FT How The Bolivarian Bourgeoisie Profit From Empty Shelves PDF

How the ‘Bolivarian bourgeoisie’ profit from empty shelves 7/13/17, 4:35 PM
The Big Read Venezuela
How the ‘Bolivarian bourgeoisie’ profit from empty

shelves
As Venezuela is rocked by protests against shortages and corruption, questions are

being asked about a huge food business empire
5 HOURS AGO by: John Paul Rathbone
On a Saturday evening in April, Miami’s Four Seasons Hotel

hosted a particularly lavish quinceañera — the party
traditionally thrown by Latino parents to celebrate the
coming-of-age of 15-year-old girls.
Outside, visitors watched limousines deliver their charges.

Inside, girls in eveningwear teetered on high heels across the
lobby, while their consorts wore black tie. Many chattered
excitedly in Venezuelan-accented Spanish; Justin Quiles, a
reggaeton star, was even rumoured to be playing. Guests said
that spirits were high as the teenagers made their way to the
Grand Ballroom on the sixth floor.
Yet the party’s most notable feature was the twin hosts’ father,
https://www.ft.com/content/25055a2a-6332-11e7-91a7-502f7ee2689…QIgJyP137V5GN78KacE4GBRaX1Q98syt8MVOWroef0aP6k&sharetype=gift Page 1 of 9
Mauro Libi. This self-described “visionary” has built a

remarkable business empire over the past two decades. As
well as food businesses in Venezuela, Mr Libi is an owner,
shareholder, director or legal representative of some 30
companies across three continents, according to public
records reviewed by the Financial Times, including banks in
Panama and Spain, a $7m Manhattan apartment and dozens
of Miami-registered companies.
What makes Mr Libi’s success extraordinary — and provides

the context for the multiple corruption allegations on which
he has been investigated — is that he built his fortune in a
country better known for shortages of basic goods, obscure
business dealings and revolutionary confrontation rather than
wealth creation. Indeed, as Mr Libi’s twin daughters and
guests danced that night, Venezuela ended its 29th day of
protests. The unrest has continued, leaving more than 90
dead.
Mr Libi’s public persona, projected on websites and Twitter

feeds, gives little sense of his home country’s drama. This is
building up to a controversial July 30 constitutional
convention, where the ruling Socialist party hopes to cement
its control by suborning institutions such as the opposition-
controlled National Assembly to communal councils selected
by President Nicolás Maduro. Critics fear it will install a
Cuban-style dictatorship.
Instead, even as three-quarters of Venezuelans lost an average

9kg of body weight last year, according to studies, and 10 per
cent of infants suffer malnutrition according to the Catholic
charity Caritas, Mr Libi’s Venezuelan oatmeal business,
Avelina, made this comment on April 19: “Being vegetarian is

an excellent way to reduce calorie intake.”
Mr Libi, 49, told the FT the corruption allegations were a

smear campaign. But they are perhaps inevitable given the
public rage over the rampant state-sanctioned corruption that
explains many of Venezuela’s problems today.
Venezuelan businessman Mauro Libi: '‘If you work and invest, you are considered an enchufado [a
government insider]. But if you close your factory, you are someone against the [government] process’
The numbers are mind-boggling — outstripping even Brazil’s

lava jato corruption scandal. The Caracas government
received a $1tn windfall from the oil price boom in the
previous decade. Of that, two-thirds was spent on cash
transfers and other social benefits. But more than $300bn
was stolen or misappropriated, according to estimates by
Jorge Giordani, a former planning minister. Food fraud alone
has reached $27bn since 2010, according to the National
Assembly.
“Malnutrition in Venezuela is a problem of corruption, not a

lack of money,” says Maritza Landaeta, a director of the
Bengoa Foundation, a Caracas-based health and nutrition
charity.
Making matters worse, critics say, is a government riddled

with corruption rackets operated by officials with a vested
interest in regime survival. Accusations of rot go all the way
up to Mr Maduro’s cabinet, 13 of whom are generals. Mr
Maduro placed the army in charge of food distribution last
July.
“The upper echelons of the military are ‘all in’ . . . making

money with various schemes,” says Russ Dallen, managing
partner of Caracas Capital, a broker. Accusations even stain

the ruling family: two nephews of first lady Cilia Flores await
sentencing in a New York court on charges of smuggling
cocaine into the US.
Global Insight Given the vast

amounts that have
Venezuela’s B-movie been stolen,
drama threatens to turn questions have arisen
from farce to tragedy over who has been
fronting for corrupt
Outlandish helicopter attack
officials and how the
provides Nicolás Maduro with an
excuse for a crackdown money is salted
away.
The schemes
typically involve fake
invoices and
currency fraud,
carried out via shell
companies and private banks. One scheme moved $4.2bn
abroad, a 2015 US Treasury probe found.
“It’s not as if there is just one group within the Socialist party
trafficking food. There are several,” says Francisco Toro, a
political scientist who edits the Caracas Chronicles website.
“But compromised officials have moved past working with a
single frontman. These days they operate through networks.”
***
As with many of the so-called “Bolivarian bourgeoisie”, the

small class of newly rich created during Venezuela’s 18 years
of “Bolivarian Revolution”, little is known publicly about how
Mauro Libi Crestani first made his fortune.
Born in Caracas in 1968, public photographs show a mild-

looking man with tight-curled hair. As a teenager, he studied
business in Milan, returning in the 1990s to work at his
father’s food businesses. But it was from the early 2000s —
after Hugo Chávez was in power — that Mr Libi made his
mark as a food importer and entrepreneur.
The oil price boom helped Mr Chávez finance his revolution
but also provided ample opportunities for fraud. In 2013, the

comptroller-general found that Bariven, a subsidiary of the
state oil company, spent $2.3bn on food imports but goods
worth only a quarter of that ever arrived in Venezuela. Three
executives were charged with corruption but later released;
two were reinstated in their jobs.
Opposition activists block a highway in Caracas in clashes with the police last month © AFP
Venezuela’s currency control system, in place since 2003, has

been plagued by fraud. Essentially, the scam works like this.
Insiders with access to preferential dollars can arbitrage the
strongest exchange rate of 10 bolívars to the dollar, and the
black market rate, currently Bs8,000, to make huge profits.
Miguel Rodríguez, Mr Maduro’s former interior minister but
now a fierce critic, has called the system “a source of
unlimited corruption”.
Against this backdrop, Mr Libi’s food businesses plus his

directorship of local bank Banplus have seen him become a
target for corruption allegations — especially from an online
campaign called “Escrache” which aims to name and shame
insiders suspected of fraud.
The National Assembly’s audit commission opened an

investigation last August, building on a dossier compiled by
Socialist Tide, a splinter chavista group. The commission
alleged that Mr Libi swindled the state of up to $573m
between 2004 and 2012, using six shell companies to invoice
for preferential hard currency to pay for fictitious food
imports. The alleged scheme “has the usual modus operandi
of this country’s criminal structures . . . working in complicity
with government members
. . . two in particular . . . Generals Carlos Osorio and Marco
Torres [the former and current food ministers],” Freddy

Guevara, a congressman, told the commission in public
proceedings.
Gen Osorio and Gen Torres, both the subject of separate

National Assembly allegations, rebut such charges as empty
accusations by political opponents.
Venezuelan President Nicolás Maduro: Critics fear a July 30 constitutional convention could increase the
government's control by suborning institutions such as the National Assembly © Reuters
Mr Libi, however, defended himself at the commission on

October 5. He rebutted allegations his Venezuelan businesses
were shell companies by pointing to their 1,400 employees
and continuing operations. A 47-page presentation showed
sales receipts: “All preferential dollars acquired by [my]
businesses fully complied with state laws,” he said. He pointed
out he was a shareholder of only four of the six alleged front
companies; the other two were owned by his half-brother and
had been cleared under a separate probe. Nor, Mr Libi
stressed, did he “keep social company with any officials or ex-
officials”.
On December 7, the commission decided “no fact, act or

omission was found to have impaired the public patrimony”
and closed its investigation.
“I would not say we were satisfied, although Libi answered all

the questions,” Carlos Berrizbeitia, a commission member,
told the FT.
Everything is ambiguous in the shell game of Venezuelan

finance. As Gen Torres, who as head of Banco de Venezuela
also distributes hard currency, wrote in an October 2014
tweet: “Meeting with Mauro Libi . . . Efficiency!” That same
month, Mr Libi opened a chilled food distribution business,

Frimaca, a venture part-financed by Banco de Venezuela.
“It’s a big problem,” Mr Libi admitted to reporters. “If you

work and invest, you are considered an enchufado [a
government insider]. But if you close your factory, you are
someone against the [government] process.”
***
Mr Libi’s story, as he tells it, is of a resourceful businessman

working against the odds. “Anyone who lacks courage to take
risks won’t achieve anything,” he tweeted on May 9.
Indeed, of the 18 active companies registered at a Miami

warehouse that name Mr Libi as their principal agent or
director, seven hold Miami property purchased between 2008
and 2013 for a total $9m, public records show. Another
investment company, Orele Properties LLC, owns a $7m two-
bed midtown Manhattan apartment, bought in 2013.
Venezuelans are consistently South Florida’s largest foreign

buyers of real estate, spending $868m in 2016, according to
the Miami Association of Realtors.
But Mr Libi also has international banking interests, which is

less common. As well as being a director and shareholder of
Finanplus, a Panama bank incorporated in 2014 that finances
car purchases, he is a director of Spain’s AFC Investment
Solutions. In 2013, Mr Libi’s Caracas investment company,
Inversiones Valentina 15402, subscribed €5m to a capital
increase by AFC: Mr Libi told the FT he has since sold his 18
per cent stake.
Mr Libi insisted his success grew out of businesses begun by

his father and that some corruption allegations are simply
blackmail, but he counts them as a “cost of being a
businessman working in difficult circumstances”.
On that point, everyone agrees. Last year, food imports fell to

$2.3bn, one-third of their 2008 peak. Even Mr Libi admits he
has to work with “lean inventories” amid the drastic shortages
and that one of his delivery trucks was recently sacked by
hungry mobs.
Foreign scrutiny of Venezuelans suspected of fronting

corruption rackets is rising. In February, the US sanctioned
one Venezuelan businessman as a “primary frontman” for
senior officials. On June 14, Rex Tillerson, US secretary of
state, said the US was building a “robust list” of other
individuals.
Domestic legal pressures are rising too. On June 15, the

National Assembly opened an investigation into an alleged
$207m fraud at a subsidised food programme, called CLAPs.
It said it was continuing other fraud investigations, including
into Mr Libi, and would “release more information soon”. (Mr
Libi says he never participated in CLAPs and reopening the
assembly’s probe “lacks logical and legal” sense.)
Mr Libi’s public relations effort has gone into overdrive. “I

invite anyone who has any evidence of crimes or irregularities
attributed to me . . . to submit them to appropriate
authorities,” he said on June 4. Exactly which authorities is
moot, however, given that Human Rights Watch says
Venezuela is “a country where impunity is the norm”.
Mr Libi remains upbeat. He gives parties in Miami. His

oatmeal business has pummeled the famous Quaker oats
brand made locally to win a 65 per cent market share. He even
claims to be exporting oatmeal to the US.
Additional reporting by Andres Schipani
Tensions have risen between Venezuelan attorney-general Luisa Ortega Díaz and President Nicolas
Maduro’s Socialist administration © AP
Facilitating fraud: Businessmen get rich

on overpriced imports
Corruption in Venezuela is local but its implications

are global — affecting banks and companies across
the western hemisphere.
Last December, US agents arrested the owners of a
Florida-based equipment company on charges they
had transferred more than $100m from construction
businesses largely in Venezuela to foreign bank
accounts belonging to Venezuelan officials, via shell
companies in Portugal and the British Virgin Islands.
Meanwhile, federal prosecutors in Chile and the office
of Venezuela’s attorney-general, Luisa Ortega, have
accused the directors of two local food exporters of
defrauding the Chilean state and facilitating an $80m
Venezuelan over-invoicing scheme. “Excessively
overpriced imports from Chile allowed the
perpetrators to get more dollars [in Venezuela] and
arbitrage exchange rates,” said Carlos Gajardo, Chile’s
public prosecutor. “All the prices were fictitious.”
According to court testimony by the companies’
accountant, cited in the prosecution’s arguments, the
Chilean companies were a front for a Venezuelan
scheme arranged and headed by Serafín García, a 73-
year old businessman known as Venezuela’s “Apple
king”.
Mr García, who lives in Miami, is also Mr Libi’s
father-in-law. Lawyers for Mr García, who has not
been charged with any offence nor called as a witness,
rejected he court allegations. Mr García has said he
was never a shareholder in the companies and was
the victim of campaign by Caracas to pressure him to
drop an arbitration claim over the nationalisation of
his food businesses.
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How the ‘Bolivarian bourgeoisie’ profit from empty shelves 7/13/17, 4:35 PM

The Big Read Venezuela

How the ‘Bolivarian bourgeoisie’ profit from empty

As Venezuela is rocked by protests against shortages and corruption, questions are

5 HOURS AGO by: John Paul Rathbone

On a Saturday evening in April, Miami’s Four Seasons Hotel

Outside, visitors watched limousines deliver their charges.

Mauro Libi. This self-described “visionary” has built a

What makes Mr Libi’s success extraordinary — and provides

Mr Libi’s public persona, projected on websites and Twitter

Instead, even as three-quarters of Venezuelans lost an average

Avelina, made this comment on April 19: “Being vegetarian is

Mr Libi, 49, told the FT the corruption allegations were a

The numbers are mind-boggling — outstripping even Brazil’s

“Malnutrition in Venezuela is a problem of corruption, not a

Making matters worse, critics say, is a government riddled

“The upper echelons of the military are ‘all in’ . . . making

partner of Caracas Capital, a broker. Accusations even stain

Global Insight Given the vast

As with many of the so-called “Bolivarian bourgeoisie”, the

Born in Caracas in 1968, public photographs show a mild-

The oil price boom helped Mr Chávez finance his revolution

but also provided ample opportunities for fraud. In 2013, the

Venezuela’s currency control system, in place since 2003, has

Against this backdrop, Mr Libi’s food businesses plus his

The National Assembly’s audit commission opened an

Torres [the former and current food ministers],” Freddy

Gen Osorio and Gen Torres, both the subject of separate

Mr Libi, however, defended himself at the commission on

On December 7, the commission decided “no fact, act or

“I would not say we were satisfied, although Libi answered all

Everything is ambiguous in the shell game of Venezuelan

month, Mr Libi opened a chilled food distribution business,

“It’s a big problem,” Mr Libi admitted to reporters. “If you

Mr Libi’s story, as he tells it, is of a resourceful businessman

Indeed, of the 18 active companies registered at a Miami

Venezuelans are consistently South Florida’s largest foreign

But Mr Libi also has international banking interests, which is

Mr Libi insisted his success grew out of businesses begun by

On that point, everyone agrees. Last year, food imports fell to

Foreign scrutiny of Venezuelans suspected of fronting

Domestic legal pressures are rising too. On June 15, the

Mr Libi’s public relations effort has gone into overdrive. “I

Mr Libi remains upbeat. He gives parties in Miami. His

Additional reporting by Andres Schipani

Facilitating fraud: Businessmen get rich

Corruption in Venezuela is local but its implications

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