The story of Fospuca, the waste collector operating in Caracas for over 40 years, has evolved from being merely a private venture providing services to the municipalities of the Venezuelan capital to a politically influential entity since its acquisition by lawyer and businessman José Simón Elarba Haddad in 2014. The relationship, sometimes symbiotic and sometimes more like sponsorship, between Fospuca and the Baruta municipality exemplifies this transformation. An additional nuance is that, at times, it’s unclear who is sponsoring whom.
Through Fospuca, Elarba established a relationship with the Baruta municipality—a middle-class district traditionally opposed to the government in southeast Caracas—that has enabled him to set rates, billing mechanisms, and even penalties according to his preferences. This represents a situation in which the provider dictates terms to the client.
Prior to the year Fospuca signed its first contract with the Baruta municipality in 2015, the fees for urban cleaning services in that and other Caracas municipalities were calculated using a straightforward method: a fee was assigned per ton of waste collected, which was then multiplied by the total waste for a municipality and divided by the number of inhabitants. However, with Fospuca’s involvement, this traditional prorating method literally became a thing of the past. After discarding it, the Municipal Council and the Baruta municipality decided to implement a fee based not on waste volume but instead on the size of commercial premises, regardless of the actual waste generated; residential rates were set using predetermined amounts, irrespective of volume.
For instance, in Baruta, if a commercial location is 50 square meters producing 1,000 kilos of waste per month, the owner pays significantly less than another location of 200 square meters generating just 100 kilos in the same timeframe. This counterintuitive logic may seem to promote efficiency in waste production and management, but in reality, it burdens the size of commercial properties, often leading to their closure.
This was just the beginning of a series of favorable decisions for the company. Besides permitting arbitrary increases in service fees, in 2019, the Baruta municipality programmed its municipal tax collection system to block payments from businesses that remained in arrears with Fospuca.
Thus, the complacency of the Baruta municipality toward Fospuca escalated to a new level: it now involves not just favoring the contractor but doing so even at the expense of the municipality’s own revenues.
A Success Worth Many Bankruptcies
It can be said that Fospuca’s business model has been successful. Currently, alongside its traditional clients in Caracas, such as the municipalities of Baruta, Chacao, and El Hatillo, it also provides services in Maneiro (Nueva Esparta), San Diego (Carabobo), El Tigre (Anzoátegui), Iribarren (Lara), and Caroní (Bolívar).
Amid this expansion, Baruta remains an ideal client and a model to follow. Signs indicate that they are preparing for a renewal of the concession to Fospuca starting in 2025, without any visible competition, for another ten years.
When José Simón Elarba obtained the concession for urban waste services in Baruta in 2015, the mayor was Gerardo Blyde, a lawyer and former leader of the Primero Justicia party, and the current opposition negotiator for the so-called Barbados Agreements. After a call for bids, Blyde and Elarba (who later became partners in the law firm Gadea, Lesseur & Asociados) signed the concession.
The regulations concerning private companies providing services in Baruta are overseen by the municipality, currently led by Darwin González since 2017, and the Municipal Council, chaired by Armando Machado. Both González and Machado are members of the Fuerza Vecinal party.
According to the current Solid Waste Rates and Fees Ordinance (Article 19, Paragraph 3), waste collection companies operating in Baruta must present a cost structure validated by professionals in budgetary matters and supported by “legal, economic, and financial” documentation.
If this Solid Waste Rates and Fees Ordinance obliges Fospuca to present a validated cost structure to increase their service fees, one must conclude that in Baruta, theory is divorced from practice. “Fees increase due to monetary harmonization, without supporting documents, without cost structures, and without audits: what exists is a letter from Elarba justifying his increases. There has been no audit, nor has he presented a cost certification from a certified professional,” denounces Soledad Rodríguez, an independent councilor in that municipal chamber, in a phone conversation.
Rodríguez averages that every six months, a letter from Elarba sufficed to justify the increases during the years of hyperinflation in Venezuela. She recalls that only once was an increase backed by a certified public professional, which occurred in March 2019.
This is not merely a perception from a political actor interviewed. In fact, as derived from documents and sources consulted by Armando.info for this investigation, Fospuca’s increases have been systematically decreed in defiance of established regulations and practically at the supplier’s request.
For instance: Armando.info confirmed, through a review of municipal gazettes and documents from the municipality, that between February 2018 and October 2019 alone, Fospuca increased service rates—expressed in the sovereign bolivars of that time—on five occasions, always at Elarba’s request. On each occasion, he requested increases for the commercial sector of 2416.29%, 60%, 75%, 75%, and 75%, respectively; and in three of those instances, he also included requests for increases in the residential sector of 1,500%, 75%, and 75%.
Until October 2019, the fees for urban waste services in Baruta were priced in sovereign bolivars. However, the reference currency started to change in December of that year through a letter from the Baruta municipality, identified as number 001347, which is part of the records that Armando.info accessed.
A letter from Mayor Darwin González heads the document, which he directs to the Municipal Council as an introduction and support for another letter, this one from José Elarba, in which Fospuca requested approval for an adjustment slightly exceeding 44 billion sovereign bolivars (equivalent at that time to 965 million dollars, according to the official exchange rate) in the billing for waste services for the commercial sector.
In his letter, Elarba justified his request based on the need for an adjustment due to the minimum wage increases decreed by Nicolás Maduro’s government and an alleged 547.40% increase “in maintenance and spare parts costs,” a structure that, by the way, once again lacks mandatory validation from a certified public professional.
In any case, the arguments resonated with Georgette Topalián, the then-president of the Municipal Council and a former member of the ruling United Socialist Party of Venezuela (PSUV), who quickly approved the tying of urban waste fees in Baruta to the Petro, the cryptocurrency sponsored by Nicolás Maduro’s government since 2018 and recently deactivated.
An additional change in service billing parameters occurred in January of this year as a result of the new Law on Coordination and Harmonization of Tax Powers (Locaptem), approved in November 2023 by the pro-government National Assembly. The law’s rate table mandates adherence to the Dynamic Account Unit (UDCD), calculated by the Central Bank of Venezuela (BCV) based on the euro’s exchange rate.
However, amid so many factors—beyond inflation fluctuations, the Petro, and de facto dollarization—billings have ultimately been subject to Fospuca’s whims.
José Alejandro Lossada, General Secretary of the National Commerce Federation (Fedecomercio), exemplifies this with an agreement reached in 2021 between that sector and José Simón Elarba himself. Under the agreement, verbally established without the presence or mediation of Baruta’s municipal authorities, the merchants agreed to pay for the service in dollars. In return, Fospuca offered them a 50% discount on the fee.
“He said, ‘If [you] commit to paying in dollars, I’ll reduce it by 50%.’ And we agreed to do it this way, reaching a verbal agreement. But it lasted a month. If you started paying 50 dollars, then it became 100 dollars, and then 150. It increased without reason,” concludes Lossada, estimating that around 400 businesses, especially small ones, have succumbed to this pricing scheme and billing system.
In the same vein, a tenant in a Baruta shopping center, who wishes to remain anonymous, states that the increases have not been indexed accurately to inflation or the depreciation percentage of the bolívar, and exceed those metrics.
“I can’t explain how this billing system works. My store is 30 square meters, and I pay 180 dollars a month to Fospuca, but I throw out one garbage bag a week [calculated out, each weekly bag costs 45 dollars]. There’s no parameter, regulation, or law. And people can’t complain because they’re ignored,” he remarks in a phone conversation.
Paying and Getting Change
As if the privileges granted to Fospuca were not enough (not referring to the bohemian and commercial area of the same name in Baruta, which until recently showcased Chavismo’s prosperity and where the company is headquartered), it enjoys another perk: waste collection services are paid directly to the company rather than through municipal taxes, as is standard in other countries.
“In this case, the municipality is supposed to pay, and that cost should come from its coffers. The problem here is that they give Fospuca a blank check to collect directly from people,” states lawyer Roberto Hung, who specializes in constitutional procedural law, in a phone conversation.
In municipalities like Chacao (Caracas) or Caroní (Bolívar), Fospuca has put small and medium-sized businesses on the ropes, as a result of debts with the company, facing threats of liens that leave their businesses in legal limbo. “More than effectuating liens, the goal is to intimidate,” emphasizes Hung, citing the case of an appliance repair business he once represented facing a lien threat from Fospuca being deliberated in Chacao, another capital municipality also governed by Fuerza Vecinal.
“The debt was only 120 dollars. We put up the same amount demanded as a guarantee, and the lien was suspended and never proceeded. (…) They aimed for something exemplary, and [thus at the same time] you had the folks from the [Taxes office of the Chacao municipality] shutting the business down over tax obligations. But nothing came of it for that reason: the main intention is to intimidate,” he asserts.
In the particular case of Baruta, Hung maintains that the municipal tax authority sometimes acts against the interests and assets of the local entity itself. “To ensure that money goes into the pockets of a third party [referring to Fospuca and, ultimately, Elarba], there’s a total network of collaboration, including this network involving the Municipal Council,” he states. The host sacrifices itself for the burden or the armadillo working for the anteater.
The peak in this role reversal occurred in 2019 when Baruta’s revenue collection system was put at Fospuca’s disposal as a method to punish delinquents.
“It must be considered that the municipality does not fine you for non-payment, but for non-declaration,” explains José Alejandro Lossada from Fedecomercio. “So, if you find yourself blocked for not having paid the waste service, you cannot declare. That blockage and unblocking of the taxpayer is subject to Fospuca, and it is dependent because the municipality cedes control of its declaration system to the company.”
This power for the company has coincided with an increase in business closures and, consequently, a significant drop in municipal revenue collection. “If you don’t pay Fospuca, you don’t pay taxes, and you are forced to close. If before you collected 14 million dollars, as a municipality you now collect four million. Who is to blame?” questions councilor Soledad Rodríguez, who assesses that Baruta has lost up to 60% of its revenues from commercial taxes as a result.
Intimidate Them Even if They Don’t Pay Well
The 2015 rates ordinance for Baruta states that the rates and fees “cover the cost of the mentioned service.” However, it incurs ambiguity: in its Article 7, it equates both terms as the same.
This may seem like a technicality, but for lawyer Roberto Hung, the confusion between rate and fee—which was also noted in the Integrated Waste Management Law approved by the National Assembly in 2010—lies at the root of the distortion of Fospuca’s role in the provision of this service, even serving as an excuse for its unchecked increases.
This opinion is shared by Bernardo Calvo, an engineer and president of the Chamber of Artisans, Small and Medium Industries of Miranda state (Campi-Miranda). “In 2005, [then-President] Hugo Chávez froze the increase of fees. That was nothing more than additional income. What was charged was something additional and improper called ‘sanitary fill,’ which corresponded to 10% of the urban cleaning fee.”
However, “with the fees frozen between 2005 and 2010, the year the [integrated waste management] law was promulgated, municipalities, to cover collection deficits, increased the price of the sanitary fill, which the vast majority of clients paid [without complaints] because it was economical. Inflationary increases were more moderate back then,” continues Bernardo Calvo. “But the 2010 law confuses the term fee with rate, and there’s ambiguity there,” from which Fospuca would be taking advantage today.
“When they began [in Baruta in 2019] to block tax payments, the story they told was that inflation was rising too fast and the collection methods were too slow. We were all accused of tax evasion, and they invented the wildcard of urban cleaning without limits: they could charge whatever they wanted.” Since then, Calvo concludes, any business that is not up to date with Fospuca unintentionally becomes a business that fails to pay its municipal taxes and, almost by necessity, a tax evader.
Not only municipalities and Fospuca in those where they operate as contractors have used the sanitary fill to impose their increases. As Lossada, the General Secretary of Fedecomercio, recalls, they had another resource at hand: “When Chávez regulated the service rates, as municipalities couldn’t sustain the waste service, they created the concept of environmental services to compensate (…) Since January 2020 [in Baruta], both fees have been applied: environmental services, which is unnecessary, and urban cleaning service. This is why I say that merchants are paying double,” he laments.
José Gregorio Meignen, a corporate attorney representing businesses in the Caroní district, Bolívar state, facing lien processes over Fospuca’s claims, adds another perspective on this issue: the practices in Baruta that favor Fospuca violate the terms of the aforementioned Law on Coordination and Harmonization of Tax Powers (Locaptem), which they should adhere to. “The Locaptem states that it must be charged based on waste generation, not by square meter (…) It also specifies that charges are by rates, not by fees. It’s very strict about that. A third violation is that the law states that payment must be made in national currency: the bolívar,” summarizes the lawyer.
In that district, which encompasses the urban joint area of Puerto Ordaz and San Félix, Meignen has seen nearly everything when it comes to Fospuca’s whims, channeled through lien requests in the courts. “A court depositor took buildings under construction that do not use Fospuca’s services because they generate debris for which a private hauling service is contracted. However, they were sued,” he is still astonished.
Moreover, attorney Roberto Hung goes beyond the mere local context and points out that these quasi-collusion schemes between municipalities and companies are also possible thanks to another collusion: that of the Judicial Power. Civil and commercial judges are the ones who threaten or execute the liens. “There is a distortion of all administrative law related to public services aimed at getting into the pockets of individuals,” Hung explains. He also warns that lien and blockage practices could contradict the current Anti-Corruption Law, which prescribes one month in prison and fines for public officials who “arbitrarily demand or collect any undue tax or fee or who, even if legal, employ means not authorized by law for their collection” in its Article 76.
A Baruta councilor who spoke to Armando.info anonymously in 2022 added another explanation for the effectiveness of these intimidating actions: “Elarba has many friends and direct relationships with the Directorate Against Organized Crime. He also has political ties within the Municipal Council, with parties like Un Nuevo Tiempo, Primero Justicia, Acción Democrática, in addition to Fuerza Vecinal.”
Fospuca Until Two Thousand Forever
Chronically, between March 2019 and the current year of 2024, Fospuca has never again submitted the documentation required by the Solid Waste Rates and Fees Ordinance, which includes certified collection reports, monthly service debt reports, and operational plans from the previous fiscal year. Nor has it validated its cost structure through a qualified professional.
This corresponds to another irregularity, this time on the contractor’s side: since January 2020, there is no record that the Baruta municipality and the Municipal Finance Commission have required the economic, financial, and legal studies that must support requests for price increases for the service.
And the omission continues. On January 18, 2024, Mayor Darwin González sent the Municipal Council another letter, number 0043, with new requests for increases, accompanied, of course, by a letter from Elarba dated January 15, outlining his requests for increases in specific rates for urban waste service for special use, namely for the commercial sector. The letter includes only the rate table in a couple of paragraphs, barely preceded by an epistolary formula: “By means of this, we direct ourselves to you to submit for your consideration the new rate proposal,” it states without further supports.
Amid consecutive increases and overlooked formalities, all these episodes have finally stirred the community. The municipal chamber has become a sounding board for this discontent. An example of this is found in the ordinary minutes number 43, which contains the transcription of the September 12, 2023 session of the Baruta Municipal Council. On that day, a local resident, whose identity remains private, highlighted the consequences of the variable billing systems provided by Fospuca: primarily, how these systems are driving many businesses to bankruptcy.
“It’s not just a matter of rates or harmonization: there’s the Fospuca factor, and the link between these two is what is bankrupting Baruta’s merchants. We don’t understand why there hasn’t been a precise and timely action if we’re interested in capturing revenue for the municipality,” the resident explained, as recorded in the transcription document that Armando.info reviewed. She also reproached the inaction of both the Municipal Council and the Mayor’s Office as well as the Autonomous Municipal Tax Administration Service (Semat) and the Municipal Engineering Department, another branch of the municipal executive power responsible for land planning.
A few lines down in the same transcript, José Gregorio González, first vice president of the Municipal Council, responds to the intervention with a barely subtle reprimand: “Fospuca is to be paid. It’s a service, not a rate, not an assessment. And who sets the regulations for Fospuca to comply with its contract? The municipal executive, which is the link, the tie between the municipality and a private company.”
Community protests have not been confined to the Municipal Council. On April 30, 2021, the organization Baruteños Unidos por un Mismo Propósito sent a letter to the then Comptroller General of the Republic, now President of the National Electoral Council (CNE) and a steadfast member of the PSUV, Elvis Amoroso, signed by 2,900 individuals. The letter, which Armando.info also reviewed, includes two fundamental requests: one, to know the exact “technical, legal, and financial” reasons for how urban cleaning rates have been set in Baruta, and the other, to promote “correctives that would allow for fair rates.”
On September 30, 2021, Mario Luis Salas, the intervening comptroller of Baruta, subordinate to the Comptroller General of the Republic, responded to the communication, emphasizing that the entity he represented did not have the authority to intervene in the approval or disapproval of rates. He merely reminded that such responsibility lay solely with the Municipal Council and the Mayor’s Office. And it still does.
Within that chamber, councilor Soledad Rodríguez has become a champion of protest and scrutiny regarding the preferential treatment of Fospuca. From this stance, she warns that a ten-year concession renewal is being secretly orchestrated for 2025. Her basis: a request for discussion on the matter she presented to the Chamber on February 15, which has yet to receive a response.
“The proposals for discussion were: the nullification of the rates until the contractor presents their audited rates by a certified professional; the establishment of a mixed commission of merchants, residents, the municipal council, and the mayor’s office to study the amendment of the ordinance imposing these rates before the renewal of the concession; and the review of contract breaches, in addition to discussing a new set of conditions when the bidding process is initiated,” Rodríguez enumerates. “No response has been given to any of these: it’s all very secretive.”
Armando.info requested, via WhatsApp and email, an interview with José Simón Elarba. A questionnaire was also left at Fospuca’s headquarters. Similarly, direct interview requests were made for the chair of the municipal council, Armando Machado, and Mayor Darwin González, including one through his press officer. None responded.
Using a fable, the anonymous tenant of a shopping center who talked to Armando.info warns of the consequences this policy leaves in Baruta: “The saddest thing is that tomorrow, if 100 or 200 stores close in a shopping center, you will close an entry for taxes. Instead of providing food, you are killing the golden goose.”