VENEZUELA'S POLICY IN CENTRAL AMERICA AND THE CARIBBEAN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP03T02547R000100270001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 21, 2016
• Document Release Date: September 26, 2008
• Sequence Number: 1
• Publication Date: December 1, 1980
• Content Type: REPORT

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National
Foreign
Assessment
Center
Venezuela's Policy in
Central America and
the Caribbean
State Dept. review completed
Secret
Secret
PA 80-10494
December 1980
AW
r
Copy 205
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National
Foreign
Assessment
Center
Venezuela's Policy in
Central America and
the Caribbean
Research for this report was completed
on 14 November 1980.
The author of this assessment is j Latin
America Division, Office of Political Analysis.
Comments and queries are welcome and should be
directed to the Chief, Latin America Division, OPA,
This assessment was coordinated with the Office of
Economic Research, the Office of Central
Reference,
Secret
PA 80-10494
December 1980
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Costa
Rica
Turks and
Caicos Islands
UU K
Dominican
Republic
Netherlands
Antilles
IN-h1
Cayman
Islands
1 U K1
British Virgin
Islands
(UKI
rRiCOV St. Kitts- Antigua UU K
(U S) Nevis Montserrat .Fr)
Guadeloupe
Dominica
Martinique )Fr)
St. Lucia
St. Vincent and Barbados
the Grenadines
Trinidad
and
Tobago
Na- and boundary representation
re not necessarily auth oritat"e
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the Caribbean
Venezuela's Policy in
Central America and
Key Judgments In its effort to become a major force in Central America and the Caribbean,
Venezuela is using its financial and political resources to expand its influ-
ence throughout the region. In doing so, it is responding to the potential
threat to its interests from the increasing pressures for change in the area, as
well as hoping to promote progressive, friendly governments in several
countries 25X1
Venezuela, however, does not appear to have the resources to be as effective
as either of the two dominant outside powers, the United States and Cuba.
In the short term, Caracas's bid for influence will be hampered by domestic
partisanship, a shortage of technical and human resources, and a lack of
central direction and coherent strategy. Over the long term, Venezuela's
commitment to this course and the availability of surplus oil revenues for aid
programs are uncertain. 25X1
These circumstances and Caracas's deteriorating relations with Havana
should produce closer cooperation with the United States. President Hcrre-
ra's government recognizes a considerable community of regional interests
with Washington but cannot abide the public perception at home or abroad
that it is acting as a US surrogate. The prospects for closer cooperation also
will be affected by Herrera's confidence in the depth and breadth of US
consultations, as well as by the extent to which Washington appreciates
Venezuela's more parochial concerns and its fears of big power confronta-
tion in the Caribbean basin.' 25X1
Venezuela accepts that it must compete with Cuba for influence in the
region, but is apprehensive and prefers to maintain stable relations with the
Castro regime and to avoid involvement in US-Cuban disputes. I f Venezuela
proceeds with plans to release a Cuban exile accused of bombing a Cuban
airliner in 1976, however, Havana may break relations in the next few
months. 25X1
' "Caribbean basin" refers to all of Central America and the Caribbean Sea. Central
America includes Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, and
Belize. "The Caribbean" refers to all of the islands of the Caribbean Sea, plus Guyana and
Suriname 25X1
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In Central America, Venezuela's short-term policies seek to counter exter-
nal forces that support violent revolution or reaction and to provide eco-
nomic assistance and political initiatives that will relieve internal pressures
in those countries. Its longer term objectives are to reduce political polariza-
tion in El Salvador, Guatemala, and Honduras by encouraging democratic
openings, bolster political pluralism in Nicaragua, and sustain and protect
Costa Rica's democracy. El Salvador currently is the key to Venezuela's
strategy.
In the Caribbean, Venezuela hopes to counter Cuban expansionism, pre-
serve stability by shoring up democratic institutions and national economies,
and avert superpower confrontations. Jamaica is the testing ground for more
aggressive pursuit of these objectives.
Venezuela prefers to work much of its policy through multilateral mech-
anisms, such as international financial institutions, the Andean Pact, the
Inter-American Energy Plan, and the OPEC Development Fund. Herrera
believes this approach supplements, and in some cases replaces, Venezuelan
resources and reduces Caracas's political exposure.
The new joint Venezuelan-Mexican Petroleum Financing Facility, the
cornerstone of Venezuela's regional policy, can significantly further Ca-
racas's interests. Among the agreement's potential pitfalls, however, are
unanswered questions regarding its practicability as an instrument of politi-
cal leverage and its vulnerability to possible Mexican-Venezuelan rivalry. In
any event, the agreement promises to blunt charges from Central American
and Caribbean nations that OPEC's pricing policies have undermined their
economies, while the financial benefits will contribute to regional economic
stability
Domestic politics is playing an important role in Venezuela's policy toward
the region. Former President Perez, still an independent force in Central
American-Caribbean affairs and spokesman for the largest opposition
party, differs with the Herrera administration on policy toward a number of
countries, especially El Salvador. Herrera's confrontational style has hurt
chances for interparty cooperation, but probably not enough to undermine
Venezuela's overall policy.
25X1
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Venezuela's Policy in
Central America and
the Caribbean
Part I
Central American-Caribbean Policy:
Motives and Tools
Foreign Policy: Background and Styles
Because of the preoccupation of Venezuelans with
consolidating their political and economic develop-
ment, the foremost issues of foreign policy are those
bearing directly on national development strategy. The
chief objectives of that strategy are:
? Institutionalization of the democratic political
system.
? Economic growth that promotes export-oriented
industrial diversification and reduces dependence on
oil exports.
? More equitable distribution of the benefits of eco-
nomic development.
Venezuela's abiding interest in Central America and
the Caribbean is closely linked to these goals.
Venezuela began to assign importance to foreign policy
in 1958, when the current era of civilian democratic
rule began. The transition from military dictatorship
and the delicate task of nurturing democratic institu-
tions gave Venezuela's foreign policy a distinctive pref-
erence for compromise and for building institutions
within which differences could be reconciled. The
quadrupling of world oil prices in 1974, however, pro-
vided Venezuela, a member of OPEC, the financial
resources to expand dramatically its role and influence
in world affairs. Then President Carlos Andres Perez
was well suited by temperament, ego, and personal and
nationalistic ambition to seize this opportunity and try
to enhance Venezuela's international stature
The current administration of Luis Herrera Campins
is trying to focus foreign policy more sharply than did
Perez on issues more widely conceded to be in Ven-
ezuela's direct national interest. So far, this has not led
to major foreign policy changes, but rather to such
shifts in emphasis as greater involvement in hemi-
spheric and subregional affairs. To the surprise of
some, Herrera has maintained much of Venezuela's
Venezuelan President
Luis Herrera Campins
Third World orientation, although with less clamor
than his predecessor. Also contrary to most expecta-
tions, the stronger ideological orientation of Herrera's
Social Christian Party (COPEI) has not yet produced
a foreign policy of greater consistency and structure
than Perez's piecemeal, action-oriented, often in-
conclusive efforts. 25X1
Tradition and the constitution give a Venezuelan presi-
dent wide personal authority. Herrera's style in ex-
ercising this power has been cautious, deliberate, and
searching In addition, 25X6
although he has an inner circle of advisers, the
decisionmaking process has been cumbersome because
Herrera consults broadly and at length
By employing broad consultation and collegial 25X1
decisionmaking, Herrera has attempted to shift some
of the personal policymaking burden to such agents as
the Foreign Ministry, the Ministry of Energy, the
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Venezuelan Investment Fund, and the Institute of
Foreign Commerce. The results have been poor; the
proliferation of actors and instruments and the absence
of central budgeting have created a bewildering
complexity.
Venezuela's Foreign Ministry has long been one of the
least professional agencies of the government. It suf-
fers from inadequate staffing and lacks sufficient in-
formation on foreign affairs issues. Turnover resulting
from the frequent changes of parties in power and the
legacy of low interest in foreign affairs have com-
pounded Venezuela's problems. Other ministries, such
as those that have primary responsibility for national
development and oil policies, compete for resources
and influence. The resulting interministerial competi-
tion generates confusion and duplication and obliges
the president to expend valuable time and scarce hu-
man and technical resources to provide coordination
and central direction)
The Herrera administration is not well equipped to
perform this coordinating role. Its uncharismatic, in-
consistent, and indecisive leadership style and its un-
usual confrontational approach to key power centers,
such as the political opposition, the media, business,
labor, and the military, have stirred partisanship and
eroded the government's domestic popularity.
Motives for Involvement in Central America
and the Caribbean
Since 1958, successive administrations have believed
that encouraging democracy elsewhere in the region
would create a more fertile environment for Ven-
ezuela's own democratic growth. With revolutionary
change now sweeping through the region, this long-
held interest has a new sense of urgency. Venezuela
has the resources, the incentives, and-for the present
at least-the desire to join Cuba and the United States
as one of the three most influential powers in the
Caribbean basin. The one element essential for success
that remains untested is Venezuela's long-term re-
solve 25X1
Venezuela's first vigorous, if spasmodic, initiatives in
Central America and the Caribbean were the result of
former President Perez's ego and personal ambition, as
well as his vision of Venezuela's hemispheric destiny.
At the same time, some Caribbean leaders were urging
Venezuela to become more involved. To be sure, Her-
rera shares Perez's desire to gain for Venezuela inter-
national prestige and favorable "public relations" from
greater regional involvement. The most immediate
source of Venezuela's increasing interest, however, is
concern over the growing danger of instability in the
region:
? Caracas is not so confident about the long-term
vitality of its own institutions as to feel immune from
either foreign-based subversion or general
revolutionary spillover.
? Venezuela fears the effects of a big power confronta-
tion in the Caribbean basin and accuses both the
USSR and the United States of playing global poli-
tics there.
? Venezuela's economic interests and investments as
well as its commerical and miltiary sea lanes could be
jeopardized by unrest in the area.
In addition to security-related concerns, Venezuela's
growing willingness to provide relief from high oil
prices to oil-importing developing countries in the
Caribbean basin indicates sensitivity to mounting criti-
cism by those countries of OPEC's pricing policies.
Venezuela has been keenly aware of this dissatisfac-
tion and of calls by the region's developing nations for
direct Venezuelan aid.
To blunt the criticism and to shift much of the finan-
cial burden to OPEC as a whole, Venezuela has be-
come one of the cartel's leading proponents of in-
creased aid to developing countries. Caracas's efforts
have been hampered by OPEC's pro-Muslim bias; only
10 percent of OPEC economic aid disbursed during
1974-79 went to non-Islamic, oil-importing developing
countries. For obvious reasons, the cartel refuses to
acknowledge that oil price increases are primarily
responsible for current account deficits in developing
nations and, therefore, has opposed preferential price
treatment
Fearing their isolation within the Group of 77-the
developing countries' caucus-Venuzuela and OPEC
in the past attempted to lay the blame for world energy
problems on massive consumption by the industrialized
countries. Since 1978, Caracas has departed somewhat
from the OPEC line by virtually acknowledging that
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25X1
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oil price increases have contributed to economic dis-
location in the developing world. Nevertheless, Ven-
ezuela backs OPEC's charge that developed countries
seek to undermine Third World unity in support of a
new international economic order by pitting the oil
exporters among the developing nations against those
that import oil
Partisan motives also play a part. The governing
COPEI party has provided assistance to fellow Chris-
tian Democratic organizations throughout the region.
Although the Venezuelan Government has been more
restrained, its sympathies are obvious.
These various political considerations have outweighed
commercial interests. Venezuela has little to gain ceo-
nomically from its relationships with Caribbean basin
countries, since its imports from the region are only a
small share of total imports and its exports consist
mainly of oil, which is readily salable to other coun-
tries-including the United States. Moreover, al-
though most loans extended to Central America have
carried commerical interest rates, as required by Ven-
ezuelan law, returns have been well below what the
funds could have earned if they had been invested
elsewhere.
Views of Central America :
Venezuela's concern about Central America's future is
more immediate and probably more fundamental than
its interest in the Caribbean. This is due less to sup-
posed cultural and historical affinities than to the more
imminent threat in Central America of growing po-
larization, revolutionary violence, and ascendancy of
radical groups.
Venezuela's short-term policies in Central America
are designed to counter external forces that support
violence of the left or right, and to provide economic
assistance and political initiatives to relieve internal
pressures. Its longer term objectives are to reduce
political polarization in Guatemala, El Salvador, and
Honduras by encouraging democratic openings, to bol-
ster political pluralism in Nicaragua, and to sustain
and protect Costa Rica's democratic momentum. F_
Visits by President Herrera or his Foreign Minister to
every country in Central America in the past year
demonstrated Venezuela's heightened concern for the
region in light of Nicaragua's revolution. Mexico's own
interest in Central America and Venezuela's habitual
uneasiness about "intervening" in other nations' af-
fairs may reinforce Herrera's inclination to act dis-
creetly. Nevertheless, he seems optimistic about Ven-
ezuela's chances of influencing forces and events in the
area, with the exception of those in Nicaragua.
25X1
In contrast to Herrera, many COPEI party leaders are
more concerned over Cuba's involvement in Central
America. They are even less sanguine than Herrera
about the prospects for pluralism in Nicaragua and are
more committed to bolstering the Christian Democrats
in El Salvador. They believe that Honduras is as
volatile as Guatemala but is being spared for the
present by subversives who need it as a supply route for
arms to El Salvador. 25X1
The Herrera administration's prospects for achieving
its goals are obscured by its still-evolving stategy, its
uncertain commitment, and the fact that the tractabil-
ity of problems varies from one Central American
country to the next:
? Venezuela's efforts in Costa Rica, for example, must
concentrate on economic problems; politically, Ca-
racas needs only to facilitate the country's demo-
cratic evolution. The Venezuelan commitment in
both regards seems reasonably firm.
? In Honduras, also, the Herrera administration prob-
ably could be effective in protecting and accelerating
the momentum toward civilian government, al-
though establishment of democratic rule there still
faces major obstacles. To date, however, Venezuela
has not been very active.
? Many uncertainties remain about postrevolutionary
Nicaragua, but experience to date suggests that even
substantial Venezuelan input may have little discern-
ible effect. Perhaps recognizing this, the Herrera
government is losing enthusiasm for the effort.
? Caracas would like to exert major influence in El
Salvador, and it appears committed to supporting the
present junta, but other ingredients will be necessary
to reverse the process of polarization in that country.
Failure in El Salvador would set back Venezuelan
I efforts throughout the region.
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? What Foreign Minister Zambrano called the most
problematical case in the region-Guatemala-may
prove critical to Venezuela's policy of attempting to
channel Central American revolutionary ferment. It
is too early to tell whether Caracas can achieve much
in Guatemala, but success there could have greater
positive effects than in any other country in the
region.
Views of the Caribbean'
Primarily because of proximity, Venezuelans consider
the Caribbean a legitimate sphere of influence and one
of their highest foreign policy priorities. Last year,
Zambrano told the UN General Assembly that Ven-
ezuela is "essentially Caribbean." Venezuela's direct
security interests in the region are:
? Countering Cuban expansionism and influence.
? Shoring up democratic institutions and national
economies to preserve stability.
? Resisting superpower competition in the Caribbean.
Concessional loans and assistance programs further
these goals, increase Venezuela's influence and stand-
ing, and satisfy Caracas's need to blunt criticism from
oil-poor developing countries.
The problems Venezuela faces in attempting to provide
this kind of aid and to seek influence in the Caribbean
are less immediate and intractable than in Central
America, but they are no less complex and deep rooted.
As a result, the Herrera government has had a difficult
time pursuing its Caribbean policy. In the English-
speaking islands, this difficulty often is attributed to
cultural and language differences, a convenient but
misleading explanation. Although cultural differences
have inhibited communication and understanding, the
shortage of capable people in the Venezuelan Foreign
Ministry and elsewhere has been the primary cause of
the failure to pursue an aggressive strategy irrespective
of these differences.
An equally serious impediment has been the difficulty
of developing an integrated policy toward a diverse
group of islands that face economic problems of vary-
ing intensity and that suffer from the continuing
strains of political fragmentation. This has resulted in
inconsistent policy in Caracas and a tendency to focus
on the trouble spots.
25X1 ' See appendix B for details on individual state-to-state relations
Herrera also will have to overcome Caribbean cyni-
cism and suspicion, some of which was engendered by
the failure of Perez to deliver on many of his promises.'
Like him, the current administration has generated
much promotional rhetoric with little concrete follow-
up, other than the joint Venezuelan-Mexican Petro-
leum Financing Facility established this year.` The
eastern Caribbean, which so far is not included in the
oil facility, will become particularly disenchanted with
Caracas if some tangible aid is not forthcoming in the
next year. Even if such assistance is offered, some of
the eastern Caribbean islands-such as Barbados, the
Netherlands Antilles, and Trinidad and Tobago-will
remain suspicious of Caracas's motives and de-
pendability. For all these reasons and despite their
genuine concern about the region, Venezuelan officials
do not seem enthusiastic about becoming deeply in-
volved in the localized, day-to-day political affairs of
the Caribbean.
Kinds of Assistance
Venezuela's efforts to project its influence in the
Caribbean basin have almost exclusively taken the
form of financial assistance.' From 1974 when Ven-
ezuelan Government credits to the region first reached
significant proportions-through 1979, the govern-
ment committed $5.8 billion of medium- to long-term
credits at less than market rates. Two-thirds of that
was disbursed, the bulk of it going to Central America,
the Caribbean, and Andean Pact countries. Earlier this
year, Caracas considered a new program of assistance
to Central America and the Caribbean on the order of
$1.5 billion to $2.5 billion for 1980. The government
now seems inclined to adopt only an interim measure of
about $250-300 million in oil facility aid annually, in
the hopes that OPEC will launch its new assistance
programs in 1981 and that Mexico can implement its
share of the facility.
' Perez's efforts to court Caribbean leftists such as Manley of
Jamaica and Castro also antagonized moderates such as Trinidad
and Tobago's Prime Minister Williams.
` The oil financing facility is a joint Venezuelan-Mexican agreement
to guarantee oil supplies to certain Central American and Caribbean
countries and to lend recipients 30 percent of the purchase price at
low interest
6 What Venezuela presents as foreign aid in its official accounts
consists almost exclusively of loans made on terms that are not
sufficiently lenient to qualify them as aid. In international accounts,
the accepted norm for Official Development Assistance is that a loan
contains a concessionary element of not less than 25 percent; nearly
all Venezuelan loans have been less than 14 percent concessional,
and, therefore, would be classified as Other Official Flows. By the
accepted standard, only about a tenth of Venezuela's pre-1979
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Multilateral Assistance 1974-80
Multilateral Agency
Venezuelan
Disbursing
Institution
1974
1975
1976
1977
1978
1979 1980
Total
International Monetary Fund
United Nations
World Bank
Inter-American Development Bank
Caribbean Development Bank
Central American Assistance
(SWAPS, bonds, coffee, and oil aid)
OPEC Special Fund
Andean Development Corporation
Reciprocal Credit Convention, Latin
American Free Trade Association
Santo Domingo Agreement
Andean Reserve Fund
Inter-American Saving and Loan Bank
National Coffee Fund
Latin American Export Bank
Contributions From International
Organizations
Stock Market
Total Commitments
BCV
MRE
FIV/BCV
FIV/MH BCV
FIV/MH BCV
BCV/FIV MAC
MH
FIV/BCV MH
BCV
BCV
FIV
FINEXPO
MRE
540.0
143.0
524.0
18.0
35.0
708.4
12.0
46.3
2,044.7
25.0
674.0
7.0
67.0
23.3
1,124.3
27.0
18.0
3.0
50.0
112.0
39.0
180.0
60.0
25.0
500.0
26.0
18.0
3.0
50.0
122.0
10.0
186.0
1,048.0
23.0
171.6
3.0
50.0
52.5
186.0
0.7
12.3
585.1
20.0
552.6
13.8
18.0
186.0
14.6
876.0
1,405.0
143.0
520.0
1,364.2
48.8
731.4
234.0
82.5
186.0
66.0
60.0
10.0
20.0
0.7
26.9
94.6
4,993.1
Disbursements
International Monetary Fund
United Nations
World Bank
Inter-American Development Bank
Caribbean Development Bank
BCV
MRE
FIV/BCV
FIV/MH BCV
FIV/MH BCV
301.4
50.2
350.0
5.0
422.2
76.4
150.0
90.0
6.6
61.8
16.4
100.0
6.2
9.0
100.0
6.2
5.7
196.7
6.3
43.9
20.0
116.0
7.7
844.0
143.0
520.0
602.7
38.0
Central American Assistance
(SWAPS, bonds, coffee, and oil aid)
OPEC Special Fund
Andean Development Corporation
Reciprocal Credit Convention, Latin
American Free Trade Association
Santo Domingo Agreement
Andean Reserve Fund
Inter-American Savings and Loan
Bank
National Coffee Fund
Latin American Export Bank
Contributions From International
Organizations
Stock Market
BCV/FIV MAC
MH
FIV/BCV MH
BCV
BCV
BCV
FIV
FIV
FINEXPO
MRE
MH
46.3
168.9
5.9
23.3
116.1
46.6
5.8
25.0
110.0
80.0
19.1
3.0
108.7
6.1
5.5
15.0
2.0
20.0
0.7
12.3
87.2
8.1
18.0
106.0
1.3
15.0
1.0
13.5
116.5
590.9
251.2
24.1
106.0
37.6
30.0
6.0
20.0
0.7
25.8
Data for 1980 are not complete.
BCV: Central Bank
MRE: Ministry of Foreign Affairs
FIV: Venezuelan Investment Fund
MH: Ministry of Finance
MAC: Ministry of Agriculture
FIN EXPO: Export Financing Fund
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Bilateral Assistance to Central America
and the Caribbean 1974-80 '
Venezuelan
Disbursing
Institution'
Barbados
FIV
5.0
5.0
Costa Rica
BCV/FIV
20.0
20.0
50.0
90.0
Cuba
BCV
2.3
2.3
2.3
2.3
2.3
Guatemala
MH
5.8
5.8
Guyana
FIV/FIN EX PO
1.2
11.2
1.2
1.2
11.2
Honduras
BCV
4.0
Jamaica
32.0
38.0
12.0
108.0
Nicaragua
BCV
3.0
Dominican Republic
FIV/BCV
100.0
11.1
111.1
Additional
MH/MRE
6.6
20.1
Caribbean countries
Barbados
FIV
Costa Rica
BCV/FIV
20.0
50.0
90.0
Cuba
BCV
2.3
2.3
Guatemala
MH
5.8
Guyana
Fl V/FIN EX PO
10.0
Honduras
BCV
4.0
4.0
Jamaica
BCV/FIV/FINEXPO
12.5
84.8
Nicaragua
BCV
3.0
Dominican Republic
FIV/BCV
45.7
14.3
10.0
11.1
81.1
Additional
MH/MRE
1.2
7.8
Caribbean countries
' According to the US Embassy in Caracas, it is impossible to
provide a country-by-country breakdown of foreign aid, because so
much Venezuelan assistance is channeled through international
agencies. Data for 1980 are not complete.
BCV: Central Bank
MRE: Ministry of Foreign Affairs
FIV: Venezuelan Investment Fund
MH: Ministry of Finance
MAC: Ministry of Agriculture
FINEXPO: Export Financing Fund
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Secret
Some Venezuelan officials believe they need to com-
plement "big check" assistance with the kinds of hu-
man and technical resources that Cuba has employed
successfully. Until unanticipated oil price increases
late last year promised substantial surplus revenue in
1980, Caracas was in fact adopting the line that for-
eign aid would take the form of "less quantity, more
quality."
Venezuela's shortage of human and technical re-
sources makes this approach difficult. One compelling
reason that 60 percent of Venezuela's financial assis-
tance from 1974 to 1979 was channeled through multi-
lateral institutions was that the responsible govern-
ment agencies lacked adequate staffs to evaluate
development projects. For the same reason, most bi-
lateral assistance has been directed initially at bal-
ance-of-payments problems rather than development
projects. Caracas continues to depend on recipients
and international financial institutions to develop and
evaluate projects for development assistance.
Venezuelan Agencies for Channeling
Assistance to Central America
and the Caribbean 25X1
Venezuelan The FIV was created in 1974 to invest excess
Investment Fund government revenue in ways that generate
(FIV) more income, complement domestic develop-
ment, and promote international financial
cooperation. Autonomous from the treasury
and the national budget, the FIV theoretically
receives 50 percent of the tax revenue from oil
and gas exploitation and income taxes. It
handles most conventional foreign assistance
programs, including the oil facility, as well as
trust funds in the Caribbean Development
Bank and the Inter-American Development
Bank. 25X1
Central Bank The Central Bank contributes to International
Monetary Fund facilities, buys bonds, and
provides central bank swaps, credit lines,
export credits, and other forms of financial
assistance. 25X1
Ministry of
Some officials-particularly those at the Foreign Min- Finance
istry-believe this reliance on multilateral channels
has diluted the political returns on Venezuela's aid.
They argue that direct bilateral aid is simpler and
more effective. For the moment, the bilateralists ap-
pear to be gaining an edge over their multilateralist
colleagues-mainly from the Ministry of Energy and
the Venezuelan Investment Fund who believe that
direct assistance entangles Caracas in foreign and
domestic political problems and overburdens the gov-
ernment's limited resources.
This debate probably also reflects differences among
policymakers over the extent to which conditions
should be attached to Venezuelan assistance. Publicly,
the government asserts that aid is given with no strings,
except that recipients are required to promote develop-
ment and institutionalization of democracy. In prac-
tice, most multilateralists take this view. The
bilateralists, however, are more aggressive in efforts to
project Venezuelan influence in the region and to
compete with Cuba.
The Petroleum Facility
If Venezuela's efforts to acquire influence in the region
are manifested primarily in its aid programs, then the
cornerstone of these programs is the Petroleum
Finance administers contributions to the
OPEC Fund and is responsible for capital
subscriptions and contributions to special
funds of multilateral development banks.
Ministry of Foreign Affairs is responsible for administer-
Foreign Affairs ing contributions to the UN and other interna-
tional nonbank agencies, and it handles non-
oil-related assistance to the smaller Caribbean
25X1
Financing Facility. A limited arrangement of this type
was in effect for some countries of the Caribbean basin
since early in the Perez administration, but an agree-
ment between Venezuela and Mexico announced on 3
August 1980 promises to increase the volume of UN~~~ r)
tance and to extend it to most countries of the regiu,
25X1
The agreement pledges Venezuela and Mexico to share
equally in guaranteeing delivery of up to 160,000
barrels of oil per day toward the net domestic
consumption of Costa Rica, El Salvador, Guatemala,
Nicaragua, Honduras, Panama, Barbados, Jamaica,
and the Dominican Republic. Other countries could be
included in the program later, but Venezuela and
Mexico hope a similar proposal by Trinidad and To-
bago, which would provide $208 million worth of oil
credits over three years, will take care of the smaller
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eastern Caribbean islands. The Venezuelan-Mexican
arrangement will be retroactive to 1 January 1980 for
Nicaragua and perhaps Costa Rica and will be phased
in gradually for the other recipients.
Participating countries will receive 30 percent of the
purchase price (which will be at the world level) paid
into their central bank accounts on credits repayable in
five years at 4-percent interest. If the money is applied
to priority economic development projects, especially
in the energy sector, the repayment period may be
extended up to 20 years at 2-percent interest. This
represents effective financial assistance of about $300
million per year, with terms that are substantially
more lenient than those of previous Venezuelan Gov-
ernment fundings. Separate one-year participation
agreements are to be signed with each beneficiary
country, renewable annually. Both Venezuela and
Mexico have asserted that they will reach their respec-
tive supply quotas during the first quarter of 1981. In
1980, Venezuela has carried nearly all of the burden.'
25X1
The joint oil facility faces several obstacles. The Ven-
ezuelan congress must approve the program and au-
thorize funding, but partisanship and procedure are
almost certain to complicate and delay legislative ac-
tion and implementation. Individual bilateral contracts
remain to be worked out, and the mediocre record of
Venezuela's previous effort and the Herrera admin-
istration's failure to correct bureaucratic inadequacies
do not inspire confidence. Nonetheless, officials in
Caracas seem optimistic that the program will be
implemented quickly.
Perhaps the strongest Venezuelan reservations concern
the anticipated shortcomings of the arrangement as a
tool for direct political influence. The necessity for
annual renewal represents potential Venezuelan lever-
age with the recipients. Once renewed, the program
becomes largely automatic. In addition, recipients gen-
erally can be expected to assert that they are entitled to
unconditional aid because they have been exploited by
the oil producers.
' Venezuela has been supplying 120,000 barrels per day to the region
and has agreed to assume the total supply burden under the agree-
Mexico may also have second thoughts about the pro-
gram. Never as enthusiastic as Venezuela, Mexico was
reluctant to take on the financial burden, was uncom-
fortable in offering assistance to regimes in Guatemala
and El Salvador that it does not support politically, and
generally was hesitant about a program that runs
counter to its conservative, commercial tendencies in
oil policy. Mexican production may not increase
enough to permit deliveries of its share without cutting
into other contracted exports.
Mexico's concern with supply details as well as its view
that guaranteed deliveries are a greater benefit than
the financial assistance reflect its longstanding preoc-
cupation with retaining total control over its petroleum
resources. For all these reasons, it would not be surpris-
ing if Mexico stalls full implementation of the agree-
ment by starting shipments now to Nicaragua and
other countries it seeks to befriend, while delaying well
into 1981 shipments to Guatemala, El Salvador, and
perhaps others. 25X1
Despite the unresolved difficulties, both sponsoring
governments evidently recognize the program's poten-
tially significant political benefits. Venezuela views the
oil arrangement as a relatively inexpensive means to
further its overall foreign policy in the region and to
blunt criticism from developing countries of Ven-
ezuelan and OPEC oil policies. Moreover, Caracas
hopes the program will encourage OPEC to expand its
financial aid to developing nations
Collaboration on this program could lead to broader
cooperation between Mexico and Venezuela on other
regional and international issues. The first signs, how-
ever, are not encouraging. Herrera apparently found it
difficult not only to get Mexico to participate in the
arrangement, but also to persuade President Lopez
Portillo to extend it to Guatemala and El Salvador.
The Mexicans may view Venezuela's current cam-
paign for hemispheric energy cooperation as competi-
tion for Lopez Portillo's UN Global Energy Plan,
which he introduced at the UN General Assembly
session in 1979. 25X1
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25X1
For its part, Venezuela has been displeased that Mex-
ico enjoys the benefits of OPEC, such as higher prices,
without assuming the obligations of membership or
sharing in the criticism from the developing world. In
addition, the association of Mexico's ruling party with
Venezuela's opposition Accion Democratica in the
Mexican-sponsored Permanent Conference of Latin
American Political Parties could antagonize COPEI.
Some Venezuelan-Mexican rivalry over influence in
the Caribbean basin is almost inevitable. The two
governments already differ to some extent on policies
toward El Salvador, Cuba, and Jamaica. Mexico's
policies toward much of the region are still in the
formative stage. Compared to Herrera, Lopez Portillo
is generally more supportive of the left, more inclined
to keep hands off, and more confident that Mexico can
accommodate major change in the region.
A number of factors, however, should inhibit serious
rivalry:
? Both governments are genuinely concerned about the
dangers of economic deterioration and political in-
stability in the region.
? Both seek to promote democratic institutions.
? Neither has a well-charted regional strategy.
? The United States has the incentive and some ca-
pability to induce both countries to cooperate.
Mexican participation in the oil agreement could be
one of several factors that might lead Cuba to reassess,
and conceivably moderate, its efforts in the region.
Castro probably would be more reluctant to jeopardize
his good relations with Mexico than with any other
Latin American nation. Moreover, the financial assist-
ance to be provided is on a scale Cuba cannot match.
Mexico benefits politically from its relationship with
Cuba, however, and for the present is not likely to
compete aggressively with Havana for influence in the
Caribbean basin
The Inter-American Energy Plan
Venezuela's Inter-American Energy Plan (IAEP) for
hemispheric cooperation in development of Latin
American energy resources is unrelated to the petro-
leum financing facility or other forms of assistance to
the Caribbean basin. Nevertheless, it is another mani-
festation of Venezuela's regional leadership aspira-
tions, since Central American and Caribbean states
would be among the chief beneficiaries of such
cooperation. 25X1
The Inter-American Energy Plan was outlined first by
Energy Minister Calderon a year ago and developed
further last March by US and Venezuelan officials at
the technical level. Personally taken with the project
and in somewhat of a hurry-Calderon sponsored an
exploratory meeting in September of energy ministers
from Colombia, Brazil, Nicaragua, Mexico, Ecuador,
Costa Rica, and the Dominican Republic. He plans a
meeting soon of all the hemisphere's energy ministers,
presumably to take formal steps toward implemcnta-
tion 25X1
Although the plan is far from fully worked out, it has
several distinct features:
? Establishment of an inter-American program for
energy cooperation and coordination with a board of'
governors and a coordinating group.
? Establishment of priorities in energy resource
development.
? Parallel effort on energy planning, training, and
conservation.
? Projects to be financed by an inter-American energy
fund, with contributions from industrialized coun-
tries, oil-exporting countries, more developed oil-
importing countries, the OPEC Fund, and the World
Bank. 25X1
A technical-level working group of the Latin American
Energy Organization (OLADE) forcefully rejected
Calderon's IAEP proposal in May. The OLADE rep-
resentatives evidently believed the plan would du-
plicate and eventually undermine their organization.
Moreover, OLADE opposes US participation, viewing
energy as a North-South issue and blaming industri-
alized countries for the world energy shortage. One
Venezuelan press article even suggested that Wash-
ington was taking part in IAEP to steer Latin
American countries toward alternative energy sources
and thus make more oil available for the United States.
Calderon appears determined to push ahead, cir-
cumventing OLADE if necessary, but preferring its
participation 25X1
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The OPEC Development Fund
The Herrera government considers the OPEC Devel-
opment Fund, previously known as the Special Fund,
to be an integral element of its Caribbean basin policy.
A founding member and one-time leading force in
OPEC, Caracas retains a surprising degree of influ-
ence primarily because of its long experience in oil
matters, its unique suitability as a moderating force, its
historical stature in and technical contributions to the
organization, and its willingness to use oil as a nego-
tiating instrument
The Herrera administration is continuing efforts be-
gun under Perez to increase assistance to Central
America and the Caribbean from OPEC resources. In
the process, Caracas has come closer than most OPEC
members find comfortable to acknowledging the ad-
verse impact of oil price hikes on the economies of
developing countries. This appears to stem from Ven-
ezuela's fear that oil-poor developing countries-
specifically in Latin America-might form a united
front that would isolate Venezuela.
Consequently, shortly after taking office, the Herrera
administration proposed that OPEC develop new
mechanisms to help these developing nations cope with
the effects of oil price increases. Venezuela, supported
by Algeria, has been a leading advocate of the trans-
formation of the OPEC Fund into an international
development bank with a capitalization of a least $10
billion and with authority similar to that of the
World Bank-to increase its resources by tapping
international financial markets. Iraq has made a some-
what similar proposal. Saudi Arabia, Kuwait, and the
United Arab Emirates have steadfastly opposed any
such conversion.
Although OPEC finance ministers in early 1980
adopted reforms that substantially strengthened the
OPEC Fund, they rebuffed the revisionists by re-
affirming its status as a development agency, depen-
dent upon OPEC contributions. The sweeping changes
proposed by Venezuela, Iraq, and Algeria, which had
been scheduled for consideration at the November
1980 Baghdad summit, have been delayed indefinitely
by the Iraqi-Iranian hostilities. While Venezuela had
hoped to see its proposals adopted b OPEC b earl
1981, this appears highly unlikely
The Andean Pact
The Herrera administration continues to hope that
some of its initiatives in Central America and the
Caribbean can be carried out through the Andean
Pact. For a variety of reasons, Venezuela derives few
economic benefits from membership in this regional
integration organization. Caracas places far more
value on such political dividends of the Pact as Andean
support for democratic institutions, increased diplo-
matic bargaining leverage, defense against criticism of
oil policies by the region's developing countries, and
shared political risks.
As the strongest power in the Pact, Venezuela has had
the greatest influence in shaping the organization's
political role, particularly in Central America. Early
last year, the newly inaugurated Herrera administra-
tion orchestrated joint Andean policies toward the
contending parties in Nicaragua's revolution. Al-
though these efforts produced mixed results, the Pact's
aggressiveness suggested some potential for joint
political action.
Complications, however, such as the latest Bolivian
coup and reservations about the Pact's political role on
the part of the new Peruvian administration, coupled
with longstanding economic disparities and political
differences, probably will inhibit Venezuela from
employing the Pact actively in its Central American-
Caribbean policy. Venezuela evidently was dis-
appointed that a joint fact-finding mission to Central
America last January and a joint declaration in March
produced nothing more than bland expressions of sup-
port for peace in El Salvador. Caracas probably will
continue to involve the organization in its regional
concerns, but the Pact's role promises to remain
limited.
ity in congress.
Impact of Domestic Politics
Venezuela's domestic political contests characteris-
tically spill over into foreign affairs, but in both spheres
a measure of compromise, or at least a truce, usually
emerges. In recent months, partisan issues increasingly
have intruded on foreign policy, in large part because
of Herrera's unrelenting attacks on the leading opposi-
tion party, Accion Democratica (AD) and his inability
to win the complete support of his own party, COPEI.
The contentious atmosphere takes on added impor-
tance because the ruling party does not enjoy a major-
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More than any other area of foreign policy, relations
with Central America and the Caribbean have been
affected by partisan competition. AD has accused the
administration of trying to foster Christian Democracy
in Central America, especially in El Salvador, at the
expense of other democratic forces. In fact, Herrera
has been less inclined to funnel assistance to regional
Christian Democrats than is the COPEI party in gen-
eral, especially former President Caldera's wing. But
even where both the government and COPEI favor
assistance, Herrera often defers to the party to avoid
public and partisan criticism. The largely independent
involvement of Caldera and his former Foreign Min-
ister Calvani in Central America-traveling through-
out the region, speaking out on issues and policy, and
supporting Christian Democratic groups-continues,
nevertheless, to provide AD with ammunition. Some
recent signs suggest that the growing intensity of de-
bate over El Salvador may have sufficiently disturbed
both sides to produce an effort at general reconcili-
ation
Interparty differences on other regional issues are
probably more resolvable. Perez was an enthusiastic
advocate of former Jamaican Prime Minister Manley,
but most AD party members did not challenge the
COPEI administration's standoffish posture. The
Adecos are more optimistic than COPEI about the
prospects for political pluralism in Nicaragua, but both
parties are concerned and see assistance as the only
lever to induce moderation. There are few differences
over policies toward Cuba-although Perez was close
to Castro-or other parts of the region, with the excep-
tion of Panama. The Herrera administration views
Panamanian strongman Torrijos as a Cuba-abetting
mischiefmaker in Central America, but most Adecos
seem unconcerned, probably because they believe Pe-
rez can manipulate Torrijos
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25X1
.25X1
25X1
25X1
Part II
The Cuban and US Factors
in Venezuelan Policy
Ambivalent Policy Toward Cuba
Cuba's involvement in Central America and the Carib-
bean gives added urgency to Venezuela's interest in the
region. It complicates the already complex and some-
times confused Cuban-Venezuelan relationship. That
relationship includes some elements of affinity, but at
the root are fundamental differences in political philos-
ophies that arouse Venezuelan apprehension over Cu-
ban expansionism
Venezuelans generally feel they ought to compete with
Havana for influence in the area, but are concerned
over their ability to compete effectively and over the
effects of such competition on their other regional
interests. For these reasons, Caracas has shown little
assertiveness and little consensus on this score, primar-
ily because the Herrera government has not truly
analyzed its Cuban policy.
More hardline elements in the government--including
the military and security forces as well as many of
the COPEI leaders not directly participating in the
executive branch favor strong and direct challenges to
Cuban initiatives in the region. Some believe the ulti-
mate objective of Cuban thrusts into the area is Ven-
ezuela's oil. Over the longer period, the hardliners
believe the Soviet Union will be less able to support
Cuba, forcing Havana to moderate and seek accom-
modation with the West. They favor a tough-minded
dialogue with Cuba that will open up chances for such
accommodation, and they believe the United States
should help by casing its economic denial program and
its policy on the Guantanamo Naval Base.
The Herrera government's official policy on Cuba is
less aggressive, seeking more subtle initiatives that
minimize the risk of polarizing the Caribbean. The
administration is particularly anxious to avoid being
caught in the middle of US-Cuban differences.F_
Competing with Cuba on any terms is cause for anxi-
ety. Venezuelans still hold Fidel Castro in awe and,
believing he has consistently bested the United States,
question their own capacity to compete. Many in the
Herrera government seem humbled, intimidated, and
almost apologetic that they can give only money to the
Caribbean basin, while Cuba can provide ideas and
human resources. Most Venezuelans, moreover, would
not want competition to undermine official relations
with Havana. They are habitually worried about the
fragility of their democratic system and its vulnerabil-
ity to a hostile Cuba and also believe that full Cuban
reintegration into the inter-American system offers the
best hope for imposing greater responsibility and re-
straint on Castro.
independence from the United States
These attitudes lead Venezuela to formulate its Cuban
policy almost on it case-by-case basis. Castro's proposal
last year that the two countries undertake joint assist-
ance programs in Central America and the Caribbean
drew a typically mixed response. Among others, Ven-
ezuela's Ambassador to Havana supported the idea as
a means to keep Cuba in line and channel its energies
constructively. More cautious observers argued
probably successfully----that Cuban interests would
profit inordinately from association with Venezuela's
financial largesse, while Caracas would not receive its
fair share of credit.
The Herrera administration's reluctance so far to alter
the quadrilateral oil arrangement with Cuba is another
example of Caracas's ambivalence. Venezuela delivers
10,000 barrels of crude oil per day to Cuba on Soviet
account in exchange for Soviet delivery of a like
amount to Venezuela's European customers. Ven-
ezuela's share of the transportation savings, about $6
million annually, is a pittance. Some Venezuelan of-
ficials would like to scrap the arrangement to dem-
onstrate displeasure with Cuba over other issues. I icr-
rera evidently has felt obliged to continue, however, for
the same political reasons that led Perez into the
arrangement several years ago - to embellish Ven-
ezuela's image of Third World leadership and
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Former Jamaican Prime Minister Manley,
Grenadian Prime Minister Bishop, UN
Secretary General Waldheim, and Cuban
President Castro at the nonaligned
25X1
Soured Relations
Notwithstanding Caracas's preference for stable ties
with Cuba and its reluctance to compete openly and
aggressively, relations in recent years have soured.
Since 1976, a series of incidents over diplomatic privi-
lege and the rights of asylum have periodically gen-
erated tension. Perez's personal rapport with Castro
and increased commercial ties generally helped dimin-
ish these differences. Last spring, however, when thou-
sands of Cuban would-be refugees stormed Peru's Em-
bassy in Havana, Cuba launched a vitriolic
propaganda offensive not only against Peru but also
against Venezuela, which has been harboring asylum
25X1 seekers sporadically for several years
Venezuela was surprised at Castro's aggressiveness
over the refugee affair. Although the media high-
lighted verbal exchanges and increased tensions, nei-
ther Venezuelan public opinion nor the Herrera
administration ever favored severing relations. Her-
rera rebutted Cuba's attacks in nonpolemical terms.
When a hemispheric conference was held in Costa
Rica in May to address the issue, Venezuela favored a
restricted agenda and a nonbelligerent approach. Her-
rera felt compelled not to back down, yet clearly pre-
ferred to reach an accommodation with Castro. Many
Venezuelans felt caught in the middle of a wider US-
Cuba struggle. Unless Castro chooses to sustain his
provocative attitude or other complications arise, dis-
agreement over the status of Cubans in Venezuela's
Embassy in Havana is not likely to pose a long-term
impediment to stable relations.
A more volatile complication, however, arose in
September. The Venezuelan Government announced
that it would release, for lack of evidence, Cuban exile
Orlando Bosch and three others who were arrested and
charged with the bombing of a Cuban airliner in 1976.
Having lobbied vehemently for Bosch's trial and
conviction, Castro was infuriated. He recalled the en-
tire Cuban diplomatic staff from Caracas, threatened
to break relations altogether, and publicly denounced
the Venezuelan Government, the COPEI party, and
President Herrera personally." Herrera forcefully
rebutted Castro's criticism, but has left the choice to
Cuba of severing relations or otherwise aggravating
the bad feelings. Castro is not likely to take concrete
, There is no evidence that political factors influenced the decision to
release Bosch, but the Cuban exile community in Venezuela is large
(estimated in 1976 at 20,000 to 50,000) and influential-several
leading government security officials under the last two administra-
tions have been Cuban exiles. Moreover, Caracas has been con-
cerned in recent months with increasing insurgent activity.
Venezuelans recall Cuba's support of Venezuelan guerrillas in the
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before the end of the year
Enter the United States
Venezuela's concerns about Cuban activities in
Central America and the Caribbean in many cases are
parallel with the views of Washington. Such concerns,
however, generally do not extend beyond this regional
context. In fact, Venezuelans are apprehensive that the
Caribbean basin might become the scene of a US-
Cuban/USSR confrontation over nonregional issues
that would polarize the region. For example, Caracas
is not concerned over Cuban adventurism in Africa,
and Foreign Minister Zambrano publicly criticized as
overreaction US military activities in response to the
Soviet brigade in Cuba.
Venezuelan criticism of US policy in the Caribbean
basin, while revealing some genuine concern over pos-
sible big power confrontation on its doorstep, should
not be taken at face value. As indicated, Venezuela
views Cuba as a competitor and the United States as
an ally. For its efforts in the Caribbean to be effective,
however, the Herrera government recognizes that it
must not be perceived as marching in step with the
United States. This would undermine Venezuelan
credibility and compound the polarization Caracas
wishes to avoid. Nevertheless, Herrera privately sup-
ports an active US role in the Caribbean basin, because
of the congruence of general US-Venezuelan interests
and his belief that only US aid-together with Ven-
ezuela's and Mexico's-can offset Cuba's investment
of human resources in the region.
In many other respects, Venezuelan policies com-
plement US interests. Both countries seek economic
and political stability, promote democratic institutions,
and support respect for human rights. Taking pride in
its record on these principles and its reliability as a
supplier of oil to the United States, Venezuela feels
entitled to an improvement in its historically close
relationship with Washington. The past two admin-
istrations appear to have been flattered by the US
effort to work some of its Central American policy
through Caracas. At the same time, Venezuelans are
uneasy about what they perceive as waning US power.
Neither Venezuela nor the United States is coin-
fortable with the fact that oil has been the cornerstone
of the bilateral relationship. Fundamental differences
over nationalization of the oil industry, price, supply,
and OPEC membership have generated friction for
years. The fact that many Venezuelans suspect thc25X1
United States of coveting their oil, particularly vast
reserves of heavy oil, has aggravated sensitivities
25X1
It is thus fortunate for both countries that complemen-
tary Latin American policies are becoming a second
cornerstone in the bilateral relationship. Herrera prob-
ably still believes the United States pays too little
attention to Latin America, and he sometimes has
trouble understanding aspects of US hemispheric
policy, but he appears generally pleased with the thrust
of that policy and with the level of bilateral consulta-
tion and coordination. To the extent that polarization
in the region increases, the bilateral gap will narrow
even further. 25X1
For the most part, Herrera will welcome US support
for Venezuelan initiatives in the Caribbean basin,
providing Washington meets his terms:
? US support must be exceedingly discreet. Caracas
can afford to work with the United States to a limited
extent, but it must not be perceived to be workingfor
the United States.
? Herrera must feel confident that the United States is
consulting closely on all facets of Central American
Caribbean policy. He questions, for example,
whether US policy toward Nicaragua has been and is
being closely coordinated with his government, and
he probably resents continuing official US contact
with his predecessor, former President Perez.
? The United States, Herrera believes, must recognize
that Venezuela's focus is narrower and its concerns
more parochial than those of Washington. Caracas
will not, as a rule, be willing to carry its regional
competition with Cuba into international forums or I
to link issues extensively.
25X1
I
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Appendix A
Venezuela's State-to-State Relations
With Central America
Nicaragua
The revolution in Nicaragua has been the strongest
single impulse behind the Herrera government's move
toward more active involvement in Central America.
After the Sandinistas took power in Managua in July
1979, Venezuela outlined its general policy objectives
for Nicaragua economic recovery and development,
a pluralistic democratic political system, respect for
human rights, a nonaligned foreign policy and,
presumably, receptivity to Venezuelan guidance.
From the beginning, the Herrera administration was
not very optimistic about attaining these goals. It
decided, therefore, to provide a great deal of financial
aid and ask nothing specific in return. Caracas appar-
ently believed that attempting directly to exact politi-
cal concessions would be counterproductive, hoping
instead that the Sandinistas would gratefully solicit
Venezuelan counsel or intuitively pursue the course
desired by Caracas. Since neither has occurred, the
Herrera government has become disillusioned and has
decided to channel assistance more directly to the non-
Sandinista democratic forces. Although the admin-
istration is more pessimistic than ever about the
chances for democracy in Nicaragua, the experience
may prove to have been a valuable lesson for Ven-
ezuelan policies on exerting leverage elsewhere in
Central America.
Shortly after the Sandinistas took power, President
Herrera told US officials that he would do everything
in his power to prevent Marxists from consolidating
their control over Nicaragua because this would rever-
berate through all of Central America. Two weeks
after Somoza's departure from Managua, Venezuelan
Foreign Minister Zambrano arrived there at the head
of a 72-person delegation-the largest in Venezuelan
history-to begin the process of buttressing Nica-
ragua's democratic forces. Over the next three months,
Caracas provided more than $40 million in aid. By
November 1979, Zambrano was disappointed that this
effort had not had much direct impact on Nicaraguan
political processes. 25X1
Leaders of the ruling Social Christian Party (COPI? 1)
were more pessimistic than the government, and at-
tempted to support and encourage non-Sandinista
political and labor groups. The opposition .-lcciun
Democratica (AD) party, and especially former Presi-
dent Perez, viewed the prospects for pluralism more
favorably and accused COPEI and the administration
of contributing to radicalization of the Sandinista gov-
ernment by failing to put sufficient confidence in it.
Given Perez's significant contribution to the
Sandinista victory, his views may be more self-serving
than simple partisanship would suggest.
25X1
By the eve of Herrera's visit to Nicaragua from 29 to
31 March 1980, Venezuelan financial commitments
had reached $111 million. Nonetheless, the Ven-
ezuelan Government had become disillusioned by the
ineffectiveness of this effort and frustrated that Cuba
received greater credit for what Caracas thought was
more modest assistance. Foreign Minister Zambrano
emphatically told US officials that his country would
stop providing money to the Nicaraguan Government,
except through the Venezuelan-Mexican Petroleum
Financing Facility. 25X1
Herrera's state visit in March can be viewed as a last
major effort to exert direct influence on the Nica-
raguan Government. The visit was described by the US
Embassy in Managua as a "public relations tour de
force." Despite Zambrano's earlier statement, I lerrera
offered even more assistance programs, and in addition
to official discussions, he met with and boosted the
spirits of several non-Sandinista groups.
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In the months following his trip, Herrera continued to
advocate in principle unconditional assistance to Nica-
ragua.' In July, Venezuela provided a $30 million
advance on the oil facility. Caracas lately has been
pressing the Nicaraguan junta more overtly for politi-
cal concessions, but the emphasis of Venezuelan policy
is shifting to direct aid for democratic forces. Herrera's
support for Alfonso Robelo, a former member of the
Nicaraguan junta who has become the leading opposi-
tion personality, was given with reluctance, however,
because of Robelo's ties to and ideological affinity with
former President Perez. Moreover, Nicaragua's Social
Christian Party is viewed as too small and ineffectual
to merit much support. Herrera, therefore, has focused
attention on the independent press, the private sector,
and the Roman Catholic Church. He met with rep-
resentatives of the leading businessmen's organization
in July, reportedly persuading them to assert them-
selves and to combat Cuban influence and Sandinista
authoritarianism. Immediately afterward, he met with
Archbishop of Managua Obando y Bravo, whom
Herrera considers a key figure in sustaining pluralism
in Nicaragua.
Nongovernment forces in Venezuela also are contrib-
uting to this campaign of support. A small group of
COPEI leaders, Venezuelan business representatives,
and clergymen are interested in helping to finance
Archbishop Obando's educational campaign and
Church radio station. The Venezuelan Trade Union
Confederation is working on behalf of independent
trade union activities in Nicaragua
The pro-Cuba militaristic tone of the Sandinista an-
niversary celebration in July seems to have reassured
Caracas of the wisdom of its present policy. During the
festivities, past Venezuelan and Mexican support for
the Nicaraguan Government was virtually ignored,
while more modest assistance from Communist coun-
tries received top billing. The Venezuelan delegation to
the celebration was prevented from attending at the
It is not a simple matter for Caracas to use its oil-related assistance
as political leverage. Because Venezuelan oil shipments to Nica-
ragua are channeled through a private company, even former Presi-
dent Perez was unable to use them politically against former Nica-
raguan President Somoza. Some officials in Venezuela's government
oil company would like to initiate direct oil sales, which presumably
would increase Venezuelan influence with Nicaragua, but it appears
last minute by bad weather and stringent airport se-
curity; Foreign Minister Zambrano acknowledged pri-
vately that in view of the atmosphere, he was just as
happy to have missed the affair.
In addition, Venezuelans recently have been surprised
and upset by official Nicaraguan criticism of their aid
effort and their policy toward El Salvador. One official
explained that Venezuelans were not used to this kind
of criticism and that its continuation could affect fu-
ture assistance programs for Nicaragua.
El Salvador
Venezuela's experience with Nicaragua may have
stimulated in part its growing involvement in El Sal-
vador, a policy that it sees as a fallback position in the
struggle to stem radicalization in Central America.
The Herrera government has supported the reformist
civilian-military Salvadoran junta since it first took
power by coup in October 1979. Venezuela's view that
the junta offers the best-and perhaps the last-
opportunity to avert revolutionary upheaval in El Sal-
vador coincides closely with US policy. The Herrera
government and the ruling party have been more gen-
erous and enthusiastic in supporting the junta since it
was reorganized in January 1980 to incorporate lead-
ers of the Salvadoran Christian Democratic Party
(PDC).
Venezuelan support has included funds, political ad-
vice, some quiet counseling on military and security
matters, and protection for Salvadoran Christian
Democratic leaders. Caracas provided a $30 million
loan through the Inter-American Development Bank.
Following a visit to Venezuela last April by junta
member and PDC leader Napoleon Duarte, Herrera
offered another $20 million loan for a hydroelectric
project.10
10 The US Embassy believed that this may not have been "new
money," but rather oil facility money already in the Salvadoran
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The full extent of Venezuelan support is not known.
The I lerrera government has tried to be discreet and
perhaps sparing out of concern that limited and
shaky public and international support for the junta
would be even further undermined by evidence of
extensive foreign backing. In addition, of all the cle-
ments of Venezuelan policy in Central America and
the Caribbean, relations with El Salvador have been
subject to the greatest amount of domestic partisan
25X1 debate
Perez and the bulk of his AD party oppose the Sal-
vadoran junta as presently constituted. Perez believes
that the junta must be expanded to include leftists, that
rightw ing officers must be purged from the military
high command, and that the government must check
rightwing terrorism. Herrera administration officials
believe Perez has covertly provided Salvadoran leftist
opposition leaders with several hundred thousand dol-
lars of his own funds. AD leaders regularly attack the
I lerrera government and COPEI for supporting Chris-
tian Democracy in EI Salvador at the expense of other
forms of democracy.
Both I lerrera and COPEI deny charges of favoritism
toward Christian Democrats, but AD's suspicions are
not entirely groundless. The ruling party has been
known to provide various forms of support to Christian
Democratic groups in other countries. Last Iuly
former Foreign Minister Calvani organized a meeting
in Caracas of the Council of Christian Democratic
Organizations of America - made up of 17 parties
from the hemisphere and orchestrated the con-
f'crence to highlight support for the Salvadoran junta
and the PDC. Immediately afterward, Calvani as
secretary general of the council- went to El Salvador
to reaffirm the organization's solidarity with the junta.
Calvani has made other trips to El Salvador in the past
year
In recent months, the Herrera administration has be-
come guardedly more optimistic about prospects for
the junta. Perhaps sensing that events were beginning
to move in favor of the Salvadoran Government, the
Venezuelan Foreign Minister in June gave a surpris-
ingly bold defense of administration support for the
junta. Critical members of the AD, however, have not
been deterred. Venezuelan support of the junta at the
present level is likely to have only modest effect, unless
other factors conic into play. The junta's failure could
have negative repercussions on Venezuelan polio,
throughout the region
25X1
Costa Rica
Earlier this year, Venezuela encouraged Costa Rican
President Carazo to assume more active leadership in
Central America, particularly in hopes of slemnting
radicalization in El Salvador. President I Icrrcra cvi
dently believed that Costa Rica's democratic reputa
tion and prestige could marshal important foreign sup-
port for the junta. Carazo was reluctant, however,
reportedly because he believed such action would
antagonize neighboring Sandinista government lead-
ers, whom Carazo felt obliged to placatc.F--
25X1
Nevertheless, Costa Rica remains an important part of
Venezuela's Central American policy for several
reasons:
? The two countries have a common bond as rare
examples of functioning democracy in lit in
America.
? Herrera believes that channeling significant aid to
Central America's only democratic government
could be an important object lesson and indutcnicat
to the nondemocracics of the region.
? Within Central America, only Costa Rica has good
relations with all of the politically diverse states ,ind,
therefore, could be a useful channel for Venezuela.
? President Carazo is the only self-proclaimed Social
Christian head of state in Latin America besides
Venezuela plans to gain influence with Costa Rica
through various forms of support, such as the oil
facility -which Costa Rica helped craft and by
backing Costa Rica's bid for a I. AN Security Council
seat this year.
Costa Rican I :ncrgy
Minister Altmann recently told the I S Antb;tssador
that Mexico had agreed to provide its share of oil under
the joint oil facility at a discount rather than under the
facility's financing terms, an unprecedented and 25X1
surprising concession if true. Altmann intended to
press Venezuela for the same special arrangenlent
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Guatemala, Honduras, and Panama
The Herrera administration and the ruling party be-
lieve Guatemala and Honduras are susceptible to
political destabilization. Caracas insisted-reportedly
over Mexico's objections on political grounds-that
Guatemala be included in the joint oil facility arrange-
ment. Despite this apparently farsighted effort to open
a channel of influence, the Herrera government sees
little hope at present of affecting the situation in
Guatemala. Caracas also remains distracted by the
more immediate concerns in Nicaragua and El Sal-
vador. Venezuela thus is maintaining formal ties but
doing little else. For its part, Guatemala eventually will
become self-sufficient in oil and, in any event, ques-
tions whether Venezuela will be able to improve its
poor record throughout the region of delivering on
promises of aid
Venezuela's periodic interest in the Guatemalan terri-
torial dispute with Great Britain over Belize is related
to Caracas's own Central American-Caribbean poli-
cies in several ways. Venezuela's support for Belizean
independence with territorial integrity probably is cal-
culated in part to raise its stock with the English-
speaking Caribbean, which avidly backs Belize. The
stance also reflects some concern about Cuban interest
in the issue as well as the possible impact of the
dispute's outcome on Venezuela's boundary problem
with Guyana.
Caracas also maintains only limited contact with Hon-
duras, despite concerns in COPEI about the Honduran
Government's vulnerability to subversion. The oil
facility represents the bulk of Venezuela's effort to
strengthen and gain influence with the Honduran Gov-
ernment and to encourage continued progress toward a
democratic opening.
Venezuela's relations with Panama are uniquely af-
fected by domestic partisanship. President Herrera is
uncomfortably aware that former President Perez has
maintained his close personal relationship and influ-
ence with Panamanian leader Torrijos. Herrera has
met twice briefly with Panamanian President Royo
this year, but presumably sees no possibility of
supplanting Perez's ties to the real source of power. In
fact, the Panamanian Government is suspicious that
COPEI is funding the opposition Panamanian Chris-
tian Democratic Party. Nevertheless, Panama will re-
ceive 24,000 barrels of oil per day under the joint
petroleum facility, and other forms of assistance also
are likely to be available.
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Secret
Appendix B
With the Caribbean
Jamaica
In recent years Jamaica has been the centerpiece of
Venezuela's Caribbean policy. During the 1975-79
period, Caracas disbursed $85 million to Jamaica,
much of which came via the earlier oil facility arrange-
ment. Former President Perez's admiration for and
close personal relationship with former Jamaican
Prime Minister Manley accounted for some of this.
Because the Herrera administration did not share
Perez's favorable views of Manley and because the
Jamaican economy is in serious trouble, Caracas lately
has been more toughminded about assistance. Rec-
ognizing the political sensitivity of Jamaica's recent
electoral period, Herrera authorized only enough aid to
help Manley's government through the elections. In
addition, while the volume of aid from Caracas to
Kingston will increase because of the joint Ven-
ezuelan-Mexican Petroleum Financing Facility, the
Herrera government was more blunt about attaching
conditions for Jamaica than for most other countries of
the region. A Venezuelan delegation warned Manley
in March 1980 that assistance was contingent on
maintenance of democratic institutions and avoidance
of a state of emergency.
Like other countries with interests in the Caribbean,
Venezuela pays excessive attention to Jamaica because
of the potential for economic collapse, growing politi-
cal violence and the outside chance of destabilization,
Cuban interest and influence, and Jamaica's promi-
nence in the Third World. Caracas never accepted
Manley's argument that his electoral defeat would
result in more extreme groups taking over. Instead, the
Herrera administration worried that radicals in
Manley's ruling party would attempt to manipulate
Venezuelan aid remains crucial to Jamaica's efforts to
devise an alternative economic strategy following
Manley's break with the International Monetary
Fund. Even after Seaga resumes negotiations with the
Fund, Caracas will retain some influence over Janmi-
can economic policy. If political concessions also are
obtained, Herrera's influence will take on new rami-
fications as well as greater proportions. Moreover, if
the overall political-economic effort toward Jamaica
has a clear stabilizing effect, Caracas probably would
be encouraged to try more aggressive policies else-
where in the region. 25X1
Because the joint Venezuelan-Mexican oil facility for
Jamaica is to be retroactive to 3 August 1980, the
effective assistance from Venezuela should be about
$64 million per year. In September, Herrera responded
to a personal appeal by Manley and authorized pay-
ment of $10 million of oil facility credits, but he
withheld the remaining funds until after the election.
Herrera's guarantee to supply most of Jamaica's oil
imports also pleased Kingston, as did his hint that
Venezuela might prepay all 1981 oil facility credits in
Januar 25X1
Caracas will be more enthusiastic about providing 25X1
support for Jamaica under Seaga
election results or retain power by force.
A high-level Venezuelan commission arranged to meet
with the new Jamaican Prime Minister, Edward
Seaga, the day after his election victory. Herrera has a
direct personal interest in policy toward the Seaga
all, Venezuela has sought influence in .Jamaica more
aggressively than in any other country in the Carib-25X1
bean.
government, because Venezuela's capacity to promote
moderate change in the Caribbean at Cuba's exper '
is being tested. Herrera is certain, therefore, to in-
crease various forms of support to Jamaica.
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Eastern Caribbean
Venezuela is not as likely to acquire influence in the
eastern Caribbean as it is in Jamaica, because both its
effort to do so and the receptivity to it will be less.
Caracas foresees many problems in undertaking an
active political role in the area, and generally is not
enthusiastic about trying. The Herrera government
would prefer not to bother with the complications of
extending the oil facility to these tiny islands. For their
part, eastern Caribbean states-especially Trinidad
and Tobago, Barbados, and the Netherlands Antil-
les-traditionally have distrusted Venezuelan motives.
Moderate stable regimes complain that Caracas pays
more attention to leftists such as Manley and to
troublespots such as Grenada. Some of these island-
states frequently accuse Venezuela of repeatedly
promising assistance, then failing to deliver.
In an effort to overcome this resentment, the Herrera
administration played host to the prime ministers of
most of the eastern Caribbean states during late 1979
and early 1980. The leaders of St. Lucia, St. Kitts-
Nevis, Montserrat, Dominica, Antigua, Grenada, and
the Netherlands Antilles all made what one Caribbean
leader called "the pilgrimage to Caracas." President
Herrera is expected soon to begin returning the visits.
All of the prime ministers signed the familiar treaties
of friendship and cooperation and received various
promises of assistance, including guaranteed oil sup-
plies.
More skeptical states, such as Barbados, have put off
the pilgrimage to register their dissatisfaction with
Venezuela's generally unresponsive attitude as well as
with trade imbalances. Some suspect Venezuela of
imperialistic designs. Trinidad and Tobago and the
Netherlands Antilles bitterly distrust Venezuela's in-
terest in buying a share of their refineries, seeing it as a
ploy to gain control of them. Nevertheless, the Nether-
lands Antilles has formally requested to participate in
the Venezuelan-Mexican oil facility. Caracas is likely
to put off this request for some months.
Grenada
Given Venezuela's desire for stability and democracy
in the Caribbean, some of its initial policies toward
Grenada set an unfortunate example. After a Caracas
newspaper first highlighted Cuban involvement in
Grenada in April 1979, the Herrera government began
to pay so much attention to the tiny island that critics
elsewhere in the Caribbean and in the United States
charged once again that Venezuela followed a
"squeaky wheel" policy. To make matters worse, of-
ficials in Caracas-perhaps despairing that Grenada
was lost to Cuba-offered assistance with no strings
attached. Incidents such as Grenada's support at the
UN for the Soviet invasion of Afghanistan and
Grenadian Prime Minister Bishop's radical posturing
at the nonaligned summit in Havana evidently stirred
Herrera to action.
By the time Bishop visited Caracas in late 1979, the
Herrera government had resolved to use assistance as a
lever to reduce Cuban influence in Grenada. After
hard bargaining, Venezuela promised Bishop a
$500,000 grant to help in construction of a new airport,
guaranteed oil supplies, help in offshore exploration,
three large oil storage tanks, road construction assis-
tance, a $1 million credit on imports from Venezuela,
and the loan of a commercial aircraft and crew. By late
March 1980, however, Caracas was still withholding
the airport construction funds on the grounds that
Cuba which was providing manpower and technical
assistance for the project-was receiving all the public
credit.
The tactic may have had some sobering effect on
Bishop. In mid-1980, another Grenadian delegation
received pledges of additional but small-scale assist-
ance-polio vaccine, a few training slots and scholar-
ships, fishing and agricultural cooperation, and a pos-
sible cultural center. In most cases, the new proposals
were subject to exploratory missions and further study,
which effectively signified that the go slow approach
on Grenadian aid was still in effect. It is not clear
whether the Herrera government has imposed precise
conditions; more likely, it has simply urged that Bishop
modify his pro-Cuba posture and guarantee demo-
cratic institutions.
Dominican Republic and Haiti
Venezuela has had close ties to and some influence in
the Dominican Republic since the fall of Trujillo in
1961. The two countries share a common language,
culture, and political distinction as Latin American
democracies. In 1978, Venezuela contributed to the
favorable resolution of the Dominican Republic's elec-
toral crisis.
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25X1
At the same time, Dominicans are suspicious of Ven-
ezuela, in part because of the continuing severe impact
of oil price increases on their economy. Caracas ex-
tended its first oil facility to the Dominican Republic
and last year loaned an additional $90 million to defray
the cost of oil imports. The Dominicans will be major
beneficiaries of the joint Venezuelan-Mexican oil
facility credits for the first year should total $57
million -although oil imports will continue to hurt the
balance of payments.
The Herrera government is acting primarily out of
concern that worsening economic conditions in the
Dominican Republic could precipitate a military coup
or Cuban encroachment. Recently, however, the op-
position Reformist Party of former Dominican Presi-
dent Balaguer began to flirt with Venezuelan-style
Christian Democracy. It is not known whether the
Social Christian Party or the Herrera government
have, or intend to, provide support to the Reformists.
Venezuela does not have similarly close ties to Haiti.
The two countries have little in common. Haiti is a
relatively insignificant actor in the Caribbean and its
political and human rights records are poor. The Her-
rera government, therefore, probably will not respond
quickly to Haiti's request last August to be included in
the oil facility.
Guyana and Suriname
Venezuela's interest in neighboring Guyana is con-
ditioned by a longstanding border dispute. Otherwise,
the two countries do not have much in common.
Successive Venezuelan administrations have been sen-
sitive to Guyana's fishing agreements and other con-
tacts with Cuba and the USSR. Caracas would like to
exercise influence over Guyana, but except for some
small loans, Venezuela has not included Guyana in its
Caribbean assistance programs. Guyana buys its oil
from Trinidad and Tobago, but might be interested in
the Venezuelan-Mexican oil facility. The Burnham
government believes that Guyana should remain non-
aligned and promote its own development rather than
become involved in what it sees as competition among
the superpowers, Cuba, and Venezuela in the Carib-
The boundary dispute complicates these objectives and
colors Guyana's relationship with Venc,ucla. l'hc two
countries decided in the 1972 Port of'Spain Protocol to
shelve the boundary question for 10 years, which
means that in 1981 tensions could recur. At the same
time, Guyana pins much of its aspiration for develop-
ment on a planned hydropower and aluminum smelter
project on the Upper Mazaruni River, within the dis-
puted territory. 25X1
The Burnham government continues to underestimate
the border problem as a factor affecting prospects for
World Bank and private investor financing for the
Upper Mazaruni project. Burnham also was misled
when former President Perez suggested that Ven-
ezuela might buy some power from Guyana, as well as
provide support directly and through international
financial institutions.
Perez's hint of support evidently hinged on Guyancsc
concessions on the border dispute. Although I lcrrcra
has not yet made a decision on support for the project,
he probably would decline in the absence of a border
settlement, though he night not make this condition
explicit. The longer Caracas waits to raise the border
issue as a consideration in approval of the Upper
Mazaruni proposal, the harder it will be, particularly
in light of Herrera's support for alternative energy
sources in developing countries. The project apparently
would compete with Venezuelan development plans for
the area, but objection on those grounds could be
embarrassing. Venezuela has expressed reservations
about the economic feasibility of the Upper Mazaruni
complex, but the project seems sound as long as both
the dam and smelter are built. 25X1
The project and stronger bilateral tics in general thus
could be at stake when discussions of the border dis-
pute resume no later than next year. Given the intrac-
tability of the problem, Venezuela's greater prior-
ities including the territorial dispute with
Colombia and the Herrera government's limited
Foreign Ministry resources, the most likely outcome
could be an extension of the Port of Spain Protocol.
This would avoid sonic problems, but do little to fur-25X1
ther Venezuela's position in Guyana
bean.
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Venezuela has even less contact with Suriname than
with Guyana. Caracas is concerned about stability,
democratic processes, the potential for Cuban involve-
ment with the new government, and human rights, but
prefers to defer to the Netherlands. Suriname buys
most of its oil from Trinidad and Tobago and regards
Venezuelan offers of aid with some suspicion. 25X1
Secret 26
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Sources of Copyrighted Photographs:
Page 1: Liaison, 14 August 1979.
Page 11: The Daily Journal, 13 March 1979.
Page 11: UPI, 27 February 1980.
Page 11: Elite, 14 April 1972.
Page 11: Bohemia, August 1978.
Page 11: Resumen, 6 January 1980.
Page 12: Caribbean Life and Times, December
1979.
Page 12: Visiting Hemisphere Leaders, 2 September
1977.
Page 16: UPI, 24 September 1979.
27 Secret
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Secret
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