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Venezuela Corruption Scandal Sparks Public Uproar

THE bogged-down investigation of a multibillion dollar corruption scandal is raising a public outcry and hampering Venezuela's bid for an economic recovery. Although nearly 50 warrants have been issued, few arrests have been made in the ``Recadi'' foreign-exchange scam. Critics charge that the politicians are trying to divert attention from themselves by blaming businessmen for the loss of billions of dollars.

One Venezuelan business leader has been jailed, and travel restrictions have been placed on officials of five foreign auto-assembly companies, including General Motors and Ford. Last week, a Venezuelan judge charged Argentina's Economy Minister and former business executive, Nestor Rapanelli, with misusing public funds. These moves undercut government efforts to rebuild foreign-investor confidence in the wake of anti-austerity riots in February that claimed at least 300 lives.

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The worst case of corruption coming on top of the country's worst economic crisis is prompting widespread discontent. A slogan appearing often on the walls of middle-class neighborhoods says it all: Arrechate - ``get mad.''

The scandal involves a government agency known as Recadi, set up in 1983 to sell US dollars to business importers at a discount. Recadi's discounted dollars were supposed to buy essential imports at reduced prices, thereby shielding the economy from the devaluation brought on by the collapse in the world price of oil, Venezuela's principal export.

In practice the agency became ``a big gold mine exploited by everybody from the doorman on up,'' says John Pate, a US attorney who is following the case for clients back home. He said he is advising them to be ``cautious'' in approaching investment in Venezuela right now.

The Recadi scam was simple enough. According to investigating Judge Luis Guillermo La Riva, importers bought cheap dollars from Recadi and then sold them on the free market at premium prices. Some $30 billion passed through Recadi, and more than $2 billion of that is missing, according to government investigators and press reports.

Allegations of corruption have been a constant refrain during the democratic era that began in 1958. Kickbacks, bribes, ``loans'' and ``commissions'' have been the booty of the political battles fought by the country's two main parties, according to Mr. Pate and others.

While there was petroleum-fueled prosperity, government corruption was tolerated by the press and public. Prosecutions were rare. Accused officials were allowed to retire abroad. But now that the petrodollars have run out, so it seems has tolerance for corruption.

A reform movement is surging out of the middle class. Urged on by the country's leading man of letters, Arturo Uslar Pietri, 10,000 demonstrators marched through downtown Caracas in mid-June to demand that the attorney general launch ``a struggle for public morality.''

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But as the public demands a house-cleaning, the investigation is becoming snarled in countercharges: An arrest warrant has been issued against one prosecutor for accepting bribes, and Judge La Riva has been accused of plotting a leftist coup in 1970, a charge he denies.

President Carlos Andr'es P'erez, who took office in February, until recently has remained quiet about corruption, saying it was a matter for the courts. But in his Independence Day speech on July 5, he announced a crusade to ``elevate'' Venezuela's ``moral content.''

The President's first administration, from 1974 to 1979, ended in a storm of corruption charges, with Mr. P'erez himself accused by the ethics committee of his own Democratic Action Party of ``moral and administrative responsibility'' for irregular practices.

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