U.S.

Juggernaut Rolls over Honduras as it Targets Hugo Chavez

E.P. Heidner

The dark side of democracy is launching its most formidable assault of recent years in its
war against the poor in Central America. When the poor of Venezuela put Hugo Chavez
in charge of the western hemisphere’s largest oil reserves, they redirected billions of
dollars away from the coffers of western investors and, bankers to the needs of the poor
in Venezuela, Honduras, Bolivia, Cuba, Ecuador, Dominica and Nicaragua.1 By sharing
Venezuela’s wealth with its neighbors using oil subsidies, Hugo Chavez allowed it’s less
fortunate neighbors to focus on meaningful reform, thus initiating a series of events
leading to the recent coup in Honduras.

Using this oil subsidy from Venezuela to improve social benefits, President Manuel
Zelaya leveraged the benefits to increase the minimum wage in Honduras by 60%,
where one of the largest industries is the textile/garment industry, employing 130,000.2
Historically, one could anticipate such windfalls to find their way to numbered accounts
in offshore banks, but Zelaya actually transferred the benefits to those in greatest need.
The deal with Venezuela provided benefits for the poor not available from the U.S.

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

All this was done in the absence of any viable support being offered from the U.S.4 More
importantly though, Zelaya threatened those who control the wealth in Honduras by
asking the poor if they wanted to continue down the path of Hugo Chavez in Venezuela,
Evo Morales in Bolivia and Rafael Correa in Ecuador, by allowing a true reform oriented
President (Zelaya) to stay in power. Some might argue that it was Zelaya’s pursuit of
reform that caused him to be ousted. Alternatively, there are a number of reasons to
believe that the removal of Zelaya is nothing more than collateral damage in the wake of
the juggernaut being launched at Hugo Chavez. If the takeover could not be ‘justified’ on
such weak arguments being currently used, other reasons would have been found.
Needless to say, the murkiness of the rationale provided enough leverage for Secretary of
State Clinton to not need to push for re-instatement of Zelaya.

The ouster of President Manuel Zelaya of Honduras in late June is one of several major
yellow flags in the recent international news suggesting that there is a coordinated effort
by those that control U.S. foreign policy to remove Hugo Chavez as a threat to American
style democracy, and enrich themselves on Venezuelan oil reserves. Rest assured, Hugo
Chavez is a real threat to ‘U.S, procedural style democracy.’ By building an international
alliance around the world’s largest reserves of hydrocarbons, he and is allies are
withdrawing from the World Bank and setting up an independent mutual defense
organization. Most important is his withdrawal from the World Bank and its control over
the International Centre for Settlement of Investment Disputes (ICSID.) The ICSID is
the legal institution that determines what international corporations are to be
compensated when a country nationalizes those corporations’ holdings.5 In 2008, ICSID
awarded ExxonMobil $12Billion against a claim that Venezuela contended was worth
only a tenth as much ($1.2 Billion).6 That Venezuela was able to arbitrate a successful
agreement without ICSID involvement with the other three companies that had its oil
claims nationalized should demonstrate that the World Bank represents an extension of
U.S. foreign policy, and is punitive in its actions.

One curious connection between the World Bank and the coup in Honduras comes with
role of former Honduras Banco Futuro President Jaime Chavez, who on two occasions
has hosted religious revivals in Miami, and used General Romeo Vasquez – the leader of
the coup – as a guest speaker.7 Banco Futuro was absorbed by the Bank Latin American
Financial Services (Lafise) Group, owned by close friend of the Bush family Roberto Zamora.
Zamora and Jaime Chavez have their names sprinkled across a range of World Bank
meetings and seminars. Zamora is also a middle man for the U.S. Overseas Private
Investment Corp. Through Lafise, he gets loans from OPIC, makes loans to Central
American developers, and does well off the interest. Zamora helps developers build five
star hotels with OPIC loans8 – Hugo Chavez and Manuel Zelaya use oil revenues to help
farmers, build infrastructure, raise minimum wage. LAFISE is a major holder of
Honduran debt.9 Jaime Chavez also operates as a ‘consultant’ on money-laundering.10
Another pundit associated with this bank crowd is Octavio Sanchez, former Minister and
defender of the takeover.

The key issues are:

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

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

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

Anyone anticipating that President Obama - while expressing ‘outrage’ at the coup – will
actually do anything about it should review some history. The reality appears to be that
Obama has arranged a quid pro quo with Wall Street that trades control of foreign policy
to Wall Street in exchange for his ability to finance his domestic initiatives. Franklin
Roosevelt arranged for financing of the New Deal with Wall Street in the wake of the
attempted coup by the Liberty League coup. In Roosevelt’s case, the bankers were spared
embarrassment, prison, and even execution for treason in exchange for their support of
the New Deal. Obama has comparable leverage over the investment bankers with the
recent Wall Street scandals, but he has to give them something. Venezuelan oil reserves
of 310 billion barrels16 should give them the incentive they need. It appears as though
Hugo Chavez’s head is part of that deal. Zelaya is just collateral damage.

1
“With no petroleum resources, Honduras signed a generous oil subsidy deal with Venezuela, and then
last year joined the emergent regional trade bloc, ALBA, the Bolivarian Alternative for the Americas.
Inspired by Venezuela it now has Bolivia, Cuba, Nicaragua, Dominica and Ecuador as members.
Simultaneously, Zelaya implemented domestic reform policies, significantly increasing the minimum
wage of workers and teachers’ salaries, while stepping up spending in health care and education.”
Crossing the Rubicon in Latin America, Honduran Coup: Target Left? , Roger Burbach, July 3, 2009,
http://www.counterpunch.org/burbach07032009.html
2
Latin American Countries Worlds Apart in Economic Downturn ,Mariana Minaya, Online NewsHour,
March 13, 2009, http://www.pbs.org/newshour/updates/latin_america/jan-june09/economy_03-13.html
3
Honduras joins a club promoted by Venezuela and Cuba, The Economist Intelligence Unit ViewsWire,
October 20, 2008, http://www.economist.com/agenda/displaystory.cfm?story_id=12451680
4
“Mr Zelaya has openly recognised that his approach to Venezuela was the result of a lack of support
from the US, the multilateral agencies and domestic business for his economic initiatives. In contrast,
Venezuela's financial aid is not conditional on economic policy considerations, nor will Mr Chávez
object to decisions taken by Mr Zelaya's government” Ibid.,
5
The Uncertain Future of ICSID in Latin America , Ignacio Vincentelli, Duke Law School; University
of Miami School of Law; Catholic University Andres Bello, February 20, 2009
6
Exxon Is Demanding Ten Times its Investment, Says Venezuelan Oil Minister , James Suggett,
Venezuelanalysis.com, 18 February 2008,
http://www.handsoffvenezuela.org/exxon_demanding_ten_times_its_investment.htm
7
http://www.jaimechavez.org/,
8
Zamora Lafise Group Built Hotel in Honduras, Agency ACAN-EFE, January 8, 2007.
www.radiolprimerisima.com/noticias/8272&ei
9
Lafise bank was concentrated in Panama, PrensaNews, Translated from http://www.prensa.com -
CITY OF PANAMA (DPA).
10
A Torrent of Dirty Dollars (How the Dutch do offshore banking. Forget about Panama for stashing
away unreported money. From Netherlands Antilles, funds under a Dutch company can find their way
back to the US tax-free. ), JONATHAN BEATY AND RICHARD HORNIK, June 24, 2001,
http://www.time.com/time/magazine/article/0,9171,150811,00.html
11
$134Billion Suitcase Bomb, E.P. Heidner, June 22, 2009
12
“State oil company Petroleos de Venezuela SA, or PDVSA, has fallen behind on billions of dollars in
payments to foreign and domestic oil contractors - prompting some, such as Dallas, Texas-based oil
driller Ensco International Corp., to halt their Venezuela operations. Such moves could decrease oil
production just when Venezuela needs those revenues most.” From Venezuela loses billions despite
Chavez's controls, Rachel Jones, AP, June 18, 2009; http://www.washingtonpost.com/wp-
dyn/content/article/2009/06/18/AR2009061802046_3.html?nav=rss_business/industries
13
Venezuela State Oil Company PDVSA Ratings Cut By FitchFrom BB- to B+, Caracas, July 7,2009,
Latin American Herald Tribune staff. “CARACAS -- The "rising risk of fiscal crisis in Venezuela" has
adverse rating implications for Petroleos de Venezuela, S.A. (PDVSA), according to Fitch Rating
Service, which has downgraded the foreign and local currency Issuer Default Ratings (IDRs) and
outstanding debt ratings of PDVSA from BB- to B+.”
14
“The magnitude of the effect of the interest rate differential adjusted for the rate of depreciation of the
black market exchange rate on the black market premium is greater than the value taken by any of the
countries in the original Fishelson (1988) study.This suggests that speculative motives may be
particularly important in the Venezuelan black market for dollars.” page15 from THE BLACK
MARKET FOR DOLLARS IN VENEZUELA, SAMUEL MALONE AND ENRIQUE TER HORST,
Universidad de los Andes in Bogota, Colombia,Enrique ter Horst is a professor of Finance at the IESA
in Caracas, Venezuela.
15
CIA Recruiting Laid-Off Bankers in NYC, June 18, 2009,
http://www.newsmax.com/insidecover/cia_bankers/2009/06/18/226909.html
16
“PDVSA factory in Carabobo, Venezuela. Venezuela has 77.5 billion barrels (1.232×1010 m3) of
conventional oil reserves according to PDVSA figures, the largest in the Western Hemisphere and
making up approximately half the total. This puts Venezuela as fifth in the world in proven reserves of
conventional oil. By also including an estimated 235 billion barrels (3.74×1010 m3) of tar-like extra
heavy crude oil in the Orinoco Belt region, Venezuela claims to hold the largest hydrocarbon reserves
in the world. Venezuela also has 150 trillion cubic feet of natural gas reserves.” Wikipedia