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