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As Venezuela Tilts Left, a Rum Mogul Reaches Out
to Poor

By Jose de Cordoba

Staff Reporter of THE WALL STREET JOURNAL | November
10, 2004; Page A1 | CARACAS, Venezuela | In the early
hours of Aug. 16, President Hugo Chavez announced his
smashing victory in a recall referendum from the balcony of
the presidential palace to thousands of red-bereted
supporters. "Tremble, oligarchs tremble," he sang to the
delight of the crowd below.

[Hugo Chavez]It didn't augur well for Venezuela's business
establishment, which has tried by means legitimate and
otherwise to unhorse the fiery leader. Mr. Chavez's
self-styled "revolution" for the poor has devastated private
companies and has sharply divided this country.

Not every oligarch, however, is trembling. Alberto Vollmer,
36 years old, scion of one of Venezuela's oldest families
and head of a century-old rum distiller, has learned to do
what few of his wealthy peers have managed: adapt and
even thrive under Mr. Chavez's hostile regime. He has
become an example of how this deeply polarized nation can
find common ground and move ahead after years of
debilitating political violence.

Mr. Vollmer's formula for survival in today's Venezuela is a
shrewd mix of altruism and self-interest. When some 450
pro-Chavez families invaded his lands to take them over,
Mr. Vollmer didn't call the police but opted instead to
negotiate. By reaching out to the other side of Venezuela's
class chasm, he fostered a social peace that has permitted
his rum company, C.A. Ron Santa Teresa, to function. He
has made some surprising alliances along the way: The
leader of the land invaders -- a former comrade in arms to
Mr. Chavez -- asked Mr. Vollmer to be his son's godfather.

Calling himself the black sheep of his patrician family, Mr.
Vollmer has thrown himself into social projects in the barrios
that sit close to his family's eclectically decorated hacienda
in the Aragua valley, about 47 miles west of Caracas. One
program, named "Alcatraz" after the prison, rehabilitates
gang members. He recently flew one of them first class to
Sarajevo to attend a World Bank conference on social
programs.

"If you have growth and well being in the company but not
in the community outside, then you are dead meat," says
Mr. Vollmer.

In a region with the world's biggest divide between rich and
poor, few of Latin America's elite have concerned
themselves with those outside their mansion walls. But with
relentless poverty and the growing class abyss driving a
rising tide of populism, some business leaders are slowly
pursuing strategies similar to Mr. Vollmer's. Mexican
telecommunications magnate Carlos Slim last year held a
retreat with fellow billionaires to argue that governments
should pursue growth-oriented economic policies to ease
poverty. And he forged an alliance with the leftist mayor of
Mexico City to redevelop the central historic district.

Mr. Vollmer has stoked resentment from some peers who
regard him as an opportunist and class traitor. Many were
furious when Mr. Vollmer appeared on television with Mr.
Chavez just weeks before August's recall election, saying
Mr. Vollmer aided an implacable and dangerous enemy.

Others, however, are starting to see his approach as a
blueprint for the future. "I want to do the same thing," says
Alexander Degwitz, a Venezuelan who helps manage a
family conglomerate of cattle ranches, coffee farms and
financial-services companies. "You can't be rich and turn
your back on society."

[Alberto Vollmer]Colombian President Alvaro Uribe has
conferred with Mr. Vollmer for tips on how to peacefully
reintegrate former combatants in Colombia's civil war back
into society. Harvard Business School and 10 other business
schools in Latin America and Spain are using Mr. Vollmer's
experience as a case study.

Since Mr. Chavez, 50, took power in 1999, business and
government have been at each other's throats. Political
strife has been the main factor in the closure of a third of
private businesses, costing Venezuela some 2.5 million
jobs. In the past five years, extreme poverty has nearly
doubled, to 40% of the population, according to a study by
the Andres Bello Catholic University in Caracas.

Despite the bleak conditions, Mr. Chavez's government
survived a coup supported by many businesspeople, as well
as a devastating strike by the all-important oil industry --
the country is the world's fifth-largest oil exporter. A
beneficiary of recent high oil prices, Mr. Chavez has plowed
money into social programs, setting up soup kitchens and
sending thousands of Cuban doctors to live in barrios
throughout the country. After winning the recent referendum
-- and overcoming accusations of fraud -- he immediately
vowed to "deepen" his revolution for the poor. If he wins
another term in 2006 elections, he would govern for another
six-year term.

Mr. Chavez blasts everyone who opposes him, from
itinerant peddlers to elderly matrons, as oligarchs. But Mr.
Vollmer is one of the few real oligarchs left in Venezuela,
where most of the old families lost their wealth generations
ago. With vast holdings of land in Caracas as well as in
Aragua, the low-key Vollmers were, until recent years,
considered the country's wealthiest family.

Mr. Vollmer, who was educated in the U.S., Europe and
Venezuela, is the oldest son in a family of six surviving
siblings. He has a degree in civil engineering and worked for
the alternative housing department of a state government,
helping to build public housing, before he joined the family
business in 1996.

Bold and charismatic, Mr. Vollmer is in a good position to
act as a bridge between his divided countrymen. He
descends from a German merchant who, in the early 19th
century, married Panchita Ribas, a cousin of Venezuela's
independence hero, Simon Bolivar. Young Panchita was
saved from marauding royalists by Juana, the black slave
who had nursed her as a baby. As family lore has it, the
slave saw the child being led away by a cavalryman, and
bartered for the little girl's life with the money she had
saved to buy her own freedom. A few years later, Bolivar
announced the end of slavery from the stoop of a hacienda
that still stands on the cane fields of Mr. Vollmer's property.

Today, the borders of Mr. Vollmer's 208-year-old hacienda,
Santa Teresa, are ringed by barrios where life is dominated
by gangs of dead-end delinquents. With unemployment
among young men at 60%, the Aragua area is one of the
country's most violent. Mr. Chavez's fiery message of class
conflict sells well here, making Aragua one of the
president's strongest redoubts.

As fate would have it, Mr. Vollmer took control of his
company in 1999, roughly the same time Mr. Chavez took
over Venezuela's government. Neither the company nor the
country were in good shape.

Founded in 1796, the Hacienda Santa Teresa was bought by
the Vollmer family in 1885 and has been producing rum
since 1857. In time, the company became the
second-largest rum distiller in Venezuela. But in 1999, the
distiller was on the brink of bankruptcy, burdened by debt
and losing market share. Mr. Vollmer and his brother
Henrique, midlevel executives at the time, flew to Rome,
where their father Alberto was Venezuela's Vatican
ambassador. They got his backing to restructure the
company, cutting product lines to 17 from 262 and
rescheduling debt. Back in the black, Santa Teresa has
increased its annual sales from about $22 million in 1999 to
some $30 million in the fiscal year ended in August.

In that period, Mr. Chavez, a cashiered lieutenant colonel
who led a failed coup in 1992, pursued his own
transformation of Venezuela. Comparing himself to Jesus
Christ, the messianic Mr. Chavez, a close ally of Cuban
dictator Fidel Castro, commanded a massive following
among Venezuela's majority poor, who had long resented
their exclusion from the country's oil cornucopia. Mr.
Chavez's inflammatory rhetoric and calls for seizures of
"unproductive" lands soon provoked waves of land
invasions.

On the night of Feb. 26, 2000, some 457 families seized a
large swath of land belonging to Mr. Vollmer across from his
hacienda. "It was literally a wake-up call," Mr. Vollmer told a
group of young Venezuelan business leaders over a recent
breakfast of scrambled eggs. His guests, heirs to some of
Venezuela's largest family businesses, face the same social
pressures and came to his hacienda seeking his advice.

[On the Decline]That night, Mr. Vollmer told his guests, he
had three choices. He could let the takeover stand, creating
a precedent for further invasions. He could call the police to
oust the invaders by force, a solution that didn't seem
advisable or even possible, given the angry mood in
Venezuela. ("I called the governor who said, 'Are you crazy?
That's my political base,' " remembered Mr. Vollmer.) Or,
he could negotiate.

Using techniques learned at a Harvard Law School
conflict-resolution course for executives, Mr. Vollmer set out
to parlay with the squatters' leader, Jose Omar Rodriguez, a
former Air Force sergeant and veteran of Mr. Chavez's failed
1992 coup.

A deceptively meek looking man with wire-rim glasses and a
balding pate, Mr. Rodriguez recalls that the meeting was
like the first round of a boxing match. "We were like two
fighters, each probing to find the other's weak spot."

Mr. Rodriguez told Mr. Vollmer the latter had a lot of land,
and the squatters needed housing. Mr. Vollmer said he
didn't want a chaotic Venezuelan barrio on the front gates of
Santa Teresa. But Mr. Vollmer had some sympathy, too. As
a college student in Caracas, he lived for a while in a barrio,
helping a local priest improve the neighborhood. The
squatter leader and the young oligarch soon found they had
common ground. "Our shared weak spot was that we both
had social sensitivity," says Mr. Rodriguez.

Over the following weeks, Messrs. Vollmer and Rodriguez
brought the state governor into the negotiations. Mr.
Vollmer agreed to donate 60 acres as well as plans for a
100-house model community. Mr. Rodriguez agreed that
the families would pay mortgages, held by a government
housing agency, and provide the labor to build the houses.
He also agreed to winnow the number of families down to a
more manageable 100 from 457. The state and federal
governments agreed to provide financing to build the
proposed neighborhood. The result is the tidy urban
development of Camino Real, inaugurated this year.

Meanwhile, Mr. Vollmer and Mr. Rodriguez drew closer. Mr.
Vollmer became the godfather of Mr. Rodriguez's son,
named Hugo Rafael, after President Chavez. Mr. Vollmer
invited Mr. Rodriguez to management courses for Santa
Teresa executives. Last year, Mr. Vollmer sent Mr.
Rodriguez to a conflict-resolution course at Harvard, working
his contacts at the U.S. embassy to get a visa for Mr.
Rodriguez, who, as a participant in Mr. Chavez's failed coup,
had been barred from entering the U.S.

For Mr. Rodriguez, the trip was an eye-opener. "Drivers
stopped at red lights," marvels Mr. Rodriguez. "There's no
reason we can't do that."

Concerned about growing population pressures in Aragua,
Mr. Vollmer is now working on a plan to attract tourism to
the valley, which boasts Venezuela's only steam railroad. To
hash things out, Mr. Vollmer earlier this year held three
weekend-long marathon sessions with some 75 community
leaders, ranging from gang members to the mayor. At first
wary of his intentions, local officials say they now are on
board.

Another violent incident led Mr. Vollmer to his most
controversial foray into social policy. In February 2003, three
members of a youth gang mugged a company security
guard, stealing his pistol. Weeks later, Santa Teresa's
security chief captured one of the young criminals,
20-year-old Derjuis Rebolledo, known as "Cara de Leon" or
"Lion Face," and took him to see Mr. Vollmer.

On impulse, Mr. Vollmer made Mr. Rebolledo an offer. He
could return the stolen gun and do three months hard labor
clearing land to make firebreaks on Santa Teresa for no
pay. Or, he could take his chances with the Aragua police,
who have been known to summarily execute criminals. A
week later, Mr. Rebolledo, along with 22 gang buddies who
wanted the same deal, showed up at Santa Teresa, ready to
work.

"Alcatraz" was born. In the mornings, participants do farm
work. Later in the day, they see psychologists and study to
complete high school or grammar school. If they complete
the first three months, Mr. Vollmer gets them temporary
jobs at Santa Teresa and tries to place them in other
companies.

Improvising the program day to day, Mr. Vollmer, an avid
rugby player, made the rough contact sport part of the
curriculum, figuring it was a way for young criminals to let off
steam while learning the value of cooperation and grit.
When members of the first gang complained that,
unarmed, they were easy prey for a rival gang, Mr. Vollmer
met with the second gang and convinced them to join
Alcatraz. The former enemies now face off in rugby games.
"People better themselves," says Darwin Ospino, 20, a
feared former gang leader better known as "Patapiche" or
"Smelly Feet." "We were enemies and now we are friends."

Two more gangs have since joined the program. Alcatraz
and Mr. Vollmer's other social efforts are funded with about
2% of the rum company's profits, or $100,000. The Andean
Development Corp., a regional development bank, kicks in
an additional $35,000 to Alcatraz.

At first, townspeople were suspicious, concerned that
Alcatraz was a way to reward criminals. But in a region where
law enforcement is often scarce, arbitrary and corrupt, many
now see the program as an effective way to disarm gangs.
Police and local officials say it has helped slash local crime
by as much as 50%. "It's been a big success," says
Commissioner David Borges, head of the community police.

These days, with his business in solid shape and his brother
Henrique helping to run it, Mr. Vollmer spends a third of his
time on Alcatraz. It's clear he enjoys himself as he drives
around the barrios, exchanging high fives with gang
members, who call him by his first name. "Alberto is the nut
in the family," says Jimin Perez, Santa Teresa's security
chief. "He can talk to anybody."

The Alcatraz program has attracted attention in Venezuela
and abroad. President Chavez has praised Mr. Vollmer as a
true revolutionary. (Mr. Vollmer, for his part, says he has
always voted against Mr. Chavez.) In an August World Bank
congress on social programs, Alcatraz was selected as a
model. Last month, Mr. Vollmer presented Alcatraz in
Mexico City at an Inter-American Development Bank
conference attended by leading Latin American
businessmen.

Not everyone is a fan. In July, Mr. Vollmer went on
television with Mr. Chavez and other businessmen the same
night that Fedecamaras, Venezuela's main business
organization, had its annual convention. Mr. Vollmer
outlined his programs, saying business had an obligation to
fight poverty.

Mr. Vollmer received dozens of angry e-mails. Some
onetime friends still won't forgive him. "That rum is poison,"
fumes Dr. Eduardo Rivero, a die-hard Chavez opponent who
runs a health-maintenance organization. "I used to buy
cases of the stuff for company parties, but no more."

Mr. Vollmer vows to invite Dr. Rivero to Santa Teresa and
give him the rundown on his projects. He makes light of the
one-man rum boycott, joking, "He's a whiskey drinker
anyway."

Write to Jose de Cordoba at jose.decordoba@wsj.com