How a Chinese venture in Venezuela made millions while locals grew hungry

From Reuters.com

By ANGUS BERWICK

In Delta Amacuro, a remote Venezuelan state on the Caribbean Sea, a Chinese construction giant struck a bold agreement with the late President Hugo Chávez. The state-run firm would build new bridges and roads, a food laboratory, and the largest rice-processing plant in Latin America. The 2010 pact, with China CAMC Engineering Co Ltd, would develop rice paddies twice the size of Manhattan and create jobs for the area’s 110,000 residents, according to a copy of the contract seen by Reuters.

The underdeveloped state was an ideal locale to demonstrate the Socialist Venezuelan government’s commitment to empower the poor. And the deal would show how Chávez and his eventual hand-picked successor, President Nicolás Maduro, could work with China and other allies to develop areas beyond Venezuela’s bounteous oil beds.

“Rice Power! Agricultural power!” Chávez tweeted at the time.

Nine years later, locals are hungry. Few jobs have materialized and the plant is only half-built, running at less than one percent its projected output. It hasn’t yielded a single grain of locally grown rice, according to a dozen people involved in or familiar with the development.

Yet CAMC and a select few Venezuelan partners prospered.

Venezuela paid CAMC at least $100 million for the stalled development, according to project contracts and sealed court documents from an investigation by prosecutors in Europe. The thousands of pages of court papers, reviewed by Reuters, were filed in Andorra, the European principality where prosecutors allege Venezuelans involved in the project sought to launder kickbacks paid to them for helping secure the contract. The material on the China deal, reported here for the first time, includes confidential testimony, wiretap transcripts, bank records and other documents.

Last September, an Andorran high court judge alleged in an indictment that CAMC paid over $100 million in bribes to various Venezuelan intermediaries to secure the rice project and at least four other agricultural contracts. The indictment charged 12 Venezuelans with crimes including money laundering and conspiracy to launder money. Among those indicted was Diego Salazar, a cousin of a former oil minister who, investigators say, enabled the contracts. Also indicted was the top representative in China at the time of state-run oil company Petróleos de Venezuela SA, or PDVSA.

Sixteen people of other nationalities were also charged and at least four other Venezuelans, one of whom was formerly ambassador in Beijing and is now the country’s top diplomat in London, are under investigation, according to the documents.

The indictment, the names of those charged, and their association with Chinese companies were reported last year by El País, the Spanish newspaper. A Reuters review of the case files, which are still under seal in Andorra, gleans how CAMC and other Chinese companies forged ties with many of those charged and paid to win projects the companies often didn’t complete. The result, according to prosecutors, was a far-reaching culture of kickbacks, paid through offshore accounts, in which well-connected Venezuelan intermediaries milked and ultimately crippled projects that were meant to develop neglected corners of the country. 

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