendum, in which the machines were many shapes. It includes the naming of six used for the first time. The results of that presidents and boards during the last referendum were questioned by the oppo- seven years, in an effort to control the com- sition but validated by the observers of the pany politically. That turnover has shat- Carter Center and the OAS.35 tered management continuity and coher- In addition to the irregularities listed ence and has practically destroyed the above, the Chávez government has gener- capacity of the company to prepare and ated two lists of voters to retaliate follow strategic plans. As a result, the six- against: one, a list of those who asked for year plan of the company is the same one the referendum against the president, prepared before Chávez came to power, a the Tascón List, named after Luis plan that has been waiting for six years to Tascón, a pro-Chávez member of the be put into effect. If it had been imple- National Assembly that put it together, mented at the proper time, the company and, two, a list of those who had, in fact, would now be producing about 5 million voted to revoke him, the so-called barrels of oil per day. In fact, it produces Maisanta List, after the grandfather of only about 2.7 million barrels per day. Chávez has Hugo Chávez, a small Venezuelan caudil- Add to that the fact that the minister of lo of the 19th century whom Chávez has mines and petroleum is also the president repeatedly used installed as one the icons of his revolu- of the company, which may be not only a oil to buy loyalty.

13 The revolution violation of the laws of the country but a heavy oil and water that competes favor- taking place in major error of strategic management since ably with coal for heating purposes and the organization is now being managed industrial use. This array of irregularities, Venezuela during and monitored by the same person. all of which squander Venezuelan wealth, the last eight Further evidence includes Chávez’s dis- is the result of the politicization of the missal, on a television program, of almost Venezuelan state petroleum company. years has been 20,000 technical and managerial staff in more successful 2002, in open violation of Venezuelan Systemic Corruption: The Interface between in creating an labor laws. That mass layoff significantly Government and the Private Sector. In addition diminished the operational efficiency of to bureaucratic corruption that constitutes instant class of the company. Not only has production the major component of corruption under the new rich than been decreasing steadily in the last three the Chávez government, there is a third cate- in solving the years, but refinery stoppages, oil spills, gory involving the interaction of state and industrial accidents, and widespread inter- private actors in a contaminated social sys- problems of ruptions in the normal operations of the tem. This type of corruption can involve poverty. company have increased dramatically. important amounts of money or small Moreover, the international marketing of favors, which are qualitatively identical. The Venezuelan oil has fallen into the hands of term “petty corruption,” although some- brokers and intermediaries, instead of times applied, tends to be misleading as it being run by the marketing division of the suggests that there are transactions that are company. Those brokers have political “more” corrupt than others because they connections with the Chávez government involve larger amounts of money. Systemic and serve as go-betweens with clients, col- corruption includes the liaison between gov- lecting significant commissions at the ernment officials and private buccaneers to expense of national income.37 do business at the expense of the public Chávez has repeatedly used oil to buy good, as well as bribes, extortion, and illegal loyalty. In November 2005 he ordered appropriation of public monies for personal Petróleos de Venezuela’s U.S. affiliate, gain. This sort of corruption has exploded CITGO, to distribute subsidized fuel oil during Chávez’s tenure, promoted by the to “poor” communities in several states of immense amounts of public expenditure and the United States for purposes of political the policy of handouts favored by the gov- propaganda. These subsidies are absorbed ernment. Some of the most prominent exam- by CITGO, but a substantial portion of ples include the following: the cost is actually paid by the U.S. gov- ernment through tax deductions. The • The emergence of a new rich, “revo- Chávez government also supplies thou- lutionary” class. The great amount of sands of barrels of oil per day to oil income freely used by the government Caribbean countries, essentially in has created what El Nuevo Herald and the exchange for their political loyalty. have called a new class of mechanism of payment allowed by the wealthy “revolutionaries.”38 According to Chávez government is in the form of agri- these reports, a new bourgeoisie has been cultural products such as bananas and created in the country: “They drive beans. This will inevitably produce signif- Hummers and Audis; use Cartier watch- icant losses to the Venezuelan nation. es and Mont Blanc bags. They buy luxu- Finally, the Chávez government gives ry apartments and fly to Miami in pri- China, on terms that are not known to vate jets. And they always pay cash,” reads Venezuelans, the licenses owned by the the El Nuevo Herald report. This sudden Venezuelan Research Center for China to wealth, says economist José Guerra in El produce Orimulsion, an emulsion of Nuevo Herald: “can only be explained by

14 the close association of these new rich not explained. Rijock also mentions the with the government.” One of the main seafood sector as a sector where this type of examples of this sudden new class of business prevails wealthy people is Wilmer Ruperti, who El Nuevo País, a Venezuelan daily, has receives an inordinate number of con- reported that in August 2005 Arne tracts from the state-owned petroleum Chacón, brother of Minister of the Interior company. Ruperti has been investigated, Jesse Chacón, made a $10 million offer to both in Venezuela and in the United buy the company INDULAC, a very large States, because of some of the transac- dairy-processing company in western tions made with the oil company and Venezuela.40 The question posed by with CITGO, but nothing has resulted Patricia Poleo, the journalist reporting the from these investigations. Last year story, is “Where did Mr. Chacón, a retired Ruperti bought at Christie’s, for $1.6 navy lieutenant, obtain the $10 million million, two pistols that belonged to required to buy this company?” Simón Bolivar, as a present to the gov- Juan Carlos Zapata, editor of ernment. An employee of one of the Descifrado, a Venezuelan publication, has Mont Blanc shops in Caracas stated to El written a more general report in which he Nuevo Herald that their customers, espe- describes the emergent new power struc- A new “revolu- cially the military, only use cash. ture surrounding the Chávez govern- tionary” bour- 41 • Government-controlled private cor- ment. From this analysis one thing is geoisie is being porations. When government officers clear: the revolution taking place in own a company but conceal this fact by Venezuela during the last eight years has born under working through private intermediaries, been more successful in creating an Chávez. corruption can reach very high levels. instant class of the new rich than in solv- Kenneth Rijock, a financial analyst for law ing the problems of poverty of the enforcement agencies who previously immense majority of Venezuelans. The sit- served time in prison for money launder- uation strongly resembles the oil windfall ing, notes that government-controlled cor- of the 1970s, except that now there is more porations have flourished under Chávez, waste since there is more money. especially corporations that produce and According to Zapata, a new “revolu- distribute food.39 The major agribusiness tionary” bourgeoisie is being born under organization that government officials Chávez. But this group is far from being control, he says, is the PROAREPA group, truly revolutionary. As time goes by it the main supplier of food to the govern- will tend to become closer to interna- ment handout programs. PROAREPA, tional capital, and there is little that Rijock says, owns a large group of compa- Chávez can do to prevent that. What will nies, including Almacenes y Transportes happen then? asks Zapata. The “revolu- de Cereales, which is “rumored to be tion,” he suggests, will simply replace one owned by Chávez’s brother Adan.” The financially dominant class with another. officers of record of PROAREPA, says Political loyalty and ideology will be sac- Rijock, include Ricardo Fernandez rificed to the desire for wealth. Zapata Barrueco, a close friend of high-level gov- lists the names of some of the members ernment officials and of certain of of this new financial aristocracy. President Chávez’s relatives. According to An Economist article published at the Rijock, Fernandez was investigated for cus- same time as Zapata’s article reports that toms-related offenses, and he deals with the brother of the minister of the interi- the government food distribution organi- or, Jesse Chacón, was “illegally lobbying zation PROAL, but the investigation was for a bank,” which he eventually bought terminated in February 2001 for reasons without really paying for it, and which

15 may have been the source of the $10 mil- money, some $2.6 million, but relief was lion he later offered to INDULAC.42 denied for lack of jurisdiction. That legal Analyst Kenneth Rijock claims that action was the reason the alleged $18 mil- the Chávez government is “engaged in a lion, payment to Bigott de Loaiza became massive operation” in known. Bigott de Loaiza has denied she order to transfer dollars derived from the was being paid such amounts. oil bonanza overseas, for the benefit of • Drug trafficking: Venezuela as a “gate- the top members of the government.43 way to heaven,” because of the absence This operation, Rijock says, seems to be of border controls.The Caracas daily El modeled after similar schemes by Fidel Universal, quotes the 2006 International Castro. He claims that the transfer mech- Narcotics Control Strategy Report as saying: anisms include moving the money “Rampant corruption and a weak judicial through Swiss banks and the possible system are the main reasons for the promi- acquisition of one such bank for these nent role Venezuela is now playing as a key purposes. transit point for drugs leaving • The case of Hugo Chávez’s personal for the U.S. The Colombian guerrillas, lawyer, Esther Bigott de Loaiza, and her FARC, ELN and the Auto Defensas de $18 million retainer. Esther Bigott de Colombia, move freely through Venezuela, Loaiza was for some time the personal unchallenged by the authorities.”45 lawyer of Hugo Chávez. In that capacity she The attitude of the government has made excellent contacts and obtained been ambivalent; on the one hand, it has important contracts from government made some efforts to combat drug traf- agencies. One in particular has created ficking, and, on the other hand, it has quite a scandal, the product of a very dam- refused the extradition of alleged drug aging decision by the government lawyer dealers and even released some of them, Marisol Plaza, who, according to the gov- as was reportedly the case with Mateo ernment, incorrectly accepted as valid some Holguín Ovalle in March 2006. A report promissory notes, called the Bandagro by Andy Webb-Vidal for Jane’s Intelligence Bonds, after the bank that issued them, Review, May 2006, asserts that back in 1981. One hundred million dollars trafficking operations are shifting worth of these bonds have been held since toward Venezuela and notes that drug 2004 by Skye Ventures, an Ohio-based seizures have skyrocketed the last 10 investment company controlled by David years, from 2.7 tons in 1995 to almost 60 Richard, that has sued the Chávez govern- tons in 2005.46 Seizures, authorities esti- ment for payment of the face value plus mate, represent only about 10 percent of interest.44 The government hired lawyer total traffic. A cursory exami- Biggot de Loaiza and allegedly gave her a One of the most recent seizures of drugs nation of real retainer of $18 million to defend the nation originating in Venezuela took place in the estate acquisi- against this legal action, according to court state of Campeche, Mexico, when the papers. That money was apparently authorities captured a DC-9 and a Falcon tions in Florida deposited in a branch of a jet. The DC-9 had 5.5 tons of cocaine reveals names U.S. bank, under authorization of Finance aboard. The growing drug industry in that are familiar Minister Nelson Merentes. Apparently that Venezuela allegedly has intimate connec- money should have also covered payment tions with high-level members of the on the to a U.S.-based lawyer named Claudia Venezuelan National Guard. The report Venezuelan Silvestre. However, Silvestre claims she stated that several generals of this force, never got paid. She tried, unsuccessfully, in including Alex Maneiro and Frank bureaucratic a legal action against Bigott de Loaiza in Morgado, as well as three other officers, scene. New York Supreme Court to get her have been denied U.S. visas because of their

16 alleged involvement in the trafficking. beyond the reach of bureaucrats earning The crime rate Venezuelans, says Webb-Vidal, “are becom- rather modest salaries. has made ing more integrated into the supply chain, • The plight of the average citizen. In rather than merely acting as couriers.” A this wild collective hunt for oil booty, in Venezuela one of former member of FARC, quoted by Webb- which the powerful few obtain most of the the most danger- Vidal, says that, during the time he operat- spoils, the ordinary Venezuelan citizen is ed in Venezuela in activities related to drug invariably a latecomer. He or she will have ous countries in trafficking, some 30 tons of cocaine worth to wait in line to receive his or her meager the world. about $750 million in Miami were moved share. A small job at a state agency requires into Venezuela by the FARC each year. The total loyalty to the government, a modest report claims that alleged prominent drug scholarship for a son requires months of traffickers of Colombian origin are pleading and persuading. Obtaining a believed to be based in Venezuela, includ- passport or an identity card usually ing Diego Montoya Sánchez, Wilber Varela involves days or weeks of getting up at 4:00 Fajardo, Juan Carlos Ramírez, and a.m. to get in line with hundreds of others, Salomón Camacho Mora. It is hard to hoping that passports have arrived and believe that the increase in drug trafficking that the person at the bureaucratic desk in Venezuela would not also increase cor- happens to be in a good mood. Paying ruption in the Venezuelan military and taxes or even the electric bill requires con- among government bureaucrats. siderable patience and hours of waiting. • Corruption at the second and third Corruption flourishes in such an environ- levels of government bureaucracy. ment. Since Venezuelans have to go to Living beyond one’s means is probably work or to school, they cannot afford to the most revealing sign of corruption. In waste time, and most end up bribing the Chávez’s Venezuela, where salaries of bureaucrat or accepting extortion. Almost ministers average some $5,000 per every bureaucratic transaction requires month and even high-level bureaucrats that payment be made or expedited. earn only between $3,000 and $4,000 per Infrastructure problems, especially month, the style of living of lower-level regarding roads and electricity, also plague bureaucrats is more in tune with the country. The number of major electrici- incomes of about $15,000 per month. ty blackouts increased from 49 in 2004 to Luxury goods, including cars and even 80 in 2005, and major highways and private planes, are bought in an abun- bridges are in need of substantive repairs.48 dance never seen before; 18-year-old In fact, the main bridge on the highway scotch whisky is the drink of choice; and connecting Caracas with the international power lunches usually last between three airport collapsed in early 2006, and some and four hours, at a cost of some $100 40,000 cars have to travel on a provisional per person. As already mentioned, pay- road that seems to have become perma- ment for most of these transactions is nent. As another example of inattention to almost always in cash. basic government functions, garbage fre- A cursory examination of real estate quently remains uncollected in the cities acquisitions in Florida reveals names that and towns of the country. are familiar on the Venezuelan bureaucrat- The crime rate has made Venezuela ic scene. A recent report by Exceso, a one of the most dangerous countries in Venezuelan magazine,47 reveals several the world. A statistical summary from examples of houses and condos in Caracas sources such as Latinobarometro, the where members of the Chávez government Inter-American Development Bank, live, a type of housing that is very expensive PROVEA (a human rights group based in by Venezuelan standards and certainly Caracas), and other organizations shows

17 that, during the period 1998 to 2005, cant political and social problems, went from homicides in Venezuela increased by 128 a score of 3.2 in 2000 to 4.0 in 2005, a signif- percent, violent deaths increased by 74 icant improvement. percent, deaths by fire arms increased by Those scores are based on surveys done 36 percent, kidnappings increased by 426 independently and involve thousands of peo- percent, and Caracas homicide rates were ple being consulted, both in the countries the second-highest in being ranked and abroad. In the case of after Recife, Brazil.49 Venezuela and Colombia, the scores were established with the help of 10 and 9 indepen- dent surveys, respectively. It is curious to con- The Chávez Anti- trast Vice President Rangel’s change in attitude Corruption Record: Broken from when he gave his speech in 1999 with his Promises and Failed Policies later reaction to Transparency International’s 2005 ranking. In 1999 he spoke of the enor- Eight years is more than enough time to mous cost of corruption in Venezuela and of evaluate Hugo Chávez’s electoral promises the need to mobilize all institutions in the fight and the effectiveness of his government’s against it. In 2005 he dismissed the ranking by Eight years is anti-corruption policies. This evaluation can making the unsubstantiated claim that more than be made by using objective international Transparency International was a discredited enough time to measures, such as the Corruption Perception institution, alleging incorrectly that it charged Index produced every year by Transparency a “tariff” to countries for their position on the evaluate Hugo International, as well as other indices that corruption table.51 Chávez’s anti-cor- examine economic freedom and quality of Venezuela’s ranking in the 2006 Economic ruption policies. governance, such as the Economic Freedom of Freedom of the World index is 126 out of a the World annual report, published by the group of 130 nations, very close to the bot- Fraser Institute, and the Human Development tom of the ladder, only above the Republic of Index of the United Nations. A more subjec- Congo, the Democratic Republic of Congo, tive, impressionistic comparison of what the Myanmar, and Zimbabwe. A comparison of government of Hugo Chávez said it would do the scores through the years is, again, reveal- and what it has done in the realm of trans- ing. In 1970 Venezuela had a rating of 7.6 on parency and honesty is also worthwhile. a scale of 0 to 10. In 2000 the rating was 5.5, and today it is only 4.4. According to the International Indices index, Venezuela is the country that has expe- The 2005 Corruption Perception Index, pub- rienced the largest fall in economic freedom lished by Transparency International, ranks since 1980.52 The bottom 10 countries in the Venezuela 136th out of 159 nations.50 In ranking are African, with the exceptions of 2000 Venezuela ranked 73rd out of 90 Venezuela and Myanmar. nations. Although in both years Venezuela The index helps to illustrate the connec- ranked near the bottom, a meaningful com- tion between economic freedom and corrup- parison is not easy to establish because of the tion. Countries with a low level of economic different number of countries included in freedom are characterized by exchange con- the rankings. More accurate is the composite trols, a large level of government consump- score obtained during these two years, since tion as a percentage of total consumption, the factors used in making up this score are investment largely concentrated in state essentially the same. On a scale of least cor- enterprises, a judicial system not indepen- rupt (10) to most corrupt (1), Venezuela went dent of the government, military influence in from 2.7 in 2000 to 2.3 in 2005, a significant the political process, high and variable infla- deterioration. In contrast, a country like tion, restrictions on access to foreign capital neighboring Colombia, in spite of its signifi- markets, price controls, and bureaucratic red

18 tape. That perfectly describes Chávez’s The fight against the United States has Venezuela. This and other studies also show helped to generate large-scale corruption in the the strong correlation between corruption Chávez government, through the use of and low levels of economic freedom. immense amounts of Venezuelan money to In 1975 Venezuela was ranked 34 in the further a global anti-U.S. alliance. That money, group of UN member countries, with a score irregularly taken from its legitimate owners, of 0.716 on the UN’s Human Development has been used to buy political loyalty from Index, which measures broad indicators of other countries in the region. At least five human well-being. That year Venezuela had a countries in the region—Mexico, Peru, Chile, higher ranking than South Korea, Chile, or , and Bolivia—have denounced the Mexico. In 2000 Venezuela was ranked 46, intervention of Chávez in their internal politi- with an index of 0.776. In 2005 Venezuela is cal affairs, and three of them (Mexico, Peru, ranked 76 with an index of 0.772, much and Chile) have recently demanded that lower than South Korea, ranked 28, Chile, Venezuela retire its ambassadors, and the ranked 37, and Mexico, ranked 53. This Bolivian Congress, in October 2006, was dis- shows a clear deterioration when compared cussing the possibility of naming the with other countries’ rankings and when Venezuelan ambassador persona non grata. measured by its rating. In particular the fall Failed Policies. Chávez’s policies have pro- by 30 places in the ranking in the last six moted corruption rather than combated it. years is dramatic. Development in Venezuela Although then–foreign minister Rangel has come to a standstill while other countries acknowledged, in his 1999 speech, the exis- are passing Venezuela by. This is in spite of tence of a systemic culture of corruption in the immense amount of income received by the country, the Chávez government has the country during that period. done nothing to change that culture—except to make it worse. The concentration of polit- A Legacy of Corruption ical power in Chávez’s hands, the rapid Broken Promises. Hugo Chávez came to turnover of ministers and other high-level power promising an all-out fight against cor- bureaucrats, the absence of debate in the ruption. At the time, he may very well have National Assembly about important nation- meant it. Most Venezuelans agreed with the al economic and political issues, and the lack need for more honesty and transparency in of checks and balances in the system have government, and they wanted a clean break contributed to a dramatic increase in corrup- with the past. They voted for Chávez to tion. Prominent cases of corruption in install an honest democratic government. Chávez’s government, such as the ones But the record shows an enormous gap described in this paper, have not been pun- between Chávez’s promises and Venezuelan ished. A few bureaucrats, such as Luis reality. Today Venezuela is not a democratic Velásquez Alvaray and Antonio Albarrán, country. It is aligned with some of the most dic- have been dismissed from their posts but tatorial regimes on the planet: those of have remained undisturbed. Mugabe, Kim II Sung, Ahmadinejad, Assad, In his 1999 speech, Rangel also called for a Gahdafi, and Castro and with armed, irregular trustworthy judicial system. This has not hap- forces that practice drug trafficking or global pened. From the Supreme Tribunal of Justice Studies show the terrorism, such as the Colombian FARC and downward, the judicial system is rotten. The ELN and the Lebanese . Chávez’s members of the Supreme Tribunal of Justice, strong correla- promise of an all-out fight against Venezuelan dressed in full regalia, stood up at the end of their tion between cor- corruption has turned into a fight against the inaugural session in January 2006 and sang; ruption and low U.S. government. Most of the energy and “Uuh ah, Chávez no se va” (Chávez is not going).53 resources of the Venezuelan government have Could such a grotesque event ever take place in a levels of econom- been placed at the service of this objective. country with independent institutions? ic freedom.

19 The record shows Rangel has also called for the elimination of an enormous gap confidentiality in banks, financial corpora- Conclusion tions, and other state and private organiza- between Chávez’s tions. Yet, the Chávez government remains a Corruption has dominated the Hugo promises and black box, much more so than any previous Chávez government as never before in government. Petróleos de Venezuela, the most Venezuela’s history. The reasons seem clear. Venezuelan important state-owned corporation, no longer Corruption occurs when there is motive, oppor- reality. publishes annual reports. The management of tunity, and impunity of action. In the case of national funds is done in total secrecy and the government of Hugo Chávez, all three of without accountability to the people. The those factors are present to a large degree. Chávez government makes the major deci- sions; when it provides information on those Motive decisions, it does so only after the fact. A common motive for bureaucrats’ engag- Rangel mentioned in his 1999 speech that, ing in corruption is low income. The as a sign of the Chávez government’s determi- Venezuelan bureaucratic system has tradi- nation to combat corruption, a fourth power tionally made a point of paying low salaries, called the Civic Power was being incorporated basing that practice on pretensions of auster- into the new constitution. In practice this has ity in the management of public funds. The turned out to be a cruel fraud against the peo- result has been negative. Since bureaucrats ple. The three members of the Civic Power—the are poorly paid, many resort to corruption to general comptroller, the ombudsman, and the increase their income. Low-level bureaucrats attorney general—have all performed dismally, resort to asking for payment from the public siding at all times with the government, failing to do the most basic tasks. High-level bureau- in their duty to control executive abuses of crats resort to asking for commissions from power and to punish corruption in govern- private contractors in order to assign them ment. As a result, the Civic Power has been com- work. When authority is highly concentrated pletely discredited in the eyes of the people. in a few officers or in one person, as is cur- Rangel warned in his 1999 speech that the rently the case in the government of Chávez, main risk the new government faced was national assets can be transferred to individ- timidity and delay in the fight against cor- uals in positions of power without any kind ruption. After eight years it has become evi- of control. The bureaucrats who came to dent that timidity and delay reign. However, power with Chávez felt excluded for many as long as there is substantial oil income, years from participating in what they felt was Chávez will continue his policy of massive partly theirs. Now that they are the govern- handouts, which tends to mask the presence ment, they feel that it’s their turn to prosper. and damaging effects of corruption. Many of the Venezuelan poor will tend to tolerate cor- Opportunity ruption as long as they get a piece of the pie. Opportunity for corruption arises when Protests will intensify only when there is not administrative controls and procedures are enough money to go around. absent, when there are few checks and bal- Finally, in 1999 then–foreign minister ances, and when bureaucratic turnover is high, Rangel criticized mere rhetoric and promised preventing the consolidation of a stable orga- that the new government would adopt con- nizational culture with a tradition of efficiency crete policies designed to make institutions and honesty. The Chávez government has been work. In fact, the Hugo Chávez government particularly disorganized. There are few con- has been dominated by rhetoric. The new trols or checks and balances because of the political leadership’s attitude toward corrup- concentration of political power at the top. tion is even more permissive than that of pre- High-level bureaucratic turnover has been very vious governments. high, with as many as five or more ministers

20 taking turns at any particular cabinet post. In the 15th anniversary of Centro de Divulgación del Conocimiento Económico, Caracas, November 1999. fact, Venezuelan cabinet changes are so fre- This speech can be found on the website of the ATLAS quent that up-to-date lists are difficult to Economic Research Foundation, http://www.atlasusa. maintain.54 At more subordinate levels the org?vz/files/pdfs/1999_H_Winter.pdf#search=% turnover is also high. When combined with an 22CEDICE%20on%20Corruption%2c% 201999%22 overall lack of accountability, that promotes 6. Equipo Acuerdo Social 2006, Venezuela: Un irregular management of public assets. acuerdo para el desarrollo (Caracas: Publicaciones Universidad Católica Andrés Bello, 2006), p. 29. Impunity 7. The transcript of the inaugural presidential In addition to motive and opportunity, speech can be found in Hugo Chávez, “Discurso impunity is a major contributing factor to de la toma de posesión del Teniente Coronel both the incidence and the intensity of cor- Hugo Chávez Frías,” URRU, February 2, 1999, ruption. The very high volumes of oil money http://www.urru.org/papers/1999_varios/1999_ DiscursoTomaPosesionHCh.htm. being received by the Venezuelan govern- ment, together with the lack of controls and 8. Letter from Hugo Chávez to the Supreme the existence of a bureaucracy ready to obtain Court of Justice. This letter can be found in Hugo its share of the booty, becomes a strong Chávez, “Carta del Teniente Coronel Hugo Chávez a la Corte Suprema de Justicia,” URRU, March 12, incentive for corruption, especially if punish- 1999, http://www.urru.org/papers/1999_varios/ ment is absent. The cases described in this 199904_cartaHcalTSJ.htm. paper illustrate the waste or illegal appropri- ation of billions of dollars, but not one single 9. Jorge Olavarría, speech before the National Congress, July 5, 1999. That speech, which was a corrupt officer or businessperson has yet strong indictment of Hugo Chávez’s violations of gone to prison as a result. A few of those offi- the constitution, can be found in Jorge Olavarría, cers who have obviously enriched themselves “Discurso de orden en el Congreso Nacional, el 5 have been removed from their posts, but no de julio de 1999,” Analitica Consulting, July 5, 1999, further action has been taken against them. http://www.analitica.com/bitblioteca/jolavarria/ 5julio1999.asp. They live rich and unmolested lives. This is exactly the opposite of what the nation was 10. Rangel, speech in Caracas, November 1999. promised by candidate Chávez. 11. See BBO Servicios Financieros, “bbo Weekly Meaningfully reducing corruption in Report,” BBO, March 3, 2006, http://www.bbo. Venezuela would require eliminating motives com.ve. and opportunity for corruption and punish- ing those responsible. After eight years of 12. Interview by Blanca Vera with economists Asdrubal Ontiveros and José Guerra, , Hugo Chávez, it’s entirely clear that the bat- July 6, 2006. See also “Las Fugas del Gobierno,” tle against corruption in Venezuela cannot VenEconomía, July 7, 2006, www.veneconomia.com. begin until Chávez has gone. 13. Johan Freitas, “Gold Reserves Looted from Venezuela’s Central Bank,” Militares Democraticos, December 28, 2002, http://www. militaresdemoc Notes raticos.com/articulos/en/20021228-06.html. 1. Gustavo Coronel, Venezuela: La Agonía del Subdesar- rollo (Caracas: Editorial Melvin, 1990), p. 136. 14. Andy Webb-Vidal, “Chávez Set to Seize $5 Billion of Central Bank Reserves,” Financial Times, 2. Ibid., pp. 138, 139. July 28, 2006.

3. Ruth Capriles, “Diccionario de la Corrupción en 15. Manuel Suárez-Mier, “President Chavez Venezuela,” 1984–1992 Ediciones Capriles (Caracas: Creates a New Government-Owned Bank,” Consorcio de Ediciones Capriles, December 3, 2002). Americas Data and Policy Commentary, Bank of America Notes, August 12, 2005. 4. Coronel, Venezuela, p. 143. 16. BBO Servicios Financieros, “bbo Weekly 5. Quoted in a speech given by José Vicente Rangel for Report,” BBO, May 2006.

21 17. Oscar García Mendoza, “Según Oscar García Cuba Policy Report 13 (February 28, 2006). Mendoza retiro del gobierno de 6 mil millones de bolí- vares dejó en completa indefensión al BCV,” 30. Velásquez Alvaray, quoted in Hernán Lugo Globovision, September 2, 2005, www.globovision.com/ and Vanesa Gómez, “Velásquez Alvaray: 15 Jueces news.php?nid=36695. Integran la Banda de Los Enanos,” El Nacional, May 26, 2006. 18. Andy Webb-Vidal, “Venezuelan Banks Enjoy Treasuries Windfall,” Financial Times, January 31, 2006. 31. See Leonardo Montiel Ortega, El Convenio Petrolero Cubano Venezolano (Caracas: 2001) which describes in 19. Juan Carlos Zapata, “Los colores del nuevo poder,” detail the characteristics of the agreement. Guiadenoticias, June 22, 2006, http://www.guiadenoti cias.com.ve/scan0606/desc0622_ rx.php. 32. Gustavo Adolfo Fabregat, “Red Flags on Venezuela’s Electoral Roll,” vcrisis.com, April 25, 20. Carlos Ball, “Social Entrepreneurship,” Daily 2006, http://www.vcrisis.com/?content=letters/ Journal, February 8, 2006. 200604251640.

21. Interview with former Venezuelan minister of 33. Richard Brand, ““Forget Dubai—Worry about finance José Alejandro Rojas, reprinted in Juan Carlos Smartmatic Instead,” , March 27, 2006. Zapata, “Peligro para los bancos Venezolanos,” Guiadenoticias, March 9, 2006, www.noticierodigital. 34. Casto Ocando, “Asocian a Chávez con com/imatges200603/ 0309_jcz.php. Fabricante de Maquina de Votar Usada en EE.UU,” El Nuevo Herald, May 14, 2006. 22. Documents on the presidential referendum of 2004 with details of the irregularities of that event 35. This detailed analysis of the alleged fraud com- can be found in Tulio Alberto Alvarez, mitted by the government of Hugo Chávez during “Ciudadanos: Magistrados de la sala plena del tri- the presidential referendum can be found in Tulio bunal supremo de justicia.—su despacho,” URRU, Alvarez, “Fraude a la democracia,” URRU, October www.urru.org/papers/TulioAlvarez_BBVA.htm. 15, 2004, www.urru.org/papers/Rrfraude/fraudeal ademocra cia_final.doc. 23. A website specializing in petroleum issues can be found in Gustavo Coronel, “Chavorragia 36. Gustavo Coronel, “Fernando Vegas Torrealba: A Financiera,” Petroleum World, January 27, 2006, Venezuelan Magistrate on a U.S. Tour,” venezuela www.petroleumworld.com/Edito012706.htm. TODAY.net, April 17, 2006, http://venezuelatoday. net/gustavo-coronel/magistrate_ ontour.html. 24. A report by Transparency International, Venezuelan chapter can be found in Silvia Salvato, 37. For an example of the new class of PDVSA’s “Contrataciones Publicas,” Transparency Internation- brokers, see “Irrevocable Master Fee Protection,” al, March 2006, www.transparencia.org.ve/admin/ URRU, 2005, www.urru.org/papers/2005_varios/ multimedia/imagenes/ 200608 10103321.pdf. documento_uno.pdf.

25. “Son 800 empresas que tienen adjudicación 38. Steven Dudley, “Surge una nueva clase de directa,” Notitarde, July 4, 2006. ricos en Venezuela,” El Nuevo Herald, July 17, 2006. See also Simon Romero, “Venezuela’s Cup Runs 26. Agustín Beroes, “La corrupción en tiempos de Over and the Scotch Whiskey Flows,” New York Chávez,” 2002, http://es.geocities.com/malversa- Times, August 20, 2006. cion/index.htm. 39. See Kenneth Rijock, “PEPwatch Venezuela: Beware 27. Gustavo Coronel, “The Case of the Venezuelan of Government-Controlled Private Corporations (Part Airbus: A Planeload of Corruption,” Venezuela 1 and Part 3),” vcrisis.com, February 2 and 3, 2006, TODAY.net, December 28, 2003, http://venezuela http://www.vcrisis.com/?content=letters/20060203 today.net/Gustavo-Coronel/Venezuela+airbus 1112 and www.vcrisis.com/?content=letters/2006020 A319CJ+Hugo-Chávez+avion.html. 31132 .

28. Alex Holland, “Venezuelan Military Officers 40. See Patricia Poleo, “Chacon Undulac,” URRU, Charged with Corruption,” VenezuelAnalysis. com, August 5, 2005, www.urru.org/papers/2005_varios/ February 16, 2006, www.venezuelanalysis.com/ 20050805_Chacon_Indulac.pdf. news.php?newsno=1897. This website is the most active pro-Chávez site in English. 41. Juan Carlos Zapata, “Los colores del nuevo poder,” Guiadenoticias, June 22, 2006, http:// 29. Ralph Galliano, “Agro-Industrial Sugar www.guiadenoticias.com.ve/scan0606/desc Complex: Cuba-Venezuela Joint Venture,” U.S. 0622_rx.php.

22 42. “The Sickly Stench of Corruption,” , 22, 2006. April 1, 2006, p. 31. 49. A special report of PROVEO can be found in 43. Kenneth Rijock, “Hugo Chávez Moves Venezuela’s English and in Spanish in Alek Boyd, “Venezuela Wealth Offshore,” vcrisis.com, January 21, 2006, www. Overtook Colombia in Homicide Numbers,” vcri- vcrisis.com/letters/200602211019. sis.com, June 9, 2006, http://www.vcrisis.com/ index.php?content=pr/200609050651. 44. Miguel Octavio, “How the Revolution Throws the Money Around: The $18 Million Retainer,” Devil’s 50. “The Corruption Perception Index,” Transparency Excrement, May 7, 2006, http://blogs.salon.com/ International, 2005, http://ww1.transparency.org/cpi/ 0001330/2006/05/07.html. 2005/cpi2005.sources.en.html.

45. A story on the 2006 International Narcotics 51. “The Sickly Stench of Corruption; Venezuela—A Control Strategy Report can be found in “El Campaign against Sleaze Raises More Questions Universal,” Caracas Daily, March 2, 2006. Than Answers,” The Economist, March 30, 2006.

46. Andy Webb-Vidal, “South American Cocaine 52. James D. Gwartney and Robert Lawson, Trafficking Shifts Operations towards Venezuela,” Economic Freedom of the World: 2006 Annual Report Jane’s Intelligence Review, May 2006, www.dere- (Vancouver: Fraser Institute, 2006), p. 3. choshu manos.gov.co/shared/venezueladrugs.pdf. 53. See Caracas Chronicles.com, Jauary 28, 2006, 47. “Al Este cueste lo que cueste,” Exceso, June 2006. http://caracaschronicles.blogspot.com/archives/ http://www.exceso.net/. 2006_01_22_caracaschronicles_archive.html.

48. Brian Ellsworth, “A Closed Bridge Mirrors 54. “The Cabinet of Hugo Chávez,” Answers.com, Venezuela’s Many Woes,” New York Times, January http://www.answers.com/topic/cabinet-of-hugo-ch-vez.

23 Board of Advisers

ANNE APPLEBAUM he Center for Global Liberty and Prosperity was established to promote WASHINGTON POST T a better understanding around the world of the benefits of market-lib- GURCHARAN DAS eral solutions to some of the most pressing problems faced by develop- FORMER CEO, PROCTER ing nations. In particular, the center seeks to advance policies that protect human & GAMBLE, INDIA rights, extend the range of personal choice, and support the central role of eco- ARNOLD HARBERGER nomic freedom in ending poverty. Scholars in the center address a range of UNIVERSITY OF CALIFORNIA AT LOS ANGELES economic development issues, including economic growth, international finan- cial crises, the informal economy, policy reform, the effectiveness of official aid FRED HU GOLDMAN SACHS, ASIA agencies, public pension privatization, the transition from socialism to the mar- ket, and globalization. PEDRO-PABLO KUCZYNSKI For more information on the Center for Global Liberty and Prosperity, visit FORMER PRIME MINISTER www.cato.org/economicliberty/. OF PERU

DEEPAK LAL UNIVERSITY OF CALIFORNIA Other Studies on Development from the AT LOS ANGELES Cato Institute JOSÉ PIÑERA FORMER MINISTER OF LABOR AND “The Rise of Populist Parties in Central Europe: Big Government, Corruption, and the Threat to SOCIAL SECURITY, CHILE Liberalism” by Marian L. Tupy, Cato Institute Development Policy Analysis no. 1 (November 8, 2006)

“Foreign Aid and the Weakening of Democratic Accountability in Uganda” by Andrew Mwenda, Foreign Policy Briefing no. 88 (July 12, 2006)

“Private Education Is Good for the Poor: A Study of Private Schools Serving the Poor in Low- Income Countries” by James Tooley and Pauline Dixon, White Paper (December 7, 2005)

“Trade Liberalization and Poverty Reduction in Sub-Saharan Africa” by Marian L. Tupy, Policy Analysis no. 557 (December 6, 2005)

“The Triumph of India’s Market Reforms: The Record of the 1980s and 1990s” by Arvind Panagariya, Policy Analysis no. 554 (November 7, 2005)

“Underdevelopment in Sub-Saharan Africa: The Role of the Private Sector and Political Elites” by Moeletsi Mbeki, Foreign Policy Briefing no. 85 (April 15, 2005)

Nothing in this Development Policy Analysis should be construed as necessarily reflecting the views of the Center for Global Liberty and Prosperity or the Cato Institute or as an attempt to aid or hinder the passage of any bill before Congress. Contact the Cato Institute for reprint permission. Additional copies of Development Policy Analysis are $6 each ($3 for five or more). To order, contact the Cato Institute, 1000 Massachusetts Avenue, N.W., Washington, DC, 20001, (202) 842-0200, fax (202) 842-3490, www.cato.org.