Billions unaccounted for in Venezuela’s communal giveaway programme

CATIA LA MAR, Venezuela, (Reuters) – The neighbourhood of El Chaparral began receiving cash from the Venezuelan government in 2005. The windfall came courtesy of the late socialist leader Hugo Chavez’s plan to fight poverty by transferring billions of dollars in oil revenue to communities around the country.

Within a year, auto mechanic Juan Freire was urging authorities to cut off El Chaparral and its sister community of Los Pinos, with a combined population of 250. The money wasn’t going to the needy, he says, and it wasn’t sowing growth. Instead, Freire alleges, leaders of the community council in this mountain suburb were using some of the cash for personal expenses and to build houses for family members. He and neighbours filed complaints with nearly a dozen state agencies seeking a halt to the transfers.

Yet the money kept rolling in: In 2008, the council received close to $1 million – equal to about $4,000 a resident.

“When we filed complaints, the responses would always be something like, ‘We’ll send some recommendations,’” said Freire, 57. “They never gave us answers.”

The unsupervised spending in El Chaparral is symptomatic of a vast community aid effort with lax financial controls. A network of more than 70,000 community groups has received the equivalent of at least $7.9 billion since 2006 from the federal agency that provides much of the financing for the programme, Reuters calculates, based on official government reports.

The money is part of a broad government effort called the “communal state” that steers funds to communities, primarily through an outfit called the Autonomous National Fund for Community Councils, or Safonacc. But exactly how much money passes through this system, who gets it and how it’s used are largely a mystery.

The communal revenue-sharing program was championed by the late Chavez. The charismatic former military officer wanted small neighborhood groups to form “communes” that would define civic life and anchor a citizen-driven socialist demo-cracy. In one of his last speeches before dying of cancer in 2013, Chavez tasked his handpicked successor, Nicolas Maduro, with advancing the plan.

“I entrust this to you as I would my life,” he told Maduro, a former bus driver who narrowly won election last year.

The most common of such organizations are the community councils, which number about 40,000, according to a 2013 Communes Ministry study. The study also identified another 30,000 such organizations, including networks of community councils.

Maduro has been beset by three months of violent opposition protests that have left dozens dead. He shows no sign of stepping down – and has vowed to advance Chavez’s community financing plan. He has described the communes as the embodiment of Chavez’s movement to reduce inequality through generous spending of oil revenue. Many communities have successfully founded community centers, repaired roads and opened small businesses.

“Without the communes, this would all end. The commune is the epicenter of solidarity, of truly human life, of socialism,” Maduro said in November.




But the Venezuelan government doesn’t publish an official accounting of how the community-support funds are spent. The Finance Ministry didn’t respond to questions about the financing of community groups for this article. Safonacc is overseen by the Communes and Social Movements Ministry, which promotes “participative social development.” An official at the ministry said she wasn’t authorized to provide any information.

Some officials have raised red flags about the spending. The comptroller of Venezuela in its 2011 annual report singled out Safonacc for scrutiny. That report concluded Safonacc has no centralized system to track outlays or follow up on projects.

The comptroller’s office said it does not keep a tally of total transfers to community groups; it only tracks the finances of the councils it audits. In spite of the irregularities it identified at Safonacc, the office said in an email, the complaints “do not allow objections with respect to the relevance of the existence of these social and community groups. On the contrary, (the complaints) illustrate the need to cooperate in the development and consolidation” of the community councils.

Political rivals say the government is using the system to finance its base while bypassing opposition mayors. They note that the Interterritorial Compensa-tion Fund, which uses federal funds to help poor regions close the gap with wealthier ones, has for three years given more to the community groups than to the country’s 337 municipal governments. The ICF funds Safonacc and also directly finances community groups. It has set aside $1.38 billion under the 2014 budget for community groups and $1.29 billion for municipalities.

“The communal state lacks the fiscal controls that would apply to state and municipal governments, meaning there is no way to guarantee the appropriate use of resources,” said Jose Vicente Haro, a professor of constitutional law at the Universidad Catolica Andres Bello in Caracas. “At the same time, there is a clear tendency toward using these groups to reduce the resources available to opposition politicians, which violates constitutional principles.”

The Reuters calculation of $7.9 billion in payments to the community groups is based on figures in the Communes Ministry’s annual reports to congress and information posted on the Safonacc website. Some of the data on the Safonacc site was taken down after Reuters began inquiring about the spending.

The Communes Ministry issued a statement in January reporting that Safonacc only transferred the equivalent of some $733 million to community groups between 2009 and 2013. That statement appeared to contradict the ministry’s own annual reports to the Venezuelan congress showing it has transferred more than that in a single year. The ministry didn’t respond to requests for clarification.



Chavez for decades dreamed of creating a nationwide network of self-governing community groups. His vision was laid out in the plans for a revolutionary society he and military comrades hoped to create through a 1992 coup.

“Popular democracy will be born of communities, and its beneficent wisdom will spread throughout the social fabric of the nation,” he wrote in the early 1990s, in one of a series of texts calling for the creation of a “concrete utopia.”

Chavez’s 1992 putsch failed but made him famous, and he catapulted into the presidency in 1999. A decade-long oil boom followed, financing lavish spending that guaranteed electoral support for his brand of socialism. During his 14-year rule, World Bank data show, the poverty rate fell by nearly half – to 25.4 percent of the populace in 2012, from 48.7 percent when he took over.

Oil revenue is the mainstay of the Venezuelan economy and a key component of the federal budget.

State oil company PDVSA last year paid a combined total of close to $44 billion in taxes, social spending and contributions to a national development fund known as Fonden, according to preliminary figures published in the oil ministry’s 2013 annual report.

But tracking where and how the oil money is spent has grown more difficult over the years with the rise of opaque state-run funds that don’t disclose their finances. Among them is the behemoth $100 billion Fonden. The secretive state fund in some years accounts for half all investment in Venezuela. As Reuters detailed in a 2012 article, Fonden is not subject to congressional oversight and provides no detailed description of its outlays.

A similar pattern has played out with the community councils, originally created in 2006.

Some localities appear to use the money as intended. At the Jose Felix Ribas Commune, which comprises 24 community councils in the Caracas slum of Antimano, neighbours transformed an abandoned lot filled with junked cars. It is now a three-story community center with an internet cafe, a textile workshop and a study center for neighborhood kids.

“You see, this can be done,” said 34-year-old Aura Aguilera, who works full time on community development. Since 2006, she says, she has helped manage some $150,000 to build the textiles business.

Authorities have made some efforts to fight waste and fraud.

The state prosecutor’s office in 2011 said 1,500 people were under investigation for abusing community council resources. Prosecutors in September 2013 announced the arrest of three people. One was an employee of a federal agency that funds community groups, accused of making off with some $110,000 earmarked for boats to be used by fisherman. The comptroller’s office has offered management training to more than 80,000 people, and has published audits showing irregularities. Reuters learned of the problems in El Chaparral through a comptroller’s annual report.


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