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Cablegate: Venezuela's Housing Crisis - Socialism the Answer

VZCZCXRO0720
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
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DE RUEHCV #1209/01 2411418
ZNR UUUUU ZZH
P 281418Z AUG 08
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 1708
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY
RUMIAAA/HQ USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 02 CARACAS 001209

SIPDIS

TREASURY FOR MMALLOY
COMMERCE FOR 4431/MAC/WH/MCAMERON

E.O. 12958: N/A
TAGS: ECON EINV ETRD EIND PGOV VE SOCI
SUBJECT: VENEZUELA'S HOUSING CRISIS - SOCIALISM THE ANSWER

REF: 2007 CARACAS 554

1. (SBU) SUMMARY: An estimated 2 million unit housing
shortage is complicating Chavez' chances for success in the
November state and local elections. In an effort to improve
one of the worst housing construction records of any recent
administration, Chavez has nationalized companies providing
construction inputs such as steel and cement, restructured
the Housing Ministry with a renewed emphasis on community
councils, and promoted high-profile joint housing projects
with countries such as Iran, Cuba and Belarus. Chavez also
announced on August 24 that he wants to create a huge,
state-owned "National Construction Company" that would help
solve the housing crisis. END SUMMARY.

--------------------------------------------- --------
CHAVEZ - POOREST RESULTS OF ANY RECENT ADMINISTRATION
--------------------------------------------- --------

2. (SBU) The Institute of Latin American Social Studies
(ILDIS) recently reported that 20 percent of the protests in
Venezuela in 2007 were related to housing issues. Moreover,
some estimates indicate up to 54 percent of the residents of
Caracas live in "barrios" or slums. Chavez himself stated in
June "the housing problem is one of the greatest that exists
and the mayors and ministries lack an integrated system to
attack the problem." The President of the Venezuelan
Construction Chamber Pedro Azpurua told Econoff the Chamber
estimates 8 million Venezuelans out of a population of 28
million lack acceptable housing.

3. (SBU) The author of an ILDIS study released in July "The
Actual State of Venezuela's Social Missions," Thanali Patruyo
reports that the current government's results in the housing
sector are worse than the poorest efforts by previous
administrations in the 90's. He noted that former president
Carlos Andres Perez built 98,532 houses in 1992 in spite of a
coup attempt. Rafael Caldera built 91,979 houses in 1997
with oil at USD 8 a barrel. By contrast, the study indicates
in 2006 Chavez only managed to build 33,867 houses.

4. (SBU) ILDIS reported that even with a budget of over USD 5
billion between 2005 and 2007, the BRV has been unable to
meet its own goals. The National Housing Construction Plan's
aim for 2005 was 120,000 new housing units but the BRV
completed 16,000 units. The 2006 goal was a more modest
75,919 units with 33,867 units built. In 2007, the Ministry
promised 80,000 units with 36,680 actually constructed. Thus
far in 2008 the public sector has built approximately 15,000
housing units, which makes it unlikely the Bolivarian
Republic of Venezuela (BRV) will meet its 2008 goal of
130,000 units.

5. (SBU) Although the BRV more than doubled the housing
budget to USD 2.8 billion in 2008, according to the BRV's
Office of Public Finance in the first six months of 2008 only
35 percent of the budget has been programmed. The
Construction Chamber argues the BRV needs to spend USD 4
billion a year and construct a minimum of 200,000 housing
units annually to address the housing shortfall.

---------------------------------------------
CAPITALISM THE PROBLEM, SOCIALISM THE ANSWER
---------------------------------------------

6. (SBU) In response to public protests, Chavez has replaced
three housing ministers so far in 2008 with a former minister
of culture Farruco Sesto replacing Edith Gomez in June.
Since the Ministry's inception in 2004, it has gone through
six different ministers. During a June 19 conference on the
"Transformation of Housing through Communal Management",
Chavez said that with the new housing minister would come a
"housing revolution." He added that Venezuela's housing
problem is the result of the capitalist model and that it
cannot be solved with capitalist methods.

7. (SBU) In the June 2008 housing conference, Chavez
announced "we have recovered the cement plants, a steel
plant, and we are in the process of recovering everything
related to steel, iron and brick. All of this forms part of
the strategy. We aren't doing this in a crazy way. No, we
have a strategy for social and economic development." In
remarks made on August 21 following the nationalization of
the three international cement companies in Venezuela, Chavez
claimed "we have been unable to advance in certain projects
because of a lack of resources..." He went on to say the
government would increase the "social production" of

CARACAS 00001209 002 OF 002


construction materials "and decrease the cost of production,
which is high because of multinational companies" in the
sector.

8. (SBU) On August 24, Chavez announced that he wants to
create a huge, state-owned construction company "that has a
thousand machines that make everything in all colors and
sizes, with asphalt and concrete factories: this will lower
costs and give us more power to solve problems." The BRV
already jointly owns a construction company with Cuba and has
invested USD 200 million in a program with Iran to construct
10,000 housing units. The BRV plans to build 20,000 more
units with China and has advanced Belarus USD 90 million for
5,000 additional units. Critics worry that based on past
performance, few houses will actually be built under these
schemes.

9. (SBU) Construction Chamber President Azpurua noted the
houses the BRV does build tend to be in large developments
with no electricity, sewage, or roads and no schools or jobs
within hours. The poor take title to their new homes but
never move out of the "barrios" or slums of Caracas as the
new developments do not meet their needs. Azpurua argued
that the BRV could solve 30 percent of the housing problem if
it gave the poor grants or subsidized mortgages and allowed
them to select their own housing rather than build more
mega-developments in the middle of nowhere.

10. (SBU) As part of Chavez' strategy to socialize the
construction industry, the new housing law reemphasizes that
community councils are to manage the construction of housing
solutions. However, on July 18 Minister Sesto called for
"revolutionary patience" on the part of communities that are
protesting due to the BRV's failure to make good on
long-promised housing developments. Sesto asked for more
time as he is trying to verify that the projects proposed by
community councils are truly community-based projects and are
not backed by construction companies or land owners. (NOTE:
The 2006 Law of Community Councils mandates that the councils
receive funds directly from the central government, bypassing
state and local authorities, in order to initiate and manage
all sorts of grass roots projects. Chavez claimed he set
aside USD 2.8 billion for the councils in 2007 and USD 4.7
billion in 2008 with hopes for more than 50,000 councils by
the end of 2008. Critics argue there are no real financial
controls over the councils and waste and abuse is common.
See reftel for additional information. END NOTE.)

-------
COMMENT
-------

11. (SBU) Housing is an issue that matters to Chavez'
strongest supporters. The BRV has publicly acknowledged that
construction has been slow and they have committed errors.
Statistics indicate the BRV has been unable to keep up with
the modest residential construction efforts of previous
administrations. Although Chavez recently justified the
nationalization of the cement industry by claiming this would
increase housing construction, the Central Bank of Venezuela
estimates constructing 100,000 housing units would only
require 10 percent of Venezuela's current cement production.
Primarily BRV-funded infrastructure projects, not shopping
malls as Chavez claims, currently consume 85 percent of the
country's cement production. Almost every day a protest
takes place over housing long-promised but never delivered,
or half-finished, abandoned developments. Although the BRV
is trying to prove it is serious about resolving the housing
crisis with sweeping nationalizations in the construction
sector, if the poor do not see progress towards meeting their
housing needs, they may take out their frustrations at the
ballot boxes in November.
DUDDY

© Scoop Media

 
 
 
 
 
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