VZCZCXRO0720
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
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.) 
 
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COMMENT 
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¶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