Wednesday, September 07, 2005

Corruption in Venezuela

Corruption was Chavez's call to power, his main political platform became the removal of the corrupt elite (1) from power. A large portion of the venezuelan middle class, and even a non negligible number of higher class citizens voted for him, exclusively because of that. He portrayed himself as the Anti-Corruption Messiah, and the great majority of clueless Venezuelans followed him like lemmings. So it requires some analysis, specially because newcomers to the Venezuelan problem know very little to nothing about its history, and thus are very easily manipulated by The Chavez Propaganda Machine™ (2). So let me expound on a couple of fallacies that surround this keystone of Chavez appeal.

Corruption levels in Venezuelan government have always been high, Chavez government is no worse than previous ones

This, which I would hardly qualify as a defense of Chavez's government, given his platform and that he has been in power for more than 6 years already, is one of those half truths that Propaganda Machines like so much. By personal experience this is not true, Corruption is now worse than ever, just a simple sample was recently reported by Miguel, and his account of the electoral history of Venezuela gives a glimpse of the evolution of government corruption, but personal experience does not a solid argument make, so let me go to the most scientific source I can find on this, the corruption perception index from transparency international and the university of Passau, these institutions compile corruption perception indexes for most countries in the world, using an average of several (up to 18) different statistic studies. Which, even if each one of them is biased, being independent studies by different institutions, the overall result should have very little variability and bias. One of the purposes of the index is that businesses know what to expect if they are setting shop in any of those countries. A lower index means more corruption. The following plot shows the Indexes for Venezuela, Brazil, Colombia, and Zimbabwe during the period of interest (as a reference, the U.S. index averages 7.6 in the graph period). Even the CPM™ has used the index in the past to erroneously show that it had improved since Chavez took power, to discredit them, or to blame AD and COPEI for the corruption. However we have to keep in mind that it is a perception index. To use it as 'absolute corruption in 1998' is as fallacious as using W's popularity index during his electoral campaign to indicate support for his presidency 9 months later. If we look at the index during the previous governments, we see a dip in 1998, coinciding precisely with Chavez's campaign, the "perception" of corruption was higher during an electoral year in which corruption was precisely the leitmotiv of the campaign, what a shocker. If we go back to the year before the campaign (1997), and the year after (1999), we can see that the index is very similar. Which is to be expected, as the level of corruption should not change overnight as the electoral year data would suggest. So from then on we can see the declining trend across Chavez's presidency. Need I say more? That is the progress that they boast about, that is the work of the Chavez government, I am just waiting for this year's numbers to continue to appreciate the Supremo's miracles, we now might have to start looking up to Mugabe for inspiration.

PDVSA was a corrupt organization before Chavez, the oligarchs (3) are not in control of it anymore

The different companies that now comprise PDVSA were all descendants of the international oil industry nationalized in 1976, the company culture, and its management was pretty much a model of what the top private oil industries in the world were like at the time. Needless to say, personal merits, and high moral standards guided the functioning of the different companies. Industry directors were all ascended from inside the company's ranks. The central government had very little interference in the industry, besides setting global country policies, taxes, tariffs, or basic industry direction planning, the day to day was handled by the different managers. Each one of the companies had a somewhat different culture, so I will talk about the one I know the most of: Lagoven. In Lagoven, efficiency was key, and any kind of corruption was heavily prosecuted. It had its internal 'police' department, and though corruption cases did exist and these were seldom publicized, we would normally learn from them through hall-rumors, when someone was forced to leave their office by the arm of a police officer to get charged on their felony. I only remember one case that made it to the media, and it was an industrial espionage case that involved some higher level management personnel. Needless to say, it was a tight ship. At the same time, Lagoven had its own internal social programs, it had scholarships for its workers and their kids, and aid campaigns, a very motivated and intelligent daily laborer that I knew made use of these programs to become an engineer in a private university, I hope he still has a job there, but I doubt it. At the time PDVSA was one of the most efficient oil industries in the world, with numbers that astounded me, like 100 times more efficient than PeMex (Mexican petroleum company). Though it was state owned, it was left alone to produce riches for the country. Of all the Venezuelan state companies (and there are many) PDVSA was the most efficient. Now, Chavista propaganda likes to portray this, as a 'state within a state,' because the central government had relatively little to say about the day to day of how things were run. We, Venezuelans, liked it that way, because we saw the amount of corruption in the rest of the government institutions, and it was refreshing to have our main source of income isolated from all this, we called it our 'golden goose'. PDVSA and all its affiliates never missed a yearly report, never missed informing the nation of all its dealings, it had cultural programs, and facts in all of the media, it conducted itself with the transparency that a company of its magnitude has to have towards its owners, the Venezuelan people. Chavez changed all that, after merging all the companies into PDVSA (which before was just the 'umbrella' company, but it was something that had been in the general plans anyway), he started by assigning industry directors from anywhere he wanted (mostly the military), changing them every time they disagreed with what he wanted. A famous episode that exemplifies this was when one of this directors gets a call by Chavez in the middle of an address to the nation, after which he retracted what he was saying before. Needless to say, he also resigned. The large purge of PDVSA (18000 employees according to some counts) that Chavez did after the industry strike in 2002 got rid of all the meritocratic systems in place, and put government cronies in all industry posts. I don't doubt that there is some honest people inside it (I know some of them, and they just stay because they have to make a living, it has become another government cesspool). Now, it's almost impossible to know any of PDVSAs dealings and accounts, and transparency has been thrown overboard. PDVSA is now no different from the rest of the government, as an example, one of my family members, a professional and a Chavista called to work for 'the revolution', got fired because of not wanting to take part in the corruption ring at the PDVSA office!!, quite a change of culture, no doubt.
And in case someone wants to talk about what Chavez has said about corruption, that is irrelevant, because the fact remains that he has done nothing but make it worse than it has ever been, as a sample, just take a quick scan of the blogs: Miguel's: Non-existing fight against corruption Coronel's: Document the illegitimacy of Chávez and denounce him Miguel's: PDVSA cannot be audited Miguel's: PDVSA, serious inconsistencies at the company Miguel's: A trully revolutionary swindle Miguel's: Seven stories El Universal: Citgo faces piteous situation Daniel's: A Cadena, the universal Chavez remedy
  1. Elite here should be interpreted as the ones in power before Chavez. If you are wondering, why I am explaining the obvious, read about my problem with labels. it might be obvious to you, but to me the new 'elite' are the Chavistas, they have absolute control of the state.
  2. I am starting to like this label, this is a topic that has been covered ad infinitum. Chavez spends millions of dollars a year in maintaining a propaganda machine with the sole purpose of distracting international attention from his dictatorship, and recruiting clueless left-wingers, specially reporters, with this cause in mind. This is handled through embassies around the world, and it seems mostly concentrated in the Venezuelan Information Office (VIO).
  3. This is fallacy on it's own, as oligarchy means "Governed by a Few persons," and now the number of deciding instances is PDVSA is lower than ever, just 1, Chavez himself.

Correction: 4:46PM, fixed the oil industry nationalization year.