Venezuelan Experts, Union Leaders Debate Increase in Gasoline Prices

Caracas, August 29^th 2014 (Venezuelanalysis.com) – In a public forum on Thursday organized by Caracas newspaper Últimas Noticias, experts and union leaders all expressed tentative approval for an increase in Venezuela’s gasoline prices.

The forum included presentations by each of the five speakers – two economists and three transportation sector representatives – followed by a period of questions from the audience.

The first presentation, from economist and researcher Víctor Álvarez of Centro Internacional Miranda, calculated a “fair price” for gasoline of 4 bolivars per liter (roughly $2.42 USD per gallon by the official exchange rate, or $0.19 by the black market exchange rate). The calculation represents a total of refining and transportation costs, as estimated by state-owned oil and natural gas company PDVSA, with a 30 percent profit as stipulated by the Law of Fair Prices.

The current price in Venezuela has been fixed at 0.09 bolivars per liter since 1997, the world’s lowest gasoline price.

Other panelists debated how the government would manage the resources generated from such an increase, estimated by Álvarez to amount to more than US$12 billion.

Richard Mambel, the spokesperson for the National Socialist Council of Public Transportation, highlighted the need to import new auto parts and lubricants for public buses, noting that up to 30,000 vehicles cannot currently be used due to a lack of specialized motor oil.

“We support the price increase, but we cannot permit the waste and corruption that exists within the current state structure,” Mambel said. “We have new buses that are currently in junk yards, and they’ve forgotten about our natural gas vehicles too.”

“And we cannot support an increase in gas prices if the long lines to buy basic food products continue,” he added.

Emiddio Palumbo, the president of a transportation union in La Guaira (Catravargas), stated that he would accept the price increase, “provided that the resources are used to address our social needs.” He cited the city’s deteriorating road conditions and high insecurity as key issues to resolve.

Economist and Professor Ronald Balza, of Caracas’ Universidad Central, disagreed with this proposal, arguing that issues of insecurity and social spending should instead be addressed through the government’s national budget. He suggested the extra resources would best go toward the strengthening of Venezuela’s international reserves.

For his part, Secretary of the Transport Sector Union, José Luis Trocel, expressed hope the government considered input from groups such as his organization as opposed to making a decision unilaterally, since “a considerable increase [like this] would have a direct impact on the operational costs of our service.”

The last time the government attempted a significant price increase occurred in February 1989 as part of a series of neoliberal reforms under President Carlos Andrés Pérez. Soon after the increase, spontaneous mass riots erupted near Caracas and spread throughout the country, a consequence of years of lower-class discontent with the country’s political system.

The riots, known as the Caracazo, represented Latin America’s first widespread rejection of neoliberalism and ushered in a decade of social and economic chaos that culminated in the election of outsider Hugo Chávez as president in 1998. It showcased the threat – for Venezuelan politicians and citizens alike – of raising the price of gasoline.

In December 2013, PDVSA President Rafael Ramírez announced the possibility of raising the price to 2.6 bolivars per liter, but no further action was taken.

Though Ramírez, who also serves as the country’s Oil and Mines Minister, was scheduled to participate in the forum, he did not attend due to a scheduling conflict.