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Jessica Tillipman
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Bill Steinman
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Richard L. Cassin
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Contributing Editor

Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
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Right Issue, Wrong Side?

When graft-busting becomes a political weapon, the rule of law grows weaker and corruption generally flourishes. Is that what’s happening in Venezuela? Maybe. For sure the number of high-profile opposition leaders accused of bribery and corruption is growing.

  • The latest is the mayor of Maracaibo, Manuel Rosales, 56. He ran against President Hugo Chavez in 2006 and lost. A Bloomberg report said authorities claim he “could not explain some $60,000 of income while he was governor of the oil-rich state of Zulia.” This week he fled to Peru instead of facing trial.
  • Leopoldo Lopez, 37, was a popular opposition mayor of Caracas’ Chacao Municipality. Based on accusations of corruption, the comptroller general banned him from ever running again for public office.
  • An opposition governor from Yaracuy state, Eduardo Lapi, was convicted of corruption and jailed. He escaped two years ago and fled to Peru, which granted him political asylum.
  • Venezuelan authorities used a corruption investigation to arrest former Defense Minister Raul Baduel, who joined the opposition two years ago.

Bloomberg quoted former mayor Lopez as saying, “The fundamental problem is that there’s no credibility in the judicial system, which is a system that’s been completely politicized. This is retaliation and selective repression.”

Venezuela’s 27 million people need a sincere anti-corruption campaign. Here’s why. The country ranked 158 out of 180 on the 2008 Corruption Perception Index, tied with Angola, Azerbaijan, Burundi, Congo, Gambia, Guinea-Bissau and Sierra Leone. That’s a rough crowd.

On the World Bank’s 2009 Doing Business Index, Venezuela ranked 174. The only countries below it were Chad, São Tomé and Principe, Burundi, Congo, Guinea-Bissau, the Central African Republic and the Democratic Republic of the Congo. One symptom of Venezuela’s condition is red tape, corruption’s constant companion. The permits needed to build a warehouse there, for example, take 395 days to obtain and cost 344% of per capita income ($11,600). The OECD averages are 161.5 days and 56.7% of per capita income.

The Heritage Foundation’s 2009 Index of Economic Freedom ranked Venezuela 174, followed only by Eritrea, Burma, Cuba, Zimbabwe and North Korea. It said, “Corruption pervades civil society and the judiciary; contracts and property rights are not well protected. Government tenders are vulnerable because the process frequently lacks transparency. Critics allege that price and exchange controls, involvement by government and military officials in narcotics trafficking, and kickbacks on major weapons purchases are sources of corruption in Venezuela.”

Venezuelan oil revenues, according to the CIA World Factbook, account for roughly 90% of export earnings, about 50% of the federal budget revenues, and around 30% of GDP. It’s the fourth-biggest supplier of foreign crude oil to the U.S.

In Pride International’s latest Foreign Corrupt Practices Act disclosure, the oil services company said it has identified potentially corrupt payment practices in Venezuela.This year, Siemens admitted paying $16.7 million in bribes there, and former Bridgestone manager Misao Hioki said he negotiated corrupt payments with Venezuelan officials. Earlier FCPA enforcement actions involving Venezuela were Oil States International, Inc. (2007) and BellSouth Corp. (2002). In an ongoing European investigation, Swiss authorities reportedly found evidence that French engineering firm Alstom paid bribes to Venezuelan government officials.

The U.S. administration has a new narrative and looks ready to engage President Chavez. At the top of the agenda should be ways to promote sincere, non-political anti-corruption initiatives. How else will Venezuelans be able to sort their honest public servants from the crooked ones?
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