Venezuela, After Liberation: Justice

Por Alejandro Chafuen: Publicado el 23/2/19 en:


Liberation should be coming soon for Venezuela. After liberation will come celebration. Almost immediately should come justice. Punishing the culprits will be difficult, but it will be easier than making restitution to all the victims.

Problems of justice fall under (a) commutative justice (justice in transactions and contracts) and (b) distributive justice (what every participant should contribute to decisions that have a “common” cost, and how much each should receive from the “common pool”).

The usual topic of justice in post-socialist transitions is the restitution of private property to its legitimate owners. Such restitution, though, seems a topic for commutative justice. If the confiscated property came under state control, however, part of the restitution should also be guided by principles of distributive justice.

As St. Thomas Aquinas—in line with Aristotle’s thought—clarified, the role of this justice is to distribute “common goods proportionately.”[1] This is totally different than taking from the rich and giving to the poor, a perverted concept of distributive justice. The late-scholastics, Aquinas followers who focused more on economics, argued that profit, salaries and rents were topics of contract law, a part of commutative justice, it is not the government’s task to determine them.

Under the horrors of 21st-century socialism, Venezuela has suffered many common violations of distributive justice. Favoritism is a typical one of these. Some concrete manifestations of favoritism are nepotism and cronyism. It is an injustice in the distribution of common goods when one party is preferred to another not by reason of merit but for another undue cause, such as family relationships. Multiple accusations have surfaced against family members of government officials, and these will have to be investigated.

Corruption, which often goes hand in hand with favoritism, is another violation of distributive justice. High inflation, overregulation, high taxes and confusing tax structures are powerful corrupting incentives, especially in countries with high inequality. Such cases have always led to widespread tax evasion, justifying a large informal economy and undermining respect for the rule of law. Sadly, giving restitution to all victims of inflation and unjust regulations is impossible and would create further victims and distributive injustices. Venezuela has high rankings of corruption, inflation and overregulation. In the rule of law index compiled by the World Justice Project it ranks last in the world. In economic freedom, only North Korea rans worse.

Another strong incentive to corruption is differential exchange rates and official exchange rates that diverge from free-market rates. These are easy to evade, can enrich bureaucrats and their associates, and – from the standpoint of natural law – appear so artificial that those who violate their regulations feel justified in their attempts. A merchant who declares that he is exporting less than he really is could be violating rules and lying, but the foreigners who buy from him see nothing wrong when asked to pay the total value to a foreign account or a subsidiary owned by the merchant. I believe that this factor was a primary contributor to the corrupt practices of Venezuelan socialists and their allies.

Some damages—such as confiscation of property with insufficient compensation—can be calculated more or less justly. It will not be simple, though. Someone from whom a piece of land was unjustly confiscated, for example, may receive it back with its productive capacity almost intact; while, on the other hand, someone who lost an industrial enterprise or a factory that was then allowed to fall into ruin, or was not maintained or kept up to date, might likely receive an industry that can only generate losses. Only exception is when it owned valuable brands and other intellectual property. I found cases such as these during transitions away from communism in Central and Eastern Europe. Justice was never served.

We then have cases where some received payments for their expropriated assets while others did not. Take the case of steel companies, such as Sivensaand Sidetur, confiscated by the Chávez regime with no compensation to their owners. It is difficult to calculate the value of these businesses before the socialist debacle, but some place it at almost $1 billion. On the other hand, Sidor, the steel company created by the Venezuelan state, was later privatized by President Caldera in 1997 and then renationalized by the Chávez regime in 2008. Compensation of nearly $2 billion was paid. The owners of the Ternium company (which received the compensation), have been accused of paying bribes to the Venezuelan government during these transactions.

I know of another case in Venezuela in which the dictatorial regime tried to resort to legal finagling to confiscate a large rural estate. Government agents tried to go back to property titles from the colonial period (back to 1493!) to argue that the land should belong to the state. The family fought in court, and, as happens in such cases, the government offered to back down in exchange for an under-the-table payment. The family members got together and honorably decided that they would prefer to lose everything rather than become accomplices of evil.

A useful guide for those who advocating for restitution is the website Un País de Propietarios (A Country of Property Owners), a project of the leading free-society think tank in Venezuela, CEDICE. It has a list of many of the regime’s violations of justice and offers a place for citizens to file their complaints. There are many, however, that we will not be able to calculate and restore adequately. The damage caused by shattered dreams, professional careers cut short, deteriorated health and families torn apart is impossible to calculate. In Latin American countries that fought against communist guerrillas and in which socialists or their sympathizers then came to power, “justice” granted large compensation to former subversives. In the same fashion, countless Venezuelans should receive recompense from the state for harm to civilians caused by the Chávez and Maduro governments. Once socialism falls, the new Venezuelan government will have resources coming from the restoration of government, as well as the resources it can recover from the guilty. But these will never be enough, and unequal treatment of victims is something that can affect the post-transition period. Three decades have passed since the fall of the Berlin Wall, and these debates continue today in post-communist countries.

Those making transition plans urgently need to carry out comparative analyses of similar experiences in order to identify which victims should be favored. Some of the more realistic transition plans envision the privatization of much of Venezuela’s petroleum production. A portion of these resources, like others that liberation could produce, should be structured so as to benefit the most easily identifiable victims. But given the need to achieve economic growth fairly quickly, it is certain that only part of the victims will be able to receive what is owed them.

Regarding the guilty who profited from the 21st-century socialist regime, again it will be difficult to punish everyone. A distinction will have to be made between those who established relationships with the regime in order to continue operating their companies and those who, at the other extreme, created fictitious companies or used their own companies for unjust and corrupt profit. Some businessmen received privileges such as monopolies in certain places, or special permits in the exchange and financial markets. If these businessmen are not punished, they should at the very least bear disproportionate moral responsibility for helping during the transition.

One possibility is to focus the corrective work of distributive justice on the most serious cases. A typical remedy in post-communist countries was that of prohibiting those most at fault from occupying public posts and certain business posts for a period of time. A case that Venezuelans ought to study is how the Brazilian justice system took up the theme of corruption in Odebrecht and Petrobras.

My recommendation to those responsible for justice during the transition is (1) not to neglect themes of distributive justice; (2) to work immediately to create an assessment committee made up of people who are beyond reproach and who have successful experience in these cases; and (3) to lend support to institutions with credibility in topics of justice and morality. For this assessment committee, from the Americas I would invite experts from Brazil and Chile. From the rest of the world I would include Central and Eastern European policy actors.

To create support for decisions regarding distributive justice, it will be imperative to gain the support of the Catholic episcopate. They have played an exemplary role during these troubling times. Before being clouded by the populist and statist view of social justice, the non-socialist tradition of distributive justice took shape in the Catholic Church. Bishops and committed laypeople from this tradition must be the ones who bring back true distributive justice and help to rebuild Venezuela, aiding those who need forgiveness and those who build a healthy consensus.

[1] St. Thomas Aquinas, Summa theologiae, II-II, q. 61, a. 1.


Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE.

FIFA Scandal Calls For More Transparency Not More Government

Por Alejandro Chafuen: Publicado en:

The front pages of leading newspapers around the world are full with news about the alleged corruption in FIFA, the world soccer federation. There are less headlines in the United States, where the Justice Department brought a 47 count indictment against key authorities and a handful of businessmen. International attention is assured: Soccer is the most popular sport and FIFA is so large that it has more members than the United Nations. After achieving independence, several countries, especially in central and eastern Europe, asked to be affiliated with FIFA even before asking to become members of the U.N.

Among the FIFA officials charged for racketeering and wire fraud were two of the organization’s vice presidents, Eugenio Figueredo and Jeffrey Webb, as well as José Maria Marin, former president of the Brazilian Football Association, and Rafael Esquivel head of the Venezuelan soccer association. Most of the charges refer to activities of the South American FIFA subsidiary, CONMEBOL, and its North American counterpart, CONCACAF.

As a good Argentinean, Gustavo Lazzari, an economist and policy advocate with theLibertad y Progreso think tank, follows soccer as much as the battles to preserve the few economic freedoms that remain in Argentina. Argentina was the runner up in the last World Cup, but was ranked 169 out of 178 in economic freedom. As Argentines are so exposed to corruption and soccer, and he lectures frequently for free-market think tanks on the topic, I asked him about his views. He said, “FIFA is the closest thing to a multilateral agency, like the World Bank, but with the additional power to regulate a formidable business. The economic and political appeal, especially when the global contests are organized in countries with weak rule of law, creates immense temptations for corruption.”

All of the FIFA authorities who were detained were from the Americas, and mostly from countries with weak rule of law. But the fact that the accusations surface after the process that selected Russia and Qatar, with frequent but unproven bribery accusations, assures worldwide attention. President Putin questioned U.S. involvement.

Corrupt dealings which damage non-U.S. citizens can still be brought to justice here. In a piece, “How Did He Get So Rich”, I wrote about an Argentinean businessman who ended up in jail mostly because his partner was based in the United States and they used American financial institutions for their dubious operations. In this case, CONCACAF is based in the United States, so there is an additional justification to act. This is not enough to satisfy Putin who, as a piece in Forbes reported, blamed America for another attack on Russian interests.

What will happen next? Lazzari argues that this scandal might refresh the debate about what is more relevant: a world cup of soccer teams or a world cup of national teams. Libertarian globalists, tend to prefer the former, libertarian “nationalists” prefer the latter. I think there is room for both. Lazzari points out that national teams, like Barcelona and Real Madrid (Spian), Chelsea (U.K.), Juventus (Italy), and many others, have fans and followers across the globe. “Barcelona soccer shirts with Messi’s name, and Real Madrid’s shirt with Ronaldo’s name, sell all over the world, much more than national team’s jerseys.” Messi and Ronaldo play outside their native countries and are some the best strikers that the world has ever seen.

Those who love freedom even more than soccer hope government will not get more involved. Magno Karl, of the think tank Ordem Livre in Brazil, has been highly critical of state interference and subsidies for sporting events. He argues that “the involvement of governments in the game should remain restricted to tightening vigilance over private entities that engage in criminal activities and prosecution of those accused of crimes. It is unlikely that more involvement in the organization of sporting events would produce more accountability. Instead, it would probably produce more $900 million empty stadiums in developing countries, such as the National Stadium of Brasilia, in Brazil.”

U.S. civil society and its government are familiar with private sector for profit and nonprofit sport leagues. Incomes and profits on those events are regulated by the same laws that regulate non sportive efforts. Violations, therefore, warrant prosecution, even if they might offend Putin.

Luis Loria, a think tank leader from Costa Rica, commented that the revelations and detention of his compatriot Eduardo Li, calls for increased transparency. Loria said, “The capture of Li, in Switzerland, has caused a media earthquake in the small ‘Central American Switzerland’ as some label Costa Rica. Until a few month ago, Li was considered as a role model and named the 2014 person of the year by the prestigious newspaper La Nación.” Loria is the founder of IDEAS Network which is creating an internet platform “The Crystal House” to increase transparency in government affairs. Eugenio Figueredo, from Uruguay, one of the FIFA Vice Presidents also detained, had been accused and suspected before. Uruguay, like Costa Rica, is also regarded as a regional “Switzerland.” FIFA’s president and headquarters are Swiss, so the comparison is not totally unfounded.

The battle against cronyism and corruption continues, this time in world soccer. No sector seems immune. Who knows what comes next, but please, counter it with transparency, not more regulations.

Alejandro A. Chafuén es Dr. En Economía por el International College de California. Licenciado en Economía, (UCA), es miembro del comité de consejeros para The Center for Vision & Values, fideicomisario del Grove City College, y presidente de la Atlas Economic Research Foundation. Se ha desempeñado como fideicomisario del Fraser Institute desde 1991. Fue profesor de ESEADE.