Business, Finance & Economics

Newly rich, now under attack


CARACAS, Venezuela — They made their money by sticking close to Venezuelan President Hugo Chavez. And now they are under attack.

The Venezuelan government has so far apprehended 10 businessmen in a corruption purge. Those arrested once seemed untouchable because of their relationship with Chavez’s revolution.

But then the government was forced to intervene in eight banks after authorities found irregularities in their operations. Those banks represent 8 percent of Venezuela's total deposits. Some had been lending their own executives large sums of money while one owner could not prove where the money had come from to finance the acquisition of four banks.

"A group of irresponsible bankers, of citizens crazed by ambition, started to use the public's money, private and public money in their banks, to commit crimes," Chavez said.

The takeovers ignited fears of a national banking crisis, and put the spotlight on Venezuela’s newly wealthy — known as the “Bolibourgeoisie” or “Boligarchs,” a term coined to refer to their enormous wealth as well as their close association with Chavez’s “Bolivarian revolution.”

“A Bolibourgeois is a man who has become a businessman or magnate through his relations with high officials in the government,” said Teodoro Petkoff, editor of the Venezuelan daily Tal Cual and a former politician, guerrilla and economics minister.

Analysts say the banking purge is a way for Chavez to distance himself from a group of people who had become enormously rich and powerful under his revolution while at the same time allowing him to portray himself as a crusader against corruption.

Those arrested include Ricardo Fernandez Barrueco, known as the “Tsar of Mercal” because he amassed his fortune by selling cornflour and other products to the government’s subsidized food markets. He is worth $1.6 billion, with most of his money stashed abroad, according to government investigations. He gained favor with Chavez after he loaned his fleet of trucks to the government during the nationwide strike of 2003.

Another, Arne Chacon, rose rapidly from being an employee in the government tax office to being president of Banco Real, one of the banks under investigation. He is also the brother of Jesse Chacon, the minister for science and technology and 20-year ally of Chavez, who resigned after hearing of his brother’s arrest.

“I’m very sorry that he is the brother of a minister," Chavez said, "but with this we are showing that here there are no untouchables.”

Jesse Chacon was widely considered Chavez’s No. 3 and held several other positions in the government including interior minister. His resignation has people pondering how deep corruption has penetrated Chavez’s government.

Graft in Venezuela is not a new phenomenon. Chavez’s rise to power was largely fueled by discontent among the Venezuelan electorate over corruption within previous governments.

Some say the problem has become endemic under Chavez, a claim backed up by Transparency International’s corruption index, which places Venezuela 162 out of 180 countries. Others say such surveys are misleading because they poll only businessmen who, with the exception of the Boligarchs, are largely anti-Chavez.

Last week, the government arrested a judge and her entire court after she released Eligio Cedeno, another "boligarch" who was arrested in 2007 for allegedly circumventing government currency controls on purchasing U.S. dollars. Judge Maria Afiuni ruled that Cedeno should be freed after being presented an opinion by a U.N.-mandated panel of legal experts. Chavez has called for Afiuni to be imprisoned for 30 years.

Pro-government voices say the case proves that the judiciary is part of a corrupt system that existed before Chavez. Others say Afiuni's verdict was legal and that Chavez's intervention shows that the courts are subordinate to his whims.

Chavez faces important elections next year when Venezuela will vote for members of its lawmaking National Assembly. His popularity has slipped from 57 percent in February to 46 percent in October, according to local polling firm Datanalisis. That may fall further if voters perceive that he turned a blind eye to the Boligarchs’ activities until now.

Many question how he would be oblivious to corruption taking place so close to him. Gregory Wilpert, editor of the pro-Chavez news site Venezuelanalysis and author of “Changing Venezuela by Taking Power: The History and Policies of the Chavez Government,” believes that is possible.

“I wouldn’t be surprised if he has only just found out about it because it’s pretty well known that Chavez is fairly insulated by his advisers,” he said. “If you look at what people in the communities always say about Chavez, they say they love Chavez but he’s surrounded by a whole bunch of corrupt people.”

But opposition voices such as Petkoff believe the Boligarchs scandal could implicate confidantes even closer to Chavez such as his former Vice President Diosdado Cabello and even his brother, Adan, the current governor of Barinas state.

“Here we are facing a paradox because in the eyes of the great public, above all members of his party, the president seems to be a champion in the fight against corruption,” he said. “In the short-term this could help him but in the mid-term will the president be able to maintain that image of himself as St. George against the Dragon? I don’t know.”