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DE RUEHCV #0404/01 0572049
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FM AMEMBASSY CARACAS
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RUMIAAA/HQ USSOUTHCOM MIAMI FL
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UNCLAS SECTION 01 OF 02 CARACAS 000404 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR KLINGENSMITH AND NGRANT 
COMMERCE FOR 4431/MAC/WH/MCAMERON 
NSC FOR DTOMLINSON 
ENERGY FOR CDAY, DPUMPHERY, AND ALOCKWOOD 
 
E.O. 12958: N/A 
TAGS: ECON PGOV VE
SUBJECT: CHAVEZ' FIRST DECREE UNDER THE ENABLING LAW: 
DECREE LAW AGAINST SPECULATION AND HOARDING 
 
REF: A. CARACAS 264 
     ¶B. CARACAS 358 
     ¶C. 05 CARACAS 1067 
 
¶1. (SBU) Summary:  The decree-law against speculation and 
hoarding, the first executive decree introduced by Chavez 
under the Enabling Law, was published, as amended, in 
Venezuela's Official Gazette on February 21.  This measure 
criminalizes the hoarding and price speculation of food 
products subject to government price controls.  It defines 
all stages of the production cycle for regulated foods as 
within the ambit of "public utility and the social interest." 
 It empowers Chavez to expropriate any business that fits 
this sweeping definition to protect "food security and 
sovereignty."  Rather than remedy retrograde price controls 
and distortions, Chavez has made "capitalists" of the food 
industry the scapegoat for the BRV's economic inefficiency 
and increasing difficulty in delivering food security.  The 
BRV has already invoked the decree-law to occupy two 
"abandoned" slaughterhouses.  The decree-law also entrusts 
grass-roots Community Councils with monitoring local 
compliance and enforcement.  End Summary. 
 
-------------------------------- 
Purpose, Scope and Applicability 
-------------------------------- 
 
¶2.  (SBU)  The "Decree Law of Popular Defense against 
hoarding, speculation, boycott, and any other conduct that 
affects consumption of food or products submitted to price 
controls" was published as Decree Number 5197 in the BRV's 
Official Gazette on February 16 and reprinted on February 21 
due to a printing error.  This decree-law is the first 
promulgated by President Chavez since the National Assembly 
unanimously approved the Enabling Law giving him diktat 
powers on January 31 (Reftel A).  Article 1 lays out the 
legal objective, tracking the language in the title 
word-for-word, and notes that the National Executive (read: 
Chavez) and Consejos Comunales (Community Councils) have the 
authority to regulate its application. 
 
¶3.  (SBU) The decree-law casts a wide net with respect to the 
scope of both activities and entities to which it applies. 
Article 3 states that the decree-law applies to natural or 
legal persons, Venezuelan or foreign, who participate in any 
phase of the chain of production, distribution, and 
commercialization of food or products subject to price 
controls. 
 
¶4.  (SBU) Article 4 defines the scope of economic activities 
potentially subject to expropriation and criminal and 
administrative penalties.  It states "It will be declared for 
the public utility and social interest, all of the assets 
needed to develop activities of production, construction, 
importation, transportation, storage, distribution and 
commercialization of food or products subject to price 
controls."  This clause paves the way for Chavez to initiate 
expropriation proceedings of any business that meets this 
sweeping definition if he deems it necessary, in his sole 
discretion, to protect food security. 
 
¶5.  (SBU) Article 5 defines all of the stages of the 
production cycle as a "public service" that should continue 
in a "regular, efficient, uninterrupted manner, with 
attention to the satisfaction of collective needs."  If the 
flow of services does not operate in the manner described, 
Chavez is authorized to take "all necessary measures" to 
correct the problem. 
 
--------------------------------------------- -------------- 
 Administrative and Criminal Sanctions, Preventive Measures 
--------------------------------------------- -------------- 
 
¶6.  (SBU) Administrative sanctions are applicable to the 
following actions: alteration of quality or price, refusing 
to sell, or selling products that have expired or are in poor 
condition.  Sanctions may include temporary closure of the 
establishment and a maximum fine of 5,000 tax units 
(approximately USD 87,500). 
 
¶7.  (SBU) The decree-law defines the following activities as 
criminal: hoarding, speculation, fraudulent altering of 
 
CARACAS 00000404  002 OF 002 
 
 
prices, boycott, and exporting controlled products produced 
for the domestic market.  These crimes are punishable by 
prison terms ranging from 2-6 years and fines from 130-20,000 
tax units (approximately USD 2,275 to USD 350,000.)  In 
addition, businesspeople who hoard, speculate, or violate 
price controls may be banned from exercising their profession 
for a 10-year period.  Article 25 provides for double fines 
and penalties when the conduct intends to threaten the 
"social peace" and "destabilize democratic institutions." 
 
¶8.  (SBU) Chavez is authorized to take preventive measures to 
guarantee food security.  These measures may include 
temporary occupation of facilities or closure for 90 days, 
product confiscation, or other measures to guarantee the 
"collective good." 
 
-------------------------- 
Role of Community Councils 
-------------------------- 
 
¶9.  (SBU) This decree-law authorizes Community Councils to 
ensure compliance with price controls and take the initial 
steps of an enforcement action.  Community Councils were 
established under the law in April 2006 as grass-roots 
political organizations (Reftel C).  Article 6 confers 
Community Councils the function of forming "Social Committees 
Against Hoarding."  These committees have the authority to 
investigate alleged violations of the decree-law and 
recommend to Community Councils that Chavez take the 
appropriate enforcement or preventive measures.  The 
committees are responsible for verifying the supply of 
regulated food products in local stores and monitoring 
compliance with the price control regime.  The councils are 
also responsible for promoting grass-roots education and 
awareness in the community with respect to food security. 
 
--------------------------------------------- ---- 
Initial Reactions and First Temporary Occupations 
--------------------------------------------- ---- 
 
¶10.  (SBU) The early effects of the decree-law are already 
beginning to show.  The BRV has invoked the preventive 
measures provided for in Article 13 to occupy two 
slaughterhouses, Fricapeca in Perija and Frigorifo Industrial 
in Barinas, said to be "abandoned."  The Perija facility 
reportedly has a capacity to slaughter 1,600 animals, but on 
average, killed only between 800 to 1,000.  The 
slaughterhouse in Barinas has been closed for the past three 
years.  Local newspapers have also reported that wholesalers 
are refusing to deliver white sugar, black beans and chicken, 
because abiding by government price controls would force them 
to sell at a loss. 
 
------- 
Comment 
------- 
 
¶11.  (SBU) The decree-law against hoarding and speculation is 
the first of many purposely vague legal measures that Chavez 
can be expected to dictate under the Enabling Law to further 
centralize power in his hands.  The measure places a large 
segment of the Venezuelan economy at Chavez' unfettered whim 
as potential targets of expropriation, temporary closures and 
criminal sanctions.  Rather than remedy retrograde price 
controls and distortions, Chavez has, not surprisingly, made 
"capitalists" of the food industry the scapegoat for the 
BRV's economic inefficiency and increasing difficulty in 
delivering food security.  Empowering Community Councils 
exemplifies Chavez' strategy of strengthening parallel 
pro-government grass-roots movements to further weaken 
traditional Venezuelan political institutions.  It also 
establishes the dangerous precedent by which Venezuelan 
citizens will be enlisted by the state to perform a quasi 
law-enforcement function.  End Comment. 
 
 
BROWNFIELD