Petróleos de Venezuela S.A. (PdVSA), which reported $2.5 billion in revenues in 2015, has supported a network that made many close to the Salvadoran regime wealthy at alarming rates and has served as the basis for expanding the Petrocaribe oil alliance model. However, it has also worked in close collaboration with firms that have been investigated for corruption and money laundering.
Petrocaribe is a geopolitical and economic initiative started by Hugo Chávez in 2005 to strengthen regional alliances through the oil trade. El Salvador’s chapter in the history of the alliance illustrates how funding for PdVSA fossil fuel imports was used to expand the economic and political power of the Farabundo Martí National Liberation Front (Frente Farabundo Martí para la Liberación Nacional – FMLN), El Salvador’s current ruling political party.
The relationship between ALBA Petróleos, PdVSA and the FMLN — and its influence on El Salvador’s politics — has lasted for a decade. However, in recent months, the presence of Merino, alias “Commander Ramiro,” and the importance of ALBA in the Salvadoran economy have waned due to funds from Venezuela drying up amid its economic crisis and Merino losing the power he once had in the FMLN following unfavorable local election results.
Founded in 2006 as a joint public-private venture, the public funding for ALBA came from Salvadoran mayors to whom Venezuela loaned millions of dollars between 2010 and 2015. InSight Crime has had access to ALBA’s founding documents, which show that PdVSA is the majority owner with 60 percent of the company’s shares, the other 40 percent belonging to 18 mayors in the FMLN party.
The documents also address the subsidiary’s business transactions with PdVSA: half of the oil shipments are paid against product delivery, and the other half are financed through 22-year loans with interest rates between one and two percent.
During the past decade, Merino — currently a member of the FMLN’s political commission and deputy foreign affairs minister in the party-run administration — was the primary middleman between the FMLN and the Chavista regime; he was in charge of maintaining ties between PdVSA and the Salvadoran and Venezuelan governments.
When the FMLN took power in El Salvador in 2009, political relations with Venezuela had already been established through ALBA, but they go back even further. Former President Hugo Chávez often sent friendly messages to the FMLN and its leadership from Caracas.
Now, US legislators are pointing to Merino’s connections with Venezuela and PdVSA as evidence of possible criminal activities.
“Multiple open sources reports indicate that financial structures controlled by Mr. Merino, currently the Deputy Minister of Foreign Affairs, have acquired hundreds of millions of dollars in unexplained wealth while helping the FARC guerrillas in Colombia, corrupt elements of the Venezuelan government and other criminal groups move funds to safe harbor,” states a letter dated June 19, 2017.1 It was signed by 14 members of US Congress on both sides of the aisle and asks the Treasury Department to open an investigation into Merino under the Foreign Narcotics Kingpin Designation Act.
The recurring suspicion in Washington is that some of the funds mentioned in the letter have been moved using companies belonging to ALBA.
While José Luis’ brother, Sigfredo Merino, is listed as ALBA’s founder in company documents, Commander Ramiro has always controlled it from behind the scenes as an advisor or middleman. José Luis has also served as the public face of ALBA.
Two sources from US security forces have told InSight Crime that both the Drug Enforcement Agency (DEA) and the Federal Bureau of Investigation (FBI) have named José Luis Merino as a “person of interest” in investigations related to ALBA Petróleos. In conjunction with these investigations, Sigfredo Merino was temporarily detained at George Bush International Airport in Houston, Texas in February.
When El Salvador’s Superintendency of Competition (Superintendencia de Competencia – SC) conducted a routine investigation into ALBA in 2013 after it requested permits to build eight gas stations, it was José Luis Merino who publicly spoke on behalf of the company. “We are prepared to accept the sanctions we deserve,” said the FMLN party leader.
It was also Commander Ramiro who faced the public in 2013 amid complaints from the National Private Enterprise Association (Asociación Nacional de la Empresa Privada – ANEP) on ALBA Petróleos’ rapid economic growth. “There is some concern because ALBA Petróleos was founded seven years ago with $1 million, and now it has $400 million — let me correct myself — $800 million,” said Merino.
By 2015, ALBA Petróleos owned 10 companies involved in a range of industries, from aviation food sales to importing medicine, providing finance services and, of course, fossil fuel distribution. That year, the company reported $1.1 billion in revenues.
Explaining ALBA Petróleos’ rapid earnings growth to the public, unusual in an economy as small as El Salvador’s, Merino and other representatives cited new international investments, growth in the oil industry and the diversification of its portfolio. However, the argument that an expanding oil industry fueled the company’s growth does not pass muster because the conglomerate’s most prosperous years, 2012 to 2015, coincide with decreases in oil prices, especially 2014 and 2015, when they fell by half.
Besides the 2013 investigations for alleged monopoly practices, to date, there have not been investigations in El Salvador into companies with ties to ALBA Petróleos, despite the fact that some have declared bankruptcy or fired their workers without the required transparency.
For example, Veca, an airline founded in 2014 whose fleet contains only two used planes purchased from Cyprus Airways, fired all its employees in 2017, in some cases without paying them the benefits required by law. ALBA contributed $60 million in financing to create the airline.
Financial documents from ALBA Petróleos show that, altogether, the conglomerate almost always had more debt than earnings; only 2013 and 2014 showed surpluses. The debt is only one part of its liabilities and is linked to loans made to or from off-shore companies established in Panama by Sigfredo Merino, Ramiro’s brother, according to Washington, DC consulting company IBI, which conducted an analysis in 2016 for the US government. In one case, ALBA owes $150 million to Atlantic Pacific Logistic, while ALBA Petróleos El Salvador (APES), a mirror company founded in Panama, owes ALBA $165 million.
Although there are no formal inquiries against ALBA regarding its finances, the Salvadoran Attorney General’s Office is currently conducting an investigation against José Luis Merino for allegations that he helped the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC) to traffic weapons and drugs. The investigation started in 2008, after the Colombian Attorney General’s Office gave El Salvador certified letters written by FARC leader Raúl Reyes — killed that March — in which he identifies “Commander Ramiro” as one of the FARC’s middlemen for missiles and other weapons.
But the most compromising investigation is political in nature and is happening now in the US Congress. The House Committee on Foreign Affairs began to scrutinize the businesses of Salvadoran politicians after Sen. Marco Rubio (R-Fla.) made accusationsin 2016 of links to drug trafficking and money laundering.
A House Committee attendee confirmed with InSight Crime that the legislative body planned to send a letter to the State Department suggesting that investigations into José Luis Merino and his finances be expanded to determine whether he has committed inancial crimes that affect the United States. The source, who spoke on the condition of anonymity, stated that the letter will have the support of both Democratic and Republican legislators.
“The idea is for the administration to be able to track the money, that it search through Merino’s finances because it is clear that there could be funds from Venezuela and the FARC,” said a former Republican official in the capital who currently works as a congressional consultant on issues related to Latin America and agreed to speak to InSight Crime on the condition of anonymity.
After Rubio’s remarks, Salvadoran Attorney General Douglas Meléndez announced that he had reopened the 2008 investigation into the FARC files. So far, however, no progress in the case has been made public.
Albaquetzal and Hydroil: Regional Expansion Initiatives
“We were at the heart of popular victories … [and it] highlighted the rebelliousness of the Latin American peoples against the impositions of the Free Trade Area of the Americas (FTAA) and other measures the multilateral agencies had imposed using their power and the capacities of their neoliberal model,” said José Luis Merino on El Salvador’s TVX television channel. It was a perfect marriage of the ALBA and Chavista scripts regarding the evolution of the FMLN since it came to power in 2009.
Merino and his role in companies financed with Venezuelan money awakened a lot of suspicion in Washington towards the end of former US President Barak Obama’s administration, not only for the similarities between Merino’s rhetoric and Chavista ideology, but also for his potential links to organized crime in the region.
In addition to Merino’s direct or indirect participation in ALBA Petróleos’ financing of other companies and his alleged long-term relationship with the FARC, in 2016, questions arose regarding his connections to the Salvadoran businessman Enrique Rais, whose planes were detained in the United States for alleged ties to drug trafficking. Rais is currently a fugitive from corruption charges in El Salvador that also involve former Attorney General Luis Martínez.
In August 2017, in cases not involving ALBA Petróleos or Merino, El Salvador’s Attorney General ordered the arrests of Rais, ex-Attorney General Martínez and a dozen attorneys and former public officials for crimes including corruption and alleged fabrication of evidence. The following January, after a high court denied an order for conditional release, Rais and other suspects fled the country.
The relationship between Rais and Merino is key for understanding how ALBA Petróleos engaged with established companies and actors as well as those suspected of corruption to advance the political and commercial aims of ALBA Petróleos, which they subsequently used to move money in El Salvador.
In a recent interview, Merino admitted he was a friend of Rais. “I know him. He’s my friend. We’ve talked about lots of things. We are not partners in anything, absolutely anything,” said the political leader.
While it is true that no legal documents exist in which the names José Luis Merino and Enrique Rais appear together, there are many establishing business deals between FMLN or ALBA Petróleos and Rais or his relatives.
A prime example of how Merino attempted to take his business ventures to new heights through his connection with Rais is the company named Hydroil, which belongs to Rais. A deal was made in which Hydroil would supply ALBA Petróleos with some of the Venezuelan oil it purchased.
On January 11, 2011, Hydroil agreed to supply and sell 8.4 million gallons of diesel to ALBA Petróleos for $2.58 per gallon on the condition that ALBA open an “irrevocable credit card … transferable against shipping documents in favor of Hydroil S.A of C.V.,” a deal totaling $21.6 million.
Six months earlier, on July 7, 2010, Rais had written to a group of subordinates who were in Kosovo exploring the acquisition of companies to purchase “product [to sell] to ALBA Petróleos.” According to the emails between Rais and his employees, to which InSight Crime had access, communication between Merino and Rais served to secure business during the 2009 to 2014 administration of former Salvadoran President Mauricio Funes, also of the FMLN party, and to attempt to expand business into Honduras and Nicaragua.
Rais’ emails to his partners reveal the aim of his relationship with Merino. On February 23, 2011, Rais writes to them, “Sorry, I’ve been involved in political issues. Ramiro has been in Venezuela. He still hasn’t given me the date. I’m leaving for Washington.” And on September 1 of the same year, he sent the following message: “I’m with the president [Funes] now. And Ramiro. We’re at the last stage … I’m working on the new project for Honduras. He [Ramiro] is traveling with me.”
Communication from earlier years, such as this message from February 8, 2010, reveals similar activity: “As I mentioned, we visited the woman in Managua [likely referring to first lady Rosario Murillo] with all her advisors. Yes, we’ve been in negotiations with them through Ramiro. We’re invited to participate.” And there was another on March 13, 2010: “This morning, at 10 a.m., I’m going to meet with Ramiro and the Finance Minister.”
The relationship between Merino and Rais grew to encompass multiple companies with ties to both men and networks with political leaders from the FMLN or their relatives, all of it resulting in important contracts.
This is evident in a contract signed by ALBA Petróleos and Vifasa, another company owned by Rais, for the construction of an access route for oil tankers in the port of the Salvadoran city of Acajutla, a deal worth more than $1.3 million. More important than the amount of the deal, though, are the signatures on its pages: Rais’ is accompanied by those of ALBA Petróleos Vice President Luz Estrella Rodríguez and Orestes Ortez Quinanar , the notary who legally certified the contract. These names show just how tight the relationships are between ALBA Petróleos, Merino, the FMLN, Rais’ businesses and their governments. (Luz Estrella Rodríguez was mayor of Apopa, El Salvador, representing the FMLN party. Ortez Quintanar is the son of Orestes Ortez, who happens to be José Luis Merino’s right-hand man and the current minister of agriculture under President Salvador Sánchez Cerén.)
These connections have helped Merino not only to make business advancements, but also to extend ALBA Petróleos’ sphere of influence into other countries. For example, in Guatemala, he started Albaquetzal, a mirror company under ALBA Petróleos, with the help of the Rais business group.
Albaquetzal was registered on December 7, 2009, in Guatemala with company headquarters located at Calle 2, #15-18 in Zona 13 of Guatemala City. The owner of Albaquetzal is listed as Lifi Consulting Group, a company based in Panama whose legal control was given to Rais in 2013.
Albaquetzal is authorized to conduct commercial transactions and imports and exports, especially in the agricultural, fossil fuel and aviation sectors, including with ALBA Petróleos. Plus, just like ALBA Petróleos, Albaquetzal has used attorneys based in Panama who have been involved with the “Panama Papers” scandal for their role in creating off-shore companies.
When Albaquetzal was established in Guatemala, its partners were José Ismael Soto Orantes and Rony Armando Martínez Iboy, Guatemalans also mentioned in the Panama Papers, whom Rais met by way of Ramiro, according to what a Salvadoran investigator who has probed Rais’ activities told InSight Crime.
In the case of ALBA Petróleos, according to an investigation published by digital media outlet El Faro, it was through law firm Infante & Pérez Almillano that the conglomerate created its various offshore companies in Panama, among them Alba Petróleos de El Salvador (APES) and Atlantic Pacific Logistic, S. A. of C.V. Merino’s brother, Sigfredo, has been involved in APES.10 Between the two of them and the Salvadoran conglomerate, there have been loans totaling approximately $460 million.
Despite the plethora of allegations surrounding them, neither the FMLN nor the Salvadoran government have faltered in their protection of Merino and their public support for ALBA Petróleos. When, at the end of October 2016, Commander Ramiro was nearing the end of his term as a representative in the Central American Parliament, President Sánchez Cerén asked his Foreign Minister Hugo Martínez to create an ad-hoc position for Merino. Thus, the Vice Ministry of Foreign Affairs was born.
It was a well calculated appointment that protected the strongman behind ALBA Petróleos against criminal prosecution. Merino took office shortly after El Salvador’s Attorney General took action against Rais in response to Senator Rubio’s accusations, and after Attorney General Meléndez announced that the FARC weapons investigation would be reopened.
The FMLN also supported Merino in the face of Senator Rubio’s accusations. In a statement, the party expressed “its emphatic condemnation and rejection of the defamatory and baseless claims against one of our best leaders, a member of the political commission of our party recognized as a long-time fighter for our people.”
Moreover, before issuing its statement, the FMLN even sent one of its most influential representatives, Roger Blanding Nerio, to Washington, DC to visit several congressional offices to drum up support for Merino and express the party’s disagreement with what it called interference by US Ambassador to El Salvador Jean Manes.
Publicly, Manes has not referred to Merino, but she has made it clear that she supports Attorney General Meléndez’s investigations against FMLN officials. Meanwhile, as confirmed by a diplomatic source in San Salvador and the two sources in US Congress, the ambassador privately supported the investigation against Merino.
On June 21, 2017, a bipartisan group of 14 members of the US Congress signed a letter requesting that the US Treasury Department open an investigation against Merino because his “long-standing associations with transnational organized criminal networks are the subject of US criminal investigations.”
The legislators who signed the letter believe that the criminal activities tied to Merino could pose a “significant threat” to US security.
It is very likely that the investigations against Merino will expand, and sanctions are another possibility. But while the United States promises to continue digging into his past activities in El Salvador, Ramiro remains well protected by the authority and influence he has maintained so far.
This article is part of a multipart investigation looking at organized crime in Venezuela. See other parts of the series here and the full report here