Watching Government: Venezuela’s petro-diplomacy

Venezuela President Hugo Chavez promoted Petrocaribe as a regional social improvement program in 2005 when he inaugurated it to sell Venezuelan crude oil at deep discounts to countries across Latin America that did not have their own production. The idea was to encourage fair trade and economic growth. It produced widespread corruption instead, a team of Latin American journalists found.

Led by Connectas, an investigative journalism platform, the group’s report, “Petrofraude,” showed that the regimes of Chavez and his successor, Nicolas Maduro, injected an estimated $28 billion into 14 beneficiary countries.

The disbursement of the funds and their use by recipient governments was often mismanaged, it said. This served instead to buy diplomatic loyalty which shielded the Chavez-Maduro regimes from stronger international criticism, it indicated.

“A dozen or so journalists came together to show how it was possible to build a ring of power to protect Venezuela’s leadership,” Connectas Director Carlos Eduardo Huertas explained during a Mar. 19 discussion of the undertaking at the Inter-American Dialogue in Washington.

“This began with low interest loans—around 2%—where several much smaller countries received more money than their sizes or populations justified,” Huertas said. “They lent their diplomatic support as Venezuela, a wealthier country, exported much of its wealth for questionable projects in those countries.”

Transparency was the most important missing ingredient, Huertas maintained. “Many of these countries did not benefit from Venezuela’s largesse. We looked into more than 400 projects and found unusually high levels of corruption where work sometimes was not even begun, let alone completed,” he said.

Another panelist noted that Haiti’s government said it used more than $2 billion it received to rebuild after several hurricanes. “Ten million dollars was disbursed for the new presidential palace which still hasn’t been built,” said Miriam Kornbluth, a senior director for Latin America and the Caribbean at the National Endowment for Democracy.

Routed to officials

“Companies benefited from lax rules. They were tied to several government officials. The money did not always stay in Haiti,” Kornbluth said.

Other panelists cited instances elsewhere. “There was a case in Nicaragua where a politician who had never been elected used millions of dollars in humanitarian aid for his first successful campaign,” said Suhelis Tejero Puntes, a reporter at Diario Libre in the Dominican Republic.

Zoe Reiter, a senior project leader at Transparency International, said that such organizations will need to start stepping forward more to help combat this corruption. “Anonymous shell companies are a popular corruption tool,” Reiter said. “We’re pleased legislation has been introduced in the US Congress to make these entities more accountable. It’s not perfect, but at least it’s a start.”