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### Viewing cable 08KINGSTON97, S) JAMAICAN-VENEZUELAN RELATIONS: AN INSIDE VIEW

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08KINGSTON97 | 2008-01-30 19:57 | 2011-06-13 09:30 | SECRET | Embassy Kingston

`

    VZCZCXYZ0009
    PP RUEHWEB

    DE RUEHKG #0097/01 0301957
    ZNY SSSSS ZZH
    P 301957Z JAN 08
    FM AMEMBASSY KINGSTON
    TO RUEHC/SECSTATE WASHDC PRIORITY 5892
    INFO RUEHLO/AMEMBASSY LONDON PRIORITY 0424
    RUEHCV/AMEMBASSY CARACAS PRIORITY 0516
    RHMFISS/CDR USSOUTHCOM MIAMI FL PRIORITY
    RHEHAAA/WHITE HOUSE WASHDC PRIORITY
    RUEAIIA/CIA WASHDC PRIORITY

` `

    S E C R E T KINGSTON 000097

    SIPDIS

    SIPDIS

    DEPT PASS EC CARICOM COLLECTIVE PRIORITY FOR INFO

    DEPT ALSO PASS CENTRAL AMERICAN CARIBBEAN BASIC COLLECTIVE FOR INFO

    DEPT FOR WHA/FO (TSHANNON), WHA/FO (KMADISON)WHA/CAR (JTILGHMAN),
    WHA/EPSC (VDEPIRRO)

    WHITE HOUSE/NSC FOR DAN FISK

    TREASURY FOR SARA GRAY

    SOUTHCOM FOR ADMIRAL STAVRIDIS

    E.O. 12958: DNG: CO 01/29/2029
    TAGS: PREL PINR SOCI ETRD ENRG ECON EINV XL JM
    SUBJECT: (S) JAMAICAN-VENEZUELAN RELATIONS: AN INSIDE VIEW
    FROM THE MFAFT (PART II)

    REF: A. 07 KINGSTON 1793 B. KINGSTON 0095

    Classified By: DCM James T. Heg for reasons 1.4 b and d 1.

    (S) The text below is a continuation of Reftel B from an
    internal briefing document drafted by the Jamaican Ministry
    of Foreign Affairs and Foreign Trade (MFAFT)'s Bilateral
    Relations Department. (see reftel).

    (BEGIN TEXT PART II)

    Ideological Endorsement
    -----------------------

    ¶53. (C) The ideological views proclaimed by President Chavez
    are both populist and uncompromising. At its heart is an
    appealing blend of principle, egalitarian belief and
    opposition to what he views as the failed neo-liberal
    policies reflected in the so-called 'Washington Consensus'.

    ¶54. (C) Any expectation that Chavez may have of securing
    Jamaica's endorsement for his ideology, is probably founded
    on his belief in the universal appeal of his principles and
    core beliefs. Chavez espouses principles of mutual aid,
    solidarity, and respect for self-determination. Allied to
    this is a strong belief that governments of the world have a
    moral obligation to improve the lot of all human beings,
    through pursuing policies that promote friendship, solidarity
    and peace. His objective of achieving socio-economic
    development within the framework of Latin American and
    Caribbean integration provides a seductive proposition,
    therefore, when allied to the financial and economic support
    that he is able to render. On top of this has been placed a
    heavy coating of strident anti-poverty, anti-dependency,
    anti-social inequality, anti-unilateralism and anti-hegemonic
    rhetoric.

    ¶55. (C) It is not difficult to see, therefore, how Chavez
    might believe that Jamaica and other developing countries of
    the hemisphere would wish to buy-in to his vision of a united
    Latin American and Caribbean region. In his world vision,
    such a unified regional bloc would utilize the approach of
    South-South co-operation to achieve social objectives such as
    the eradication of illiteracy, the promotion of social
    inclusion, the attainment of food security, while
    collaborating in the areas of energy, communications and
    infrastructure development.

    ¶56. (C) In reality, however, the situation is much more
    complex. Chavez's own expectations of Jamaica's endorsement
    of his ideology would be tempered if he were to consider that
    Jamaica has moved away from the developmental strategy he has
    chosen to adopt, i.e.

    ¶A. His denunciation of the neo-liberal capitalist system is
    at odds with JamaicaQ,s liberal market-oriented economic
    model;

    ¶B. His criticism of the international financial institutions
    and the operation of the international systems runs counter
    to Jamaica's reliance on the international capital market;

    ¶C. The negative attitude he displays towards foreign
    investors and multi-national corporations is at variance with
    Jamaica's welcoming approach to foreign investment;

    ¶D. His rejection to the FTAA contrasts with JamaicaQ,s
    commitment to this hemispheric trade integration pact
    (although prospects for negotiations resuming are remote).

    Political Analysis
    -------------------

    ¶57. (C) There is now sufficient evidence to show that
    President Chavez is beginning to question what Jamaica and
    other CARICOM countries stand for. This was clearly
    articulated by him following the November 2005 Summit of the

    Americas in Argentina. In relation to CARICOM's position
    towards the FTAA, which he has said he wishes to see buried,
    he enquired:

    "I would like to hear from my CARICOM brothers to see what
    they have to say about this, to see if they are going to join
    this blackmail by the mob; silence in the room. "

    On the ability of small states to compete with large
    developed ones:
    " ... that's why I do not understand the positions of the
    leaders of the Caribbean; today, I asked some of them: What
    are you defending? I said clearly and I will tell them more
    clearly each day: What are you defending? Don't you see that
    they are presenting you with an illusion, a mirage; are they
    not aware of the grave danger which hangs over them?"

    In commenting on geopolitical relations within the hemisphere
    he remarked:
    "I always tell my friends of the Caribbean to look more
    towards the South, to look a little more towards the South
    and they will find reality. "

    ¶58. (C) An assessment of Jamaica's strategic interests
    demonstrates that there are indeed significant differences in
    the perspectives and governing philosophies of the Venezuelan
    and Jamaican governments. Therefore, it can be expected that
    the Chavez administration will place increasing pressure on
    Jamaica and other Caribbean and Latin American recipients of
    his largesse to subscribe to his ideological tenets, as a
    condition for receiving continued and expanded economic
    assistance.

    ¶59. (C) The most recent evidence of President Chavez's
    frustration on this issue came during a private meeting he
    had with Prime Minister Simpson Miller, during the previously
    referenced visit to Montego Bay on 12th March, 2007. In
    response to his invitation to join ALBA, Prime Minister
    Simpson Miller indicated that Jamaica welcomed the
    opportunity to study the matter in greater detail. There was
    an awkward silence following the Prime Minister's comments
    and it is safe to conclude that President Chavez was not
    impressed by Jamaica's non-committal position, particularly
    coming after his passionate public appeal for Jamaican
    support for the ALBA.

    ¶60. (C) A part of the reason why the relationship has become
    so one-sided, in terms of the bilateral assistance that is
    provided, is that there was developed a level of policy
    incoherence among the various Jamaican Ministries, agencies
    and other governmental bodies that all rely, to some degree,
    on gaining assistance from the Government of Venezuela. This
    lack of policy coherence will need to be addressed as soon as
    possible.

    Political Developments in Venezuela
    -----------------------------------

    ¶61. (C) Presidential elections in Venezuela took place on 3rd
    December 2006, and Hugo Chavez Fr!as was again victorious at
    the polls. In the period immediately following his election
    to a second six-year term, President Chavez set in motion a
    process that resulted in him being granted special powers by
    the Venezuelan Congress to rule by decree. Such powers have
    given him significant latitude to undertake the
    nationalization of segments of Venezuelan private industry,
    which is ostensibly aimed at giving Venezuelans greater
    control over their country's resources and shoring up
    Venezuelan sovereignty.

    ¶62. (C) Among President Chavez's early statements following
    his re-election was his proposals that the country's main
    political parties be merged into a single political entity
    and that the constitution be re-written. Such proposals were
    in keeping with his intention of advancing the Bolivarian
    revolution and with his characterization of the guidepost of
    the country's future as "Fatherland, socialism or death."
    Such utterances have left many observers with the impression
    that it was his intention to take the country further along
    the path towards socialism.

    ¶63. (C) President Chavez's 28th December 2006 announcement of
    his decision not to renew the broadcast license for Radio
    Caracas Television (RCTV), the country's second largest
    television station, when its license expired on 27th May
    2007, sparked domestic and international controversy. The
    station, which had been created in 1953, had been
    characterized as 'pro-opposition', particularly in the light
    of its coverage of the 11th April 2002 coup attempt against
    President Chavez and the anti-government strikes that took
    place in its wake. Following the announcement of the
    non-renewal of RCTV's license, there was widespread protest
    within the country by those against, as well as those in
    support of the President's actions. The matter was also
    accorded much attention in the international media, with
    several commentators raising questions about the extent to
    which press freedom was guaranteed in Venezuela.

    ¶64. (C) Among the more significant international reactions to
    the RCTV incident was that of OAS Secretary General Jose
    Miguel Insulza, who issued a communique wherein he condemned
    the action and raised questions about the extent to which the
    Government of Venezuela was abiding by democratic principles
    and practice. In response, President Chavez characterized the
    Secretary General as "a true idiot" and "a viceroy for the
    empire".

    ¶65. (C) In addition to the RCTV matter, the Venezuelan media
    landscape underwent further changes with the Government's
    introduction of TELESUR, station that was aimed at
    counteracting what it characterized as anti-Government
    political propaganda being broadcast by several networks,
    particularly those that were privately owned. The station was
    also geared towards providing coverage of social, cultural
    and political matters that would serve to promote a greater
    degree of integration among the countries of the region. With
    long-term plans for TELESUR to broadcast in Europe and the
    United States, the station may be regarded as an attempt by
    Venezuela to provide an alternative to the perspectives of
    Western media outlets such as CNN.

    Economic Developments
    ---------------------

    ¶66. (C) The increases in oil prices for the last two to three
    years, coupled with growing global demand for the commodity,
    have placed oil producing countries in an advantageous
    economic position. As such, Venezuela has seen an increase in
    its oil revenues which has underwritten President Chavez's
    particular brand of petro-diplomacy.

    ¶67. (C) Venezuela's economic fortunes are linked to world oil
    prices and the country remains highly dependent on the
    petroleum sector, which accounts for approximately one third
    of its GDP, 80 percent of export earnings and more than a
    half of the government's operating revenues.

    ¶68. (C) In recent years, increased tax collection has
    resulted in an increase in government revenue. Revenue
    derived from taxes is the main source of non-oil revenue for
    the country. Though Venezuela has a rich resource base,
    possessing significant quantities of coal, iron ore, bauxite
    and gold, in addition to oil, most Venezuelans live in
    poverty, in shanty towns throughout the country. The country
    is also characterised by high rates of unemployment and
    widespread poverty (although the poverty rate has declined
    sharply as a result of President Chavez's policies).

    ¶69. (C) Since his re-election in December 2006, President
    Chavez has sought to nationalize several of Venezuela's key
    industries. Among the developments in this regard has been
    the Government's purchase for USD 1.3 billion of 86.2 percent
    of the shares in CANTV, the country's largest
    telecommunications company and its acquisition of 93 percent
    of the shares in the countryQ,s largest private electric
    company, for USD 836.9 million.

    ¶70. (C) Another significant example of this was the recent
    takeover of the four Orinoco belt heavy oil upgrading
    projects from the existing multinational operators, worth
    more than USD 30 billion and responsible for the conversion
    of approximately 600,000 barrels per day of heavy crude into
    the more valuable synthetic oil. The transfer of control of
    the four projects to PDVSA marked what President Chavez
    described as "the last step" in the government's advance
    toward full control of Venezuela's hydrocarbons sector.

    ¶71. (C) The plans for the nationalization of the oil fields
    were announced in February 2007 and took effect on 1st May
    2007, a year to the date that Chavez ally, Bolivian President
    Evo Morales, ordered that the country's gas fields be
    nationalized. The companies (US oil firms Chevron, Exxon
    Mobil, ConocoPhillips, as well as Norway's Statoil and BP of
    Britain), which were slated to give the Government of
    Venezuela a 60 percent stake in the projects, all adhered to
    the decree to transfer operational control to the Government
    of Venezuela and each negotiated arrangements pertaining to
    compensation and shareholding. In June 2007, US oil company
    ConocoPhillips decided not to accept a minority stake in the
    Venezuelan oil projects and discontinued its operations, in a
    move that reportedly cost the company USD 4.5 billion. Exxon
    Mobil was also reported to have been unable to arrive at a
    mutually satisfactory joint venture agreement with the
    Government of Venezuela and the two sides remain in
    discussion on the matter.

    ¶72. (C) Some analysts anticipate that PVDSA may face
    production and other problems, with the departure of
    experienced technical and managerial personnel, in the wake
    of the takeover. This may be a reason for the 9.2 percent
    decline in Venezuela's Q2 2007 oil production referenced
    earlier. Concurrent to the takeover of the oil projects and
    the consequent circumscribing of the role of several major
    oil companies in the oil rich Venezuelan economy, President
    Chavez has undertaken joint ventures with other countries
    such as Belarus, China and Iran. Venezuela's relations with
    Iran have been deepening and expanding in recent times, with
    several high level visits having taken place in the last
    year, including the April 2007 visit to Venezuela by the
    Iranian Foreign Minister.

    ¶73. (C) In recent years, President Chavez has championed the
    creation of a South Bank as an alternative to the traditional
    international financial institutions such as the
    International Monetary Fund (IMF) and the World Bank, which
    would be run by the countries of South America and partially
    funded by Venezuela's oil revenue.

    ¶74. (C) In an action that was indicative of President
    Chavez's disdain for such institutions and his plans to
    create an alternative, he announced, on 13th April 2007, that
    Venezuela would sever its relations with the World Bank and
    the IMF. This move was in keeping with Chavez's efforts to
    create a socialist state on the basis of economic policies
    such as significant increases to the minimum wage and a
    proposed reduction to the number of hours in the working day,
    which was anathema to multilateral institutions such as the
    IMF and the World Bank. While the move was politically
    significant, analysts argued that it would have no immediate
    financial implications.

    Recommendations
    ---------------

    ¶75. (C) Given the strength of Jamaica/Venezuela bilateral
    relations over the past several decades, which have spanned
    successive political administrations, it will be important
    for early contact to be made at the highest level with
    Government in Caracas. The Ministry perceives a need for the
    new administration to start-off on the right footing by
    carefully considering the manner in which it undertakes its
    initial diplomatic approaches towards Venezuela. In this
    regard, it is recommended that an early visit to Venezuela be
    undertaken by Foreign Minister Baugh in order to meet with
    his counterpart, Foreign Minister Nicolas Maduro. Such a
    visit should be used to stress the importance that the
    Government of Jamaica continues to attach to the
    traditionally close relations that have existed between
    Jamaica and Venezuela. It should also serve as a precursor to
    a visit by Prime Minister Golding. The scheduling of
    ministerial visits prior to the initial visits by the Foreign
    Minister and Prime Minister should be avoided, to the extent
    possible.

    ¶76. (C) In tandem with the above, it is recommended that the
    Venezuelan Ambassador, H.E. Noel Enrique Martinez-Ochoa, be
    accorded an early audience with the Prime Minister. This
    would send a strong signal to President Chavez and his
    government that it is the intention of the new Jamaican
    administration to continue to strengthen friendly relations,
    as well as further develop the level of economic cooperation
    between the two countries. Furthermore, the Prime Minister
    has already seen fit to meet with the Cuban Vice President,
    as well as the Ambassadors of the United States and China.

    ¶77. (C) It should be noted that virtually no decisions on
    technical and economic cooperation are taken by the
    Venezuelan government without the issue under consideration
    receiving the personal imprimatur of Preside Chavez.
    Therefore, matters such as the renewal and renegotiation,
    under PetroCaribe, of the commercial Sale/Purchase Agreement
    between PCJ and PDVSA (which includes outstanding issues
    related to unutilized quota carry-over) may well need to be
    addressed at the political, rather than technocratic level.
    There are other outstanding matters of importance, which have
    been languishing and that may require political intervention
    at the highest level. These include the following:

    ¶A. The outstanding payment by PDVSA of the 49 percent joint
    venture equity position it has taken in the Petrojam
    refinery, which is valued at USD 63.7 million;

    ¶B. The loan request made to BANDES to support the Rural
    Electrification Programme (REP).

    ¶78. (C) Effective management of the bilateral relationship
    with Venezuela requires a coordinated and joined-up approach
    to be adopted on the part of the GOJ. This is because our
    relations span across a range of areas and cross-cuts
    numerous ministries, agencies and departments of government.
    The GOJ should devote its considered attention to the
    management of this strategic and valuable partnership, during
    this period of transition.
    (END TEXT)

    JOHNSON

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