Friday, July 10, 2009

U.S. Juggernaut Rolls over Honduras as it Targets Hugo Chavez

The dark side of democracy is launching its most formidable assault of recent years in its war against the poor in Central America. When the poor of Venezuela put Hugo Chavez in charge of the western hemisphere’s largest oil reserves, they redirected billions of dollars away from the coffers of western investors and, bankers to the needs of the poor in Venezuela, Honduras, Bolivia, Cuba, Ecuador, Dominica and Nicaragua.(1) By sharing Venezuela’s wealth with its neighbors using oil subsidies, Hugo Chavez allowed it’s less fortunate neighbors to focus on meaningful reform, thus initiating a series of events leading to the recent coup in Honduras.
Using this oil subsidy from Venezuela to improve social benefits, President Manuel Zelaya leveraged the benefits to increase the minimum wage in Honduras by 60%, where one of the largest industries is the textile/garment industry, employing 130,000. (2) Historically, one could anticipate such windfalls to find their way to numbered accounts in offshore banks, but Zelaya actually transferred the benefits to those in greatest need. The deal with Venezuela provided benefits for the poor not available from the U.S.

"Honduras will receive access loans worth US$30m for farmers and a donation of 100 tractors from Venezuela, both aimed at improving agricultural productivity. Venezuela will also buy bonds worth US$100m for housing programmes and help to encourage technological development and promote oil exploration." (3)

All this was done in the absence of any viable support being offered from the U.S. (4) More importantly though, Zelaya threatened those who control the wealth in Honduras by asking the poor if they wanted to continue down the path of Hugo Chavez in Venezuela, Evo Morales in Bolivia and Rafael Correa in Ecuador, by allowing a true reform oriented President (Zelaya) to stay in power. Some might argue that it was Zelaya’s pursuit of reform that caused him to be ousted. Alternatively, there are a number of reasons to believe that the removal of Zelaya is nothing more than collateral damage in the wake of the juggernaut being launched at Hugo Chavez. If the takeover could not be ‘justified’ on such weak arguments being currently used, other reasons would have been found. Needless to say, the murkiness of the rationale provided enough leverage for Secretary of State Clinton to not need to push for re-instatement of Zelaya. The ouster of President Manuel Zelaya of Honduras in late June is one of several major yellow flags in the recent international news suggesting that there is a coordinated effort by those that control U.S. foreign policy to remove Hugo Chavez as a threat to American style democracy, and enrich themselves on Venezuelan oil reserves. Rest assured, Hugo Chavez is a real threat to ‘U.S, procedural style democracy.’ By building an international alliance around the world’s largest reserves of hydrocarbons, he and is allies are withdrawing from the World Bank and setting up an independent mutual defense organization. Also important is his withdrawal from the World Bank and its control over the International Centre for Settlement of Investment Disputes (ICSID.) The ICSID is the legal institution that determines what international corporations are to be compensated when a country nationalizes those corporations’ holdings.(5) In 2008, ICSID awarded ExxonMobil $12Billion against a claim that Venezuela contended was worth only a tenth as much ($1.2 Billion).(6) That Venezuela was able to arbitrate a successful agreement without ICSID involvement with the other three companies that had its oil claims nationalized should demonstrate that the World Bank represents an extension of U.S. foreign policy, and is punitive in its actions. Most important though, Hugo Chavez represents the threat that substantive democracy can work. He is Fidel Castro with a $30 trillion oil reserve, and cannot be pushed around by large corporations. He even beat ExxonMobil in court when they tried to freeze Venezuela's international trading accounts. He is the Robin Hood of the Third World nations, and Hillary Clinton is the Sheriff of Nottingham.

[One curious connection between the World Bank and the coup in Honduras comes with role of former Honduras Banco Futuro President Jaime Chavez, who on two occasions has hosted religious revivals in Miami, and used General Romeo Vasquez – the leader of the coup – as a guest speaker. (7) Banco Futuro was absorbed by the Bank Latin American Financial Services (Lafise) Group, owned by close friend of the Bush family Roberto Zamora. Zamora and Jaime Chavez have their names sprinkled across a range of World Bank meetings and seminars. Zamora is also a middle man for the U.S. Overseas Private Investment Corp. Through Lafise, he gets loans from OPIC, makes loans to Central American developers, and does well off the interest. Zamora helps developers build five star hotels with OPIC loans (8)– Hugo Chavez and Manuel Zelaya use oil revenues to help farmers, build infrastructure, raise minimum wage. LAFISE is a major holder of Honduran debt. (9)Jaime Chavez also operates as a ‘consultant’ on money-laundering.(10) Another pundit associated with this bank crowd is Octavio Sanchez, former Minister and defender of the takeover. ]

The key issues are:

  • Hugo Chavez’s control of Venezuelan oil wealth has created a financial counterweight to U.S. control of Central and South America, allowing local politicians to make decisions which favor their own constituencies rather than the international investors;
  • This counterweight is in the process of wresting legal control away from World Bank courts where pro-U.S. investors usually have their way with third world nationalizations. Other nations in the Americas and Africa are taking note and following suit;
  • Venezuela has recently completed taking effective control of "all" aspects of its oil industry by taking over controlling interest in services;
  • The U.S. has failed in its efforts to takeover Iraqi oil, and has been pushed out of its behind-the-scenes control of Russian oil. Its national policy advisors are desperate to secure long term ‘control’ over global oil reserves.

The response appears to be a series of quiet initiatives within the U.S. foreign policy to isolate and remove Hugo Chavez. In many respects, the actions mirror activities undertaken to bring down the collapse of the Soviet Union in 1991, and take over its oil industry. Moreover, the reader should not forget the terrible "carpet of bombs’ that the U.S. was able to promise to rain down on the Taliban when it dared to announce departure from its deal with Enron on the Afghan pipeline - a promise made several months before September 11, 2001.
  • Removing Manuel Zelaya begins a political isolation process; Removing Zelaya maintains U.S. control over its military bases in Honduras used so effectively to host the anti-Sandinista (Contras) forces in the rebellion that destabilized Nicaragua. The Central American ALBA coalition can expect more of the same, whereas under Zelaya that would not happen;
  • The purportedly illicit $134 billion in U.S. bonds confiscated in Italy in June of this year were suggested by the Italian officials to be targeting Venezuela. The background to these bonds is explained elsewhere, but essentially it is speculated that the funds support the takeover of Venezuelan oil.(11)
  • U.S. based oil platform contractors are stopping the pumping of oil, reducing flow of oil and revenues to Venezuela;(12)
  • Fitch is lowering the credit rating, increasing the costs to Venezuela of its bonds, and citing the ‘rising risk of fiscal crisis’; (13) With oil prices on the rise, it is hard to envisualize the fiscal crisis Fitch is referring to.
  • There has been inexplicable market speculation occurring around the Venezuelan bonds, above and beyond normal market demand.(14)

The recent announcement by the U.S. Central Intelligence Agency that it intends on hiring a ‘bench’ of financial experts in derivatives should only confirm that it is going to engage in actions to financially destabilize its perceived enemies and pursue its goals.(15)

Anyone anticipating that President Obama - while expressing ‘outrage’ at the coup – will actually do anything about it should review history. The reality appears to be that Obama has arranged a quid pro quo with Wall Street that trades control of foreign policy to Wall Street in exchange for his ability to finance his domestic initiatives. Franklin Roosevelt arranged for financing of the New Deal with Wall Street in the wake of the attempted coup by the Liberty League. In Roosevelt’s case, the bankers were spared embarrassment, prison, and even execution for treason in exchange for their support of the New Deal. Obama has comparable leverage over the investment bankers with the recent Wall Street scandals, but he still has to give them something. Venezuelan oil reserves of 310 billion barrels should give them the incentive they need.(16) It appears as though Hugo Chavez’s head is part of that deal. Zelaya is just collateral damage.

1. "With no petroleum resources, Honduras signed a generous oil subsidy deal with Venezuela, and then last year joined the emergent regional trade bloc, ALBA, the Bolivarian Alternative for the Americas. Inspired by Venezuela it now has Bolivia, Cuba, Nicaragua, Dominica and Ecuador as members. Simultaneously, Zelaya implemented domestic reform policies, significantly increasing the minimum wage of workers and teachers’ salaries, while stepping up spending in health care and education." Crossing the Rubicon in Latin America, Honduran Coup: Target Left? , Roger Burbach, July 3, 2009,

2. Latin American Countries Worlds Apart in Economic Downturn ,Mariana Minaya, Online NewsHour, March 13, 2009,

3. Honduras joins a club promoted by Venezuela and Cuba, The Economist Intelligence Unit ViewsWire, October 20, 2008,

4. "Mr Zelaya has openly recognised that his approach to Venezuela was the result of a lack of support from the US, the multilateral agencies and domestic business for his economic initiatives. In contrast, Venezuela's financial aid is not conditional on economic policy considerations, nor will Mr Chávez object to decisions taken by Mr Zelaya's government" Ibid.,

5. The Uncertain Future of ICSID in Latin America , Ignacio Vincentelli, Duke Law School; University of Miami School of Law; Catholic University Andres Bello, February 20, 2009

6. Exxon Is Demanding Ten Times its Investment, Says Venezuelan Oil Minister , James Suggett,, 18 February 2008,


8. Zamora Lafise Group Built Hotel in Honduras, Agency ACAN-EFE, January 8, 2007.

9. Lafise bank was concentrated in Panama, PrensaNews, Translated from - CITY OF PANAMA (DPA).

10. A Torrent of Dirty Dollars (How the Dutch do offshore banking. Forget about Panama for stashing away unreported money. From Netherlands Antilles, funds under a Dutch company can find their way back to the US tax-free. ), JONATHAN BEATY AND RICHARD HORNIK, June 24, 2001,,9171,150811,00.html

11. $134Billion Suitcase Bomb, E.P. Heidner, June 22, 2009

12, "State oil company Petroleos de Venezuela SA, or PDVSA, has fallen behind on billions of dollars in payments to foreign and domestic oil contractors - prompting some, such as Dallas, Texas-based oil driller Ensco International Corp., to halt their Venezuela operations. Such moves could decrease oil production just when Venezuela needs those revenues most." From Venezuela loses billions despite Chavez's controls, Rachel Jones, AP, June 18, 2009;

13. Venezuela State Oil Company PDVSA Ratings Cut By FitchFrom BB- to B+, Caracas, July 7,2009, Latin American Herald Tribune staff. "CARACAS -- The "rising risk of fiscal crisis in Venezuela" has adverse rating implications for Petroleos de Venezuela, S.A. (PDVSA), according to Fitch Rating Service, which has downgraded the foreign and local currency Issuer Default Ratings (IDRs) and outstanding debt ratings of PDVSA from BB- to B+."

14. "The magnitude of the effect of the interest rate differential adjusted for the rate of depreciation of the black market exchange rate on the black market premium is greater than the value taken by any of the countries in the original Fishelson (1988) study.This suggests that speculative motives may be particularly important in the Venezuelan black market for dollars." page15 from THE BLACK MARKET FOR DOLLARS IN VENEZUELA, SAMUEL MALONE AND ENRIQUE TER HORST, Universidad de los Andes in Bogota, Colombia,Enrique ter Horst is a professor of Finance at the IESA in Caracas, Venezuela.

15. CIA Recruiting Laid-Off Bankers in NYC, June 18, 2009,

16. "PDVSA factory in Carabobo, Venezuela. Venezuela has 77.5 billion barrels (1.232×1010 m3) of conventional oil reserves according to PDVSA figures, the largest in the Western Hemisphere and making up approximately half the total. This puts Venezuela as fifth in the world in proven reserves of conventional oil. By also including an estimated 235 billion barrels (3.74×1010 m3) of tar-like extra heavy crude oil in the Orinoco Belt region, Venezuela claims to hold the largest hydrocarbon reserves in the world. Venezuela also has 150 trillion cubic feet of natural gas reserves." Wikipedia

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