Stemming Collapse : Venezuela’s War on Corruption

Bruno Sgarzini
Translated by Tortilla Con Sal

The most recent investigations by the Attorney General indicate a healing of damage to sensitive structures in Venezuela’s government such as the State oil company Pdvsa, the State’s main source of income and the State bodies in charge of assigning the foreign currency earned by oil exports.

Since 2008, the Orinoco Oil Belt business suffered inflated invoices of up to 200% by subcontractors to Pdvsa under Pedro León’s management. Just 10 of 14 contracts analyzed by the Attorney General’s office involved the embezzlement of the enormous amount of US$200 million. Given that 41,000 similar Pdvsa contracts may involve that kind of corruption, losses to the Venezeulan State may amount to around US$35 billion, according to Venezuela’s Attorney General Tarek William Saab

The Cuferca group owned by businessman Carlos Urbano Fermín, which benefited from these kinds of contracts via its joint venture company wth Pdvsa, Orinoco Logistical Oil Services, is a good example because it was an important economic entity in the state of Anzoátegui, thanks to its activities in construction, transport, timber distribution and medical and media services. The Attorney General’s office also suspects the company of serious political interference in the region given Cuferca’s relationship with the mayor of Guanta, Jonathan Marín.

The whole case was covered up under previous Attorney General Luisa Ortega Diaz, who is presumed to have used the lawyer Parra Saluzzo, who has also represented Leopoldo López, as an intermediary to help Cuferca avoid investigation in exchange for a bribe, according to leaks made public by the investigative web site, La Tabla. Parra Saluzzo is also implicated in the network of Ortega Diaz and her husband German Ferrer which extorted businesses in the Orinoco Oil Belt caught up in the embezzlement of Pdvsa.

This combination of corruption, big business, politics and legal abuses, took hold of Pdvsa, which is a vital artery of the Venezuelan State, the source of 96% of the foreign currency Venezuela uses for the operation of its economy and for the social rights consecrated in the Constitution. If that artery gets blocked it directly affects the heart of Venezuela as a nation and as a politically viable country.

Corruption as a means to paralyze the State

In that regard, the Attorney General’s investigation, together with military counter-intelligence, uncovered other cases, like that of Petrozamora, in which a network of senior management in Pdvsa Occidental played a leading role in corruption and sabotage that affected production of that joint venture operation between Pdvsa and the Russian company Rosneft, which reported what was happening to the then Attorney General in 2015 without Luisa Ortega Diaz doing anything about it.

According to investigative journalist Víctor Hugo Majano, the internal sabotage in Pdvsa aimed at paralyzing the company’s maintenance programs so as to complicate repair and recovery of vulnerable areas affected by accidents. In that way it was hoped to provoke a technical breakdown in the company, just when, overseas, it was blocked from access to emulsifying additives needed for processing its heavy and semi-heavy crude oil so as to be able to sustain oil production which in fact diminished by 20% according to OPEC estimates. Majano’s reporting suggests this drop in production was due at least in part to the internal sabotage in Pdvsa.

These are not minor details given that military counter-intelligence suspects that many of the snior managers involved received offers from the US authorities to help themkeep themoney they embezzled in exchange for sensitive information about Pdvsa.this happened in the context of the Trump administration’s order to shut down Pdvsa’s lines of credit so as to hinder external financing to ensure stable oil production so as to guarantee economic resources in the middle of the drop in oil prices,

So the Attorney general’s actions seek to ensure that this kind of corruption does not affect Pdvsa’s administrative capacity and to heal damaged management structures and operations so as to avoid a technical breakdown which would make Venezuela’s financial situation worse at a time when it needs to keep going economically while also meeting debt repayments of around US$10 billion a year, with no way of rescheduling them via conventional means, thanks to the blockade imposed by the United States.

A healing process – the focus of the fight against corruption

Elsewhere, the Attorney General’s investigations have covered other vulnerable areas of the Venezuelan State where efforts were made to provoke a breakdown in line with the US strategy of making the country implode so as to be able to invoke the “humanitarian crisis” motif. For that reason Attorney General Saab’s investigations have focused on Pdvsa, the main source of foreign exchange income for Venezuela and on the entities in charge of assigning that foreign currency, the Commission for Foreign Currency Administration (Cadivi) and the National Center for Foreign Trade (Cencoex)

In relation to Cadivi-Cencoex, a good example of the over-billing involved is that of 130,000% in the case of the Bates Hill company, which in many transactions presented documentation lacking a tax domicile. In all these cases, it almost goes without saying that 80% of the companies involved in this type of fraud had their investigations set aside by Luia Ortega Diaz, which simply allowed these private businesses to repeat their recidivist behavior, with extremely serious financial consequences for Venezuela.

That is why it is so important for the Attorney General’s office to repair the damage in such a sensitive area as the administration of the country’s income and expenditure. These two factors have been subject to efforts at creating a choke hold on Venezuela so as to weaken the moral, political and institutional supports that sustain its integrity as a nation. Ultimately, the day to day reality lived by ordinary Venezuelans in their access to food and medicines is victim to this corrupt conspiracy, one aimed at eliminating any possibility of an autonomous national project.

A nation-building judicial model

It is very important that the Attorney General’s work is centered on unblocking these two vital arteries for the working of the Venezuelan State. Almost two months ago the former Attorney General Luisa Ortega Diaz bet that she could use the monopoly on criminal action enjoyed by her office to behead the country’s leadership on the pretext of a fight against corruption. She hoped to create a cascade effect so as to deepen the process of institutional paralysis begun by the MUD political opposition’s conquest of the National Assembly.

This is in a regional Latin American context, guided by US government funding, aimed at using corruption cases to dismantle key State income sources. Such is the case in the Lava Jato judicial process in Brazil, which currently constrains the capacity of the country’s main energy company, Petrobras, and has left it without access to the country’s Pre Sal deposits, rich in crude oil, via a law privatizing them on the pretext of the company’s corruption scandal.

Examples abound in the region where the fight against corruption is exploited to facilitate policies dismantling State control of strategic sectors. Instead of facilitating greater efficiency in sensitive areas like public works and public services, currently the source of popular discontent, aggressive media campaigns are used to divert all the blame on to the government in power.

That is why the justice model promoted by Venezuela’s Attorney General is a model to follow at a time when public administration in Venezuela is focused on preventing the destruction of the State. That objective requires flexible and efficient institutions of government and new ways of doing things which involve the accompaniment of the population in exceptional and audacious policies at a time when Venezuela faces the most serious attack since Independence.