Venezuelan Ransom Funds Hedge Against Kidnaps as Vote Looms

Photographer: Leo Ramirez/AFP via Getty Images

Venezuelan opposition presidential candidate Henrique Capriles is trying to tap into this sense of unease among the middle-class as he tries to narrow the advantage his rival has in the polls. Close

Venezuelan opposition presidential candidate Henrique Capriles is trying to tap into... Read More

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Photographer: Leo Ramirez/AFP via Getty Images

Venezuelan opposition presidential candidate Henrique Capriles is trying to tap into this sense of unease among the middle-class as he tries to narrow the advantage his rival has in the polls.

Venezuelans are banding together to create informal insurance societies to pay off criminals in case of kidnapping as violence soars and moves to the forefront of voters’ priorities before the April 14 presidential election.

Groups of friends and relatives are pooling money that can be tapped in a hurry if one of its members is held for ransom, said a Venezuelan lawyer in the city of Barquisimeto who participates in a fund with three other couples and requested anonymity for security reasons. The lawyer’s fund has more than $60,000 divided between bank accounts and cash kept at home.

Venezuela has the world’s highest number of kidnappings after Nigeria, Mexico, India and Pakistan, according to London- based research group Control Risks, which describes the country’s capital, Caracas, as a “hotspot” for these crimes. As the South American nation prepares for a snap election following President Hugo Chavez’s death last month, security has become a central campaign issue. Chavez’s hand-picked successor, interim President Nicolas Maduro, and his opponent, Miranda state Governor Henrique Capriles Radonski, are vowing to get tough on criminals if they win the six-year term.

“Violence and impunity have gotten so bad in the country that the opposition and the government have recognized in the campaign that it is one of the problems that hasn’t been resolved,” Carlos Romero, a political scientist at Central University in Caracas, said by telephone. “Crime is the biggest problem for Venezuelans and they partially blame bad governance for it.”

Photographer: Cecilia Serrano/AP Photo

Venezuelan comedian Laureano Marquez was kidnapped in southeast Caracas, Globovision reported on its website. He was released within a matter of hours unharmed, he told the news service, declining to provide details of the ransom. Close

Venezuelan comedian Laureano Marquez was kidnapped in southeast Caracas, Globovision... Read More

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Photographer: Cecilia Serrano/AP Photo

Venezuelan comedian Laureano Marquez was kidnapped in southeast Caracas, Globovision reported on its website. He was released within a matter of hours unharmed, he told the news service, declining to provide details of the ransom.

Actor Kidnapped

On April 9 comedian Laureano Marquez, a supporter of Capriles and a television actor, was kidnapped in southeast Caracas, Globovision reported on its website. He said he was released within a matter of hours unharmed and declined to say whether he was ransomed, the television station’s online edition said. Caracas-based newspaper El Universal also reported the kidnapping. The public prosecutor’s office didn’t respond to a telephone call seeking comment.

Marquez was arriving at his home at 9:30 p.m. in a gray Jeep Cherokee when he was intercepted by men who assaulted him and forced him into another car, Manuel Tangir, head of citizen security for Caracas’ Baruta municipality, said on Globovision today. Marquez was released five hours later, Tangir said.

Homicides have almost quadrupled during Chavez’s 14 years in power, jumping to 16,030 in 2012 from 4,550 in 1998, the year before he took office, according to data published by the government and United Nations. They rose 23 percent in the past two years, and the oil-rich nation has overtaken Colombia as South America’s most dangerous country since 2006.

The homicide rate of 73 per 100,000 inhabitants is more than 14 times higher than in the U.S. Still, the Venezuelan Violence Observatory, a non-governmental organization, says the government under-reports murders and estimates 21,692 people, or 59 people a day, were killed in 2012.

‘Key Drawback’

While there are no official statistics on kidnapping, the government said it helped resolve more than one case a day last year, facilitating the safe return of a total of 413 hostages, a report submitted to the National Assembly last month said.

Venezuela had between 625 and 1,970 kidnappings last year, according to data gathered by Nicholas Watson, Latin America analysis director at Control Risks.

“Crime represents one of the key drawbacks to doing business in Venezuela,” Watson said in a phone interview from Bogota. “The bottom line is there have to be stringent security measures in place to protect all premises and assets at all times.”

Some companies avoid setting up shop in Venezuela altogether, preferring to use a Venezuelan partner to conduct business, Frank Holder, FTI Consulting’s chairman for Latin America, said in a phone interview. FTI’s Venezuelan clients often move their families out of the country and commute every week, Holder said. These clients often use armored cars with armed guards on motorbikes as escorts, he said.

“It’s a very hostile environment for a businessman,” Holder said. “If you compare it to anywhere else in the region, only countries like Guatemala and Honduras, where organized crime controls part of the territory, do you have this security situation.”

Many families and friends set aside money so they can quickly pay a ransom without having to involve the authorities, Caracas-based security adviser and lawyer Fermin Marmol Garcia said.

Wealthy Victims

Criminals target wealthy victims such as Washington Nationals baseball player Wilson Ramos, who was kidnapped for two days in 2011, as well as middle-class families who can come up with enough cash and jewelry to pay the ransom. Victims are usually randomly chosen as they walk or drive through residential areas after dark and held captive for an average of eight hours, Garcia said.

The target of these so-called express kidnappings are driven around as the criminals contact family members before releasing them in the outskirts of the city after a ransom is paid, he said.

The four couples who created the informal insurance plan in Barquisimeto, the fourth-biggest city in Venezuela, have known each other for more than five years. The lawyer said the family’s two-bedroom house was burglarized last year.

The fund was created after a member of the group was kidnapped two years ago and held in captivity for almost a week, the lawyer said. The group shares a common plan with details of how to proceed in case one of them is kidnapped, said the group member.

Life and Death

Opposition candidate Capriles is trying to tap into this sense of unease among the middle-class as he attempts to narrow the advantage his rival has in the polls.

“Can you imagine walking at this hour in Caracas?” Capriles said during a nighttime rally April 1 as his supporters marched in the capital city and 19 states to protest crime. “This is a fight for the future, for life. God has given us an opportunity to choose between life and death.”

Maduro, a former union leader who served as foreign affairs minister in Chavez’s government, has 55 percent support against 45 percent for Capriles, Credit Suisse wrote in a report April 10, citing a survey conducted from April 1 to 5 by Caracas-based polling company Datanalisis. The poll of 1,300 people has a margin of error of 2.66 percentage points, it said.

Capriles says he would increase police patrols and step up gun control measures while cracking down on drug trafficking, according to proposals posted on his campaign website.

Two-Hand Approach

Maduro said that crime is a growing problem in Venezuela and promised to boost investment in the police force, focusing his efforts on the most dangerous municipalities, according to proposals published on his campaign website.

He also said that carrying on with Chavez’s 21st century socialist revolution will reduce income inequality and, therefore, cut incentives to commit crime. He vows to continue increasing the state’s control over the economy after his mentor seized more than 1,000 companies or their assets, while redistributing wealth to the poor.

“If I extend one hand and they don’t take it, with the other I’ll come with the police, the National Guard and with the people,” Maduro said in a speech March 11 as he vowed to disarm criminals. “This needs to end.”

While social programs created by Chavez helped reduce poverty and inequality, police forces remain undermanned and oftentimes lack proper equipment to enforce the law, Watson said.

For Holder, there’s no direct correlation between crime and social inequality. Instead, a country’s institutions play a key role in reducing crime.

“Though social inequality dropped, the institutions themselves have deteriorated even more,” Holder said. “The government is more monolithic, but ironically the institutions are weaker, there isn’t an independent judiciary in Venezuela. If the institutions don’t work, something replaces it, and that something is usually organized crime.”

Venezuela was given the maximum score of five in FTI Consulting’s Latin Security Index for 2013, which measures security for businesses, meaning it is a “very dangerous country,” according to the Baltimore-based consulting company. Venezuela was considered the region’s most dangerous nation after Haiti, and was designated with a red light meaning that crime is getting worse.

Coming Storm

Reducing crime is only one of the challenges the next government will need to face.

Venezuela’s economic growth will decelerate this year as a fiscal deficit limits government spending, with gross domestic product expanding an estimated 1.9 percent after climbing 5.6 percent in 2012, according to analysts surveyed by Bloomberg.

The government in February devalued its currency for the fifth time in nine years to narrow its fiscal gap. The country has the fastest official inflation in Latin America with a 22.8 percent annual rate in February, while the unemployment rate is the highest after Colombia.

The cost of protecting Venezuelan bonds against default for five years increased 37 basis points this year to 682 basis points on April 10, the highest level among major Latin American nations tracked by Bloomberg after Argentina.

Pledges by both candidates aren’t convincing voters who remain skeptical over the ability of the state to reduce crime, Luis Vicente Leon, president of pollster Datanalisis, said by phone. Capriles lost the October election to Chavez by 11 percentage points after making public safety a central focus of his campaign.

“Caracas is akin to a war zone,” Watson said. “Crime rates are really, really high. I don’t see any significant improvement, at least not in a one-, two-, three-year period.”

To contact the reporters on this story: Corina Pons in Caracas at crpons@bloomberg.net; Randall Woods in Santiago at rwoods13@bloomberg.net.

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.

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