Maduro Entertains Raising Gas Prices But Rejects Devaluation of Venezuela´s Currency

Caracas, January 22, 2015 (Venezuelanalysis.com)- On Thursday, Venezuelan President Nicolas Maduro made a much-anticipated address to the Venezuelan legislature in which he announced slight changes to monetary policies and the need to raise the extremely low cost of gasoline in the country.  He also announced a 15% increase in the minimum wage and increased investment in education and housing.

By 3pm Caracas´ Plaza Bolivar was full of chavistas who cheered as President Maduro walked towards the National Assembly building to give his annual national address to the legislature last night.  With oil prices tumbling to a decade low of under $40 USD per barrel of Brent crude, Maduro recently returned from a whirlwind tour of Russia, Asia and the Middle East in an attempt to ensure loans and investment to make up the difference in falling foreign reserves triggered by low oil prices.

In the President´s absence, the economic turmoil in Venezuela has deepened.  Following holiday buying, and the discovery of warehouses with tons of hoarded basic goods, block-long lines have been growing throughout the country so that people can get scarce items such as soap, diapers, and corn flour.

While the President was abroad, right-wing opposition leader, Henrique Capriles called for mobilizations and despite some minor protests and disturbances in San Cristobal, near the Colombian border, his call to action was largely ignored. 

Yesterday, thousands of Venezuelan gathered in Plaza Bolivar and around the National Assembly building in Caracas´ historic center to show their support for President Maduro and to hear what policy solutions he might propose in the face of economic difficulties.

 “I am here to listen to what President Maduro has to say about his trip abroad, about what he will do for the youth, for students and for the people of Venezuela” said Barbara Duran, 15 from  Valle de Tuy.

The supporters in the plaza did not deny the economic problems that the country faces.

“It´d be good for there to be more economic opportunities for youth, more equality.  I want Maduro to do something, the unemployment, the economic situation, the scarcity, the sabotage from the right that still has a stronghold in the government.  I want him to do something for the country and for the Venezuelans” declared David Mendez an unemployed graduate of the Bolivarian University of Venezuela.

Inside the National Assembly, President Maduro addressed the legislature and the nation and sketched out a loose outline of new programs and policies that would be enacted and debated.  These proposals address monetary policy, the gasoline subsidy, the minimum wage, housing, educational scholarships, and enforcement actions towards distributors who are hoarding goods.

Monetary Policy

Venezuela´s multi-pronged currency exchange system has been long criticized by economists from across the political spectrum.  In his address last night, President Maduro acknowledged this criticism but noted that uniting the currency exchange system to 30-40 bolivares would be “a collective suicide of the country´s economy.”

While there had been speculation that the Venezuelan government would devalue the Venezuelan Bolivar by raising the official rate from 6.3, Maduro affirmed the need to use the preferential dollars to import medicine and food in the midst of the “economic war” that has contributed to shortages throughout the country.

Instead of devaluing the currency or creating one exchange rate, President Maduro instructed that the SICAD II rate which priced Bolivares at over 50 to the dollar (through an auction system) would be abolished and combined with the SICAD I rate of 12 bolivares to the dollar.  He did not specify the new combined SICAD rate but instead the President announced the creation of a third exchange rate (replacing SICAD II) which the private sector could participate in.  No details were given as to how the system would operate or what the exchange rate would be.

Raises in Wages and Scholarships

As of February 1^st, the minimum wage in Venezuela will be raised by 15%, which includes workers earning above the minimum wage and pensioners.    This will bring the monthly minimum wage from 4,900 bolívares to 5,634.  The increase will be done through adding value to the Cesta food ticket, which all workers in the public and (formal) private sector have access to.  Current Cesta tickets, which work as debit cards and can be used anywhere debit cards are accepted, currently range from 1,905 to 2,857 Bolivares.

President Maduro stated that 49,703,000 bolivars were designated to ensure payment of the first corresponding minimum wage increase.   

Scholarships will also increase, the President announced.  Students receiving 200 Bs per month will now receive 500 and University students receiving 500 will receive 1000, the President stated.  In 2014, wages increased by 55% but these increases did not keep pace with the annual inflation in of 64% last year.

Maduro also announced that pensioners will also receive increased health benefits for buying medicine or paying for other health-related costs.

Housing, Social Programs and Infrastructure

The Social Mission, Gran Vivienda which provides housing for Venezuelans will also be expanded, according to President Maduro.  Huge investments will be made in infrastructure improvement projects, largely facilitating the construction of additional public transportation in Caracas, and surrounding areas.

Maduro also announced a new social program called Mission Homes of the Country that is meant to incorporate more Venezuelans into the already existing educational and anti-poverty social missions.

An Increase in the Cost of the World´s Cheapest Gasoline

It is no secret that the cost to fill up a tank in Venezuela, at less than 5 bolivares, is the lowest in the world.  The debate on raising the price of gasoline has circulated among Venezuelans for decades.  Many Venezuelans consider gas to be essentially “gifted” from the government, free.

“The price of gasoline is the lowest in the world market,” Maduro stated “we need to do more to a regime of balanced prices, of fair prices of gasoline.” 

He mentioned that discussions would begin on how to go about raising the price of gasoline so that it covered the costs of production.  The Venezuelan government spends an estimated $20 Billion USD on the gas subsidy every year, roughly the amount that they just secured in loans from China.

Maduro did not say what the price of gasoline would be changed to nor whether any policy would be implemented immediately, but his affirmation that the price must be raised shows a change in petro-policy for the Venezuelan head of state.

The Economic War

During the President´s address, he showed a video that was made of a phone call of right-wing Provocateurs who discussed trying to make disturbances outside of super-markets as a part of a strategy to rile people up.

A cache of tons of hoarded basic goods such as soap, detergent, milk, diapers, flour, beans and lentils was confiscated by the government earlier this month.  This past week those confiscated items were distributed through the roving government subsidized Mercal mission in the 23 de enero barrio in Caracas.

Today, Maduro announced, inspectors will be examining all food distributors to make sure that goods are not being hoarded.

While no one is denying the existence of lines and scarcity in Venezuela, the government supporters who gathered in the plaza to show their support for President Maduro outlined the interests behind the economic war.

“Who benefits from the Economic Crisis?” was scribbled on a sandwich board hanging around the shoulders of Carbin Merio in Plaza Bolivar yesterday.  People came up to use the marker and write answers to the question.  The answers included, “the parasitic bourgeoisie” “the empire” and “the opposition.”

Merio, who is from the Parroquia of San Juan noted, “the economic situation is delicate in the country in this moment because we are in the middle of an economic war created by Empire to fuel tensions between people and to topple our government because their (the opposition) other strategies to do so (topple the government) have failed.¨”

“This impacts all of us,” said government supporter Maribel Lenda, referring to the difficult economic circumstances in the country. “Not only the opposition but the revolutionaries too.  Perhaps, the revolutionaries more because we are poorer,” she added.

Contrary to the reporting in the International Press which has blamed the economic problems on the failed policies of the Chavez and Maduro governments combined with falling oil prices, many of the grassroots Venezuelans who came out to cheer on their President agree with the analysis that the economic problems are a part of a broader political strategy to oust Maduro.  Nonetheless, the difficult situations, the soaring inflations, lack of basic goods and long lines have created serious problems for many Venezuelans and a certain level of “indifference” even among some Chavistas, as one government supporter admitted.

“Yes, we are all annoyed about the lines. It causes inconvenience.  I am annoyed and I am a revolutionary chavista.  We are annoyed but it is not the government´s fault,” Angel Rorones from La Vega declared. “People are tired of the lines but they are not tired of the revolution.  We are going to defend the revolution on whatever terrain we have to,” he said enthusiastically.

As Maduro began addressing the National Assembly at around 6pm last night, people trickled out of the Plaza Bolivar and headed home and Maduro´s speech continued past 9pm. It is still unclear if the measures that he announced will provide the change that many Venezuelans are hoping for but the mobilization in Plaza Bolivar yesterday demonstrated ongoing support for the government even through economic hardships.