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Cablegate: (S) Jamaican-Venezuelan Relations: An Inside View

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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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