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ZNY EEEEE ZZH
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FM AMEMBASSY CARACAS
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INFO RUEHBO/AMEMBASSY BOGOTA 5969
RUEHLP/AMEMBASSY LA PAZ 1637
RUEHPE/AMEMBASSY LIMA 9840
RUEHQT/AMEMBASSY QUITO 1709
RUEHAO/AMCONSUL CURACAO 0582
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RUCPDOC/DEPT OF COMMERCE
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RUEATRS/DEPT OF TREASURY

UNCLAS E F T O SECTION 01 OF 03 CARACAS 000335 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 02/28/2016 
TAGS: ECON PGOV VE
SUBJECT: CARACAS URBAN EXPROPRIATIONS SPURS WAVE OF 
SQUATTERS 
 
REF: A. CARACAS 000043 
 
     ¶B. CARACAS 000126 
     ¶C. CARACAS 00071 
 
This message is sensitive but unclassified, please treat 
accordingly. 
 
------- 
SUMMARY 
------- 
 
¶1. (SBU)  After the Mayor of Caracas announced the 
expropriation of thirteen (mostly vacant or under 
construction) residential buildings on Jan 5 to provide 
housing for those displaced by heavy rains, a wave of illegal 
occupations swept through the city.  The occupations were 
aided directly by police and carried out by organized 
homeless groups.  Venezuela faces a serious urban housing 
shortage, as the BRV has delivered only a third of the homes 
it promised last year.  Announcements of real estate price 
controls and further expropriations are having a significant 
effect on the construction sector.  The BRV does not have a 
unified message on urban expropriation, and the timing of the 
announcement coming the same day of the closure of the 
Caracas-La Guaira bridge indicates the move may have been 
well-timed propaganda intended to distract attention from the 
embarrassing bridge closure.  End Summary. 
 
 
-------------------------------------- 
MAYOR EXPROPRIATES, SQUATTERS MOBILIZE 
-------------------------------------- 
 
¶2. (SBU)  After heavy rains in the Caracas-Metropolitan area, 
Mayor Juan Barreto declared on January 5 the "temporary 
occupation" of thirteen urban residential buildings in order 
to house persons displaced by the floods, including displaced 
police and firemen.  The municipal decree called the rains 
"unusual" and declared Caracas in an official state of 
emergency.  (Note: Rains of that intensity are common during 
rainy season and intermittent during the dry season.  End 
Note).  The announcement came the same day the main bridge 
linking Caracas to the country's main air and sea ports was 
closed, an event that sharply highlighted the lack of 
national attention to infrastructure maintenance (See Refs A, 
B, C).  Though the neighborhoods surrounding the bridge had 
to be evacuated, the municipal decree makes no specific 
mention of displaced persons from those areas. 
 
¶3. (SBU)  Within days of the decree, over 40 urban 
residential buildings (including ones with expropriation 
decrees) were illegally taken by squatters.  Most of the 
buildings were vacant or under construction but at least two 
of them housed tenants who were forced to flee their homes. 
One of the buildings belongs to the opposition party COPEI. 
Most invasions were reportedly assisted by police and 
firemen, and when EconOff visited one of the buildings on 
Avenida Urdaneta, the area of the city where many ministry 
headquarters are located, a police escort was stationed 
directly in front.  Squatters have banded together to form an 
organization called "Los Sin Techo" (translation: the 
Homeless), which has over 57,000 registered families and has 
reportedly facilitated occupations by scouting locations 
(Note: The organization considers "homeless" to mean "living 
in inadequate homes," not necessarily living on the street). 
 
¶4. (SBU)  Under Venezuelan law, urban expropriations are 
legal only if two steps occur: first, issuance of an 
expropriation decree by the mayor declaring the property "of 
public utility," followed by certified inspection to 
calculate real estate value and formal notification of the 
owner.  Second, the owner must either accept compensation or 
battle the move in court.  Only until these two steps have 
been carried out can the building be occupied.  Barreto's 
decree declared the properties to be "of public utility," 
which is legal in itself, but in the same decree called for a 
"temporary occupation," which is not legal.  Occupation 
before the completion of the expropriation process, as well 
as occupation without any process at all, is illegal.  The 
National Assembly is studying an amendment to the 2004 
expropriation law which would allow immediate occupation in 
cases of "natural disaster." 
 
CARACAS 00000335  002 OF 003 
 
 
 
---------------------- 
BRV RESPONSE CONFUSING 
---------------------- 
 
¶5. (SBU)  Responses from different BRV members sent 
conflicting messages.  The mayor made aggressive declarations 
in favor of expropriations, even going so far as threatening 
to expropriate golf courses and shoving a reporter who 
grilled him on the issue.  A week after the decree, the 
President of the Supreme Court, Omar Mora, justified the 
expropriations and noted that "the right to private property 
is not absolute."  On the other hand, the Attorney General, 
Isaias Rodriguez, gave an opposite viewpoint by declaring 
that court authorization was necessary in order for prior 
occupation of expropriated buildings to take place, implying 
that Barreto's actions were improper.  By Jan 22, a spokesman 
from the Mayor's office said the expropriations were not a 
"state policy" and that the decrees were issued due to an 
"emergency situation," signaling a backing-down from 
Barreto's initial furor.  Though Barreto had declared that 
the expropriations were planned out by the BRV "long ago," 
President Chavez only made vague declarations that private 
property would be respected, but did not comment on the urban 
expropriations directly. 
 
¶6. (SBU)  Police took little action to vacate occupied 
buildings, as more often they were either occupying the 
residences themselves or protecting the squatters.  By Jan 
27, however, the Attorney General's office called for 
National Guard troops to vacate the buildings, and also asked 
for firefighter and police forces to provide security for the 
process.  At least one recent case of an attempted illegal 
occupation resulted in occupants, with police backing, 
staving off the squatters.  As of today, it is unknown how 
many illegally-occupied buildings have been vacated. 
 
----------------------------------- 
ROOT OF THE PROBLEM: HOUSING CRISIS 
----------------------------------- 
 
¶7. (SBU)  Caracas' squatter problem is not new.  According to 
the Association of Urban Building Owners, over 100 buildings 
were illegally occupied from 2003-2005, and a poll of Los Sin 
Techo members shows that 15 percent have been "homeless" 
since 1984.  According to the National Statistics Institute 
(INE), Venezuela has a housing deficit of 1.8 million homes, 
and 60 percent of existing homes require major 
reconstruction.  The BRV has fallen far short of the 120,000 
new homes it announced in 2004 it would build by the end of 
2005, constructing only 41,500 homes.  According to Chavez, 
the Ministry of Housing plans to oversee the construction of 
80,000 homes in 2006. 
 
¶8. (SBU/NF)  According to Alvaro Sucre, president of 
Venezuela's Construction Chamber, low-income home 
construction proposals from the private sector have been 
ignored in favor of (more costly) Chinese or Iranian 
proposals.  He believes that Chavez is simply not interested 
in working with the private sector, and though Sucre has 
presented proposals (including one for repair of the 
Caracas-La Guaira bridge) directly to the President, he has 
never received a reply.  The construction sector is concerned 
with the recent expropriation wave and the possible enactment 
of price controls on real estate, which would be very 
detrimental to their sector (see Para 8).  However, they 
still expect to see a 25 percent growth in construction in 
2006 if overall GDP growth reaches 6 percent as estimated 
(Note: Construction GDP fell by 25 percent from 2001-2005. 
End Note). 
 
¶9. (SBU)  Mayor Barreto's answer to the housing crisis is to 
enact real estate price ceilings, though he has not yet taken 
this step.  His proposal is to fix prices per square meter of 
property (regardless of quality) to check the growing price 
of urban real estate.  In the last nine months of 2005, 
property prices rose an average of 35 percent due to high 
demand.  Rent ceilings have been in place since May 2003 
(fixed at Nov 2002 prices) and over the last three years, 
sales as a percentage of real estate transactions have gone 
from 63 to 90 percent.  (Note: this may have been due to low 
profit margins for landlords after rent controls.  End Note). 
 
CARACAS 00000335  003 OF 003 
 
 
 Real estate price fixing was attempted under the 
administration of Carlos Andres Perez, yielding disastrous 
price distortions and a sharp decline in sales. 
 
------- 
COMMENT 
------- 
 
¶10. (SBU)  The recent wave of urban expropriations has not 
translated into a strong trend in urban Caracas.  The lack of 
a unified message on the part of the BRV lends credence to 
the belief that it might have been a distraction tactic 
rather than an overt policy move, as the government stood to 
lose much more on the bridge issue than on the more diffuse 
housing issue.  The housing deficit continues to be a very 
real problem for the BRV, and as the homeless population 
grows due to the collapse of shoddily-built hillside homes, 
the government is feeling mounting pressure to find 
solutions.  Unfortunately, neither infrastructure nor housing 
have been the BRV's strong suit, and the government has done 
little more than announce more funds for these sectors for 
the coming year. 
BROWNFIELD