Army Gets Shiny New Cars as Venezuelans Queue for Food

Fort Tiuna Military Base
The 43 trucks and tents at the market in the military base in August were loaded with subsidized milk, cooking oil and detergents -- goods that are out of stock in most shops across the country. Photograph: Bloomberg

Venezuela’s national parade ground at the Fort Tiuna military base presents a scene that local civilians can only dream of -- stalls laden with goods and no waiting lines.

The market with everything from subsidized meat to baby strollers, along with loans, new cars and apartments, are perks provided to the armed forces as the economy contracts, poverty rises and President Nicolas Maduro’s popularity sinks to a record low.

The benefits help ensure the loyalty of the military, while siphoning reserves away from the poor who have seen wage growth fall behind inflation, according to analysts, citizen activists and academics.

Since Maduro came to power 17 months ago, the armed forces have created their own television channel, housing program and bank, the only military-owned one outside Iran and Vietnam. A third of Venezuela’s 28 ministers and half the state governors are now active or retired officers, mostly companions of former paratroop commander and late President Hugo Chavez.

“The military remains the only element guaranteeing political stability under Maduro’s weak government,” Diego Moya-Ocampos, an analyst at consulting firm IHS Country Risk, said by phone from London. “As an outsider, Maduro had to give the generals a bigger role in managing the country to keep them on-board. He has militarized politics.”

Maduro named a brigadier general as economy vice-president on Sept. 2, the second most important post in the cabinet. He now has eight active or retired officers in the cabinet, up from five in 2012, the year before Chavez died.

New Cars

Fifteen years after Chavez started his revolution in “21st century socialism,” South America’s largest oil producer is running out of money, the economy is contracting and companies and investors are deserting what was Latin America’s richest nation in 1980.

Inflation has more than doubled and the bolivar slumped 76 percent against the dollar on the black market since Maduro came to office in April 2013 describing himself as the “son of Chavez.” More importantly to his support, the poverty rate has started to rise, climbing to 32 percent at the end of last year from a record low 25 percent in 2012, according to the National Statistics Institute.

Military personnel don’t have to contend with the economic chaos in the rest of the country. The 43 trucks and tents at the market in the military base on Aug. 22 were loaded with subsidized milk, cooking oil and detergents -- goods that are out of stock in most shops.

People line up for hours outside state-owned supermarkets to buy regulated staple goods, or pay three times as much from street hawkers. One in four basic goods were unavailable at any given time in January, the last month for which figures are available.

Food Lines

“Food lines are part of our daily existence,” said Douglas Romero, 45, a Caracas motorbike taxi driver. “I spend so long waiting, that I end up becoming friends with others in the line.”

At Fort Tiuna in southern Caracas, hundreds of new Chinese cars glistened in the parking lots, after former Defense Minister Diego Molero pledged in May of last year to purchase 20,000 autos for the armed forces.

That compares with just eight new cars imported into the country of 29 million people in August, according to the Venezuelan Automotive Chamber, which excludes Chinese carmakers. Few Chinese cars are imported outside government programs, said Raul Alvarez, a Caracas-based car industry consultant.

Cars are particularly prized in Venezuela because they don’t lose value amid the world’s highest inflation as their prices tend to track the dollar. Consumer prices rose 63 percent in the year to August.

Coup Attempts

The economy contracted 2.1 percent in the second quarter, according to a median of five economists surveyed by Bloomberg. The cost of insuring Venezuelan bonds against non-payment rose the most in the world today to 1,472 basis points, implying investors see a 64 percent chance of default in the next five years, according to data compiled by Bloomberg.

“As the economy continues to deteriorate, so will the political and security situation and the armed forces will be key in deciding the outcome,” said Moya-Ocampos.

Venezuela has seen nine major coup attempts in the past century, including the failed effort Chavez headed in 1992 and the one against him in 2002, according to Daniel Hellinger, professor of International Relations at Webster University in St. Louis, Missouri.

Maduro’s popularity is falling. The president’s approval rating dropped to a record low of 39 percent in August from 60 percent in December, according to Caracas-based polling company Hinterlaces. The poll of 1,200 people between Aug. 2 and 9 had a margin of error of 2.7 percentage points.

Protest Movement

Discontent over rising prices, soaring crime and mounting shortages sparked nationwide protests in February that were put down by soldiers and police resulting in 43 deaths, according to the public prosecutor’s office.

As the protests swept the country, military personnel were given greater access to credit to buy the goods that inflation had left beyond the reach of most Venezuelans.

The latest state bank to provide loans to the military is the Bank of the Bolivarian Armed Forces. The bank known as Banfanb has opened 21 branches and raised assets to 4.2 billion bolivars ($670 million at the official rate) at the end of June from 170 million at its inception 12 months ago, according to data from the regulator and the bank’s website.

While everyone can open a bank account at Banfanb, its loans, including 100 percent financing for new and used cars, are for service personnel only, according to the bank’s website. Moreover, with interest rates at 17 percent compared with 63 percent inflation, Banfanb’s loans are cheap. Few other people in the country can get consumer loans.

More military personnel are also getting promoted, enjoying higher pay and perks. The military now has between 4,000 and 5,000 generals, compared with fewer than 50 in 1993, according to estimates by Caracas-based non-government organization Citizens’ Control.

No General Shortage

There is one general for every 34 servicemen in Venezuela, compared with one for 1,490 servicemen in the U.S., based on the latest figures from the countries’ ministries of defense.

Spokesmen for the Defense Ministry, the Venezuelan Armed Forces, the Information Ministry and Maduro’s office declined to comment on the role of the army in the nation’s politics and economy.

“These armed forces are Chavista,” the commander of the military, General Vladimir Padrino, said in a televised address July 5, referring to Chavez supporters. Maduro can “count on our loyalty.”

As the military retains its loyalty, the benefits continue. The government has given out 2,821 apartments to soldiers and officers in the year through May, Planning Vice Minister Paul Grillet, a major general, said in a televised address that month.

On the Edge

At least 100 of the flats were given out in the past year to families of servicemen in the east of La Guaira, a port city 30 kilometers (19 miles) north of Caracas, according to press releases from the defense and information ministries. Locals have received 24 apartments in those buildings, according to the Jose Maria Espana Women’s Movement, a La Guaira activist group focused on public services.

Ulpiana de Rodriguez, 79, looks down from her hut on an eroded hillside above the city to a line of new apartment towers on the coast, many of which have gone to the military and police.

“The government is putting all sorts of people in those apartments while we teeter on an edge here for 15 years,” said De Rodriguez, a retired school teacher who has spent the last 46 years caring at home for her son’s cerebral palsy. “Many of them just use it as a holiday beach house.”

On Aug. 22, La Guaira residents occupied the local housing authority’s office after state Governor Jorge Garcia Carneiro, gave out 512 new apartments to undisclosed recipients in a televised ceremony attended by soldiers and generals in fatigues.

‘In Return’

“We have always supported this government, mobilizing the people in shantytowns, campaigning for them,” said Jacqueline Zuniga, 39, coordinator of the Women’s Movement and member of the ruling United Socialist Party. “They give us nothing in return.”

It is not just the housing policy that is alienating supporters.

Jose Villalonga, an Agriculture Ministry official in western Lara state, says he has spent five years trying to buy a car offered by the government on preferential payment terms for low-income earners. The only reply he ever got from at least three programs he applied for was a call from someone who said they were an army officer looking to re-sell his allotted vehicle.

“This is a disgrace, not the socialism Chavez had in mind,” Villalonga, 52, said by telephone from Barquisimeto, Lara. “I feel impotent in front of this rigged system that favors the military.”

TV Station

The army’s support for the government was on display when the protests started in February. A television station owned by the armed forces broadcast Chavez’s speeches accompanied by songs such as “Maduro From My Heart.”

“The TV station is born with a mission to fight for the ideology of our eternal commander, Hugo Chavez,” the broadcaster’s president, General Pedro Alvarez, said during the channel’s launch in December. The telecommunications regulator has ordered every cable provider to show the channel.

While anger mounts among ordinary citizens, the loyalty of the military is ensured, said Rocio San Miguel, director of Citizens’ Control.

The military has been given control of many sectors of the economy, while active or retired officers are in charge of the finance, food and industry ministries.

Election Cost

Retired officers now control the bulk of food imports, helped by colleagues still in the military or politics, according to retired captain William Biancucci, a former member of Chavez’s strategic planning team who imported as much as $110 million of livestock from Brazil between 2009 and 2011.

Congressional elections due in December of next year will show how much resentment the policy of buying off the military has created.

“There’s a political cost Maduro will pay for prioritizing the soldiers over the poor neighborhoods,” Hugo Perez Hernaiz, sociology professor at Central University of Venezuela in Caracas, said by telephone. “The size of this cost will be seen in the next elections.”

— With assistance by Anatoly Kurmanaev

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