Aides in firing line as Hugo Chávez targets bank corruption in Venezuela

Authorities have closed seven banks and detained eight bankers in a widening crackdown

A corruption scandal has shaken Venezuela's financial system and triggered the arrest of tycoons who are linked to President Hugo Chávez's government.

Authorities have closed seven banks and detained eight bankers in a widening crackdown which has toppled Jesse Chacón, a cabinet minister and senior Chávez ally. Twenty-seven warrants have been issued, including nine requests to Interpol for international arrests.

"We are demonstrating that there are no untouchables here," Chávez said on his TV show, Alo Presidente. He told his socialist party to denounce corrupt members.

The scandal is the first serious breach between the president and a group of businessmen who have grown extremely wealthy from deals with, or sanctioned by, the government. They are known as the "Boli-bourgeoise", a play on the name of Simón Bolívar, the liberation hero revered by Chávez.

Opponents said Chávez had long ignored corruption within his own ranks and the arrests were not a clean-up so much as a feud between rival factions. Authorities last week shut the seven banks, which comprise 8% of the nation's deposits, citing capitalisation problems and unexplained funds. Chávez threatened to nationalise the financial system.

Investors dumped Venezuelan bonds and the Bolivar currency and Moody's Investor Services downgraded credit ratings on two big Venezuelan banks, the private Banco Mercantil and the state-owned Banco Venezuela.

Markets recovered yesterday when the president signalled he would work with private banks to stabilise the financial system.

Analysts said most banks in the South American oil exporter were sound and not at risk of collapse unless the government did something rash.

Chávez said well-run banks would not be touched but warned those who broke the law would be punished. "What I have said is that he who slips up, loses. Banker, I don't care if you are the biggest."

In a newspaper column Chávez added: "These bankers should be shown for what they really are to the public: vulgar robbers, thieves in ties, pickpockets and obstinate kleptomaniacs."

His rhetoric has regularly targeted "vampire capitalists" and "squealing oligarchs" who opposed his socialist revolution. Until now, less was said about government supporters who grew rich from an oil boom which flooded state coffers with petro-dollars.

Their rise was spectacular. One, Ricardo Fernandez Barrueco, amassed a billion-dollar fortune by supplying corn and transport services to a state-run network of subsidised food stores.

"Whoever falls, falls. Those are the president's instructions, to get to the bottom of these problems," said Jorge Giordani, minister of economic planning.

With legislative elections looming next year, the crackdown could help Chávez to neutralise corruption allegations.


Rory Carroll in Caracas

The GuardianTramp

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