Doug asked:
Production volume aside, what's the impact of the halving of oil prices
been on the Venezuelan budget?
Oy! Things are tough with budget cuts. (Our institute, which comes
under the Minister for Higher Education, is scrambling.) The original
budget was set on the assumption of a $60 price (pretty conservative
given that prices were $90 at the time); when prices tanked, they
shifted to the basis of $40 and haven't since adjusted. Ministries have
been cut back substantially (and were suffering before oil prices
fell--- because of the restructuring of the state). My information is
that the governors are suffering in particular now and are cutting back
on employment for this reason (the irony being that with iron-clad
public sector employment protection-- from the days when the AD and
Copei traded government-- the opposition folks are protected while
recent contract hires, the Chavists, are out). So, lots of anecdotal
stuff re job loss but the April figures showed 7.7% unemployment, the
lowest in a long, long time. At this point, the best information in
English can generally be found on Links or Green Left Weekly. Vzla, btw,
could solve much of its budget problem pretty easily by devaluing.
Here's an excerpt from a recent GLW of an interview conducted back in
April when I was in Oz./michael
*With the global economic crisis, Venezuela is relying on much-reduced
oil income. What policies is the government implementing to tackle the
crisis? *
Nothing fundamental so far. Venezuela has a very nice cushion in the
form of US$40 billion in international reserves. So in the face of
reduced revenue, and oil is a very substantial part of their budget,
80% I think, state budgets have been cut and waste is being tackled.
What the government has done is take $12 billion out of reserves so it
could be used for maintaining the pro-poor social programs.
That part is fine, but other measures are not entirely clear yet. The
minimum wage has been raised by 20%, although this is still below
inflation. Also the Value Added Tax, a regressive tax, has been
increased.
There was some talk about raising gasoline prices, currently extremely
cheap, as a way of increasing revenue, while simultaneously
discouraging wasteful overuse of gasoline and ensuring that the burden
falls on the wealthy hummer-drivers rather than the poor.
I think if gas prices increase, the government will definitely ensure
a subsidy for all public transport to protect the poor.
Also, the government is hesitant on devaluation of the bolivar, which
would solve a lot of problems because with every dollar in oil
revenue, it would receive more bolivars. This could solve a lot of
budgetary problems.
Ali Rodriguez, the finance minister, said they would not devalue the
bolivar in order to solve budgetary problems. However, he said they
would consider the question in terms of strategic economic issues. The
over-valued bolivar (and there is no question that it's over-valued)
means that it is very cheap to import goods and it is very difficult
for local agriculture and local industries, including cooperatives, to
compete with imports.
Devaluing would reduce imports and strengthen local manufacturing and
local agriculture. Strategically, with the government's goal of ending
reliance on the oil industry, this is very important. The government
is hesitant to devalue, however, because the oligarchy, which has
taken its money out of the country and holds it in dollars, would
therefore be able to receive a wealth gift by transferring the cash
back to bolivars.
We can see why all of the opposition newspapers are shouting
?Devalue!? Sure, because the rich oligarchs will benefit.
One of the things I have heard they may attempt to do is introduce a
selective devaluation depending on what is being imported. For
example, luxury cars. Why should buyers of luxury cars get a better
rate? A selective removal of items from the current official bolivar
rate would allow for a selective devaluation that wouldn?t give that
wealth gift to those who hold dollars outside.
I think before long there will be new proposals for reforms. Right
now, what they have done is definitely inadequate--- raising taxes
and reducing government spending in an economic crisis does not reduce
the crisis but increases it.
Further, the reduction in oil export revenue and what that means for
the ability to import may compel the government to take more vigorous
steps to increase agricultural production (which may involve recovery
of latifundias (large landholdings), which could be used to produce
for domestic needs.
--
Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6
Director, Programme in 'Transformative Practice and Human Development'
Centro Internacional Miranda, P.H.
Residencias Anauco Suites, Parque Central, final Av. Bolivar
Caracas, Venezuela
fax: 0212 5768274/0212 5777231
www.centrointernacionalmiranda.gob.ve
[email protected]
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