Caracas, March 9, 2022 (venezuelanalysis.com) – The Nicolás Maduro government decreed a near twentyfold salary hike.
In a public forum with trade unions on March 3, the Venezuelan president announced that the minimum wage would be set at half a Petro, some 126 bolivars (BsD) which amount to US $29 at the present exchange rate.
The new figure represents a significant increase over the previous one of 7 BsD (roughly $1.6). The government is reportedly weighing raising public employee food bonuses o 45 BsD ($10.4). They are currently set at 3 BsD.
Pensions and regular government bonuses, such as support for large households, will be updated with a similar factor.
In his speech, Maduro called the new wages an effort to “salarize” Venezuelans’ income. Under a severe economic crisis and crippling US sanctions, the government has turned to ad hoc bonuses via the digital Homeland platform to complement earnings. By restoring formal salaries, workers recover benefits such as social security contributions.
“Wages have been our deepest wound,” Maduro said. “But we have a plan to recover salaries, all salary scales, as well as establish new collective bargaining agreements.” Memorandum 2792 eliminated bargaining rights in October 2018. Specific groups such as oil workers have recently struck new collective agreements, with Maduro stating others would follow.
The Venezuelan leader added that with oil revenues increasing, wages would continue to recover and could soon be set at one or two Petros. The Petro was originally conceived as a cryptocurrency but serves mostly as an accounting unit for government spending. It has a stable value around $60.
The hiked income remains far from covering living costs in Venezuela, with estimates for the monthly food basket at over $350. Public sector workers have largely migrated to the private sector or abroad, or in other cases picked up second jobs or relied on remittances from relatives.
However, the roughly $30 a month wage is the highest since August 2018. At the time, the government rolled out a package of economic reforms, including a monetary reconversion as well as tax and exchange control reforms.
But with the measures largely failing to stabilize the economy, authorities gradually adopted a more liberal path which featured the removal of forex controls, tax breaks on imports and increased private capital participation in state assets.
The government likewise moved to phase out subsidies in certain services and fuel supply.
Coupled with tightened spending and heavily depressed wages, the policies managed to bring currency devaluation and inflation under control. According to the country’s Central Bank, inflation registered 2.9 percent in February, the lowest monthly figure since February 2014. The Caribbean nation has likewise had six straight months of single-digit inflation, the longest period since the first half of 2015.
The tamed inflationary spiral and increased oil revenues were considered the main reasons that saw Venezuela register GDP growth for the first time in seven years in 2021. According to government sources, the country’s economy grew by 4 percent last year, with growth forecasts as high as 8 percent for 2022.
Venezuelan economist Luis Salas told Venezuelanalysis that “it is more accurate to talk about economic stabilization rather than recovery.”
Salas, who briefly served as economy vice president, recalled that the Venezuelan GDP has contracted by more than 70 percent and that going back to past levels will be a long-term process.
“The sustainability of the economy’s growth is also uncertain because of the number of factors at play, some of them international like US-led sanctions,” he added. Washington’s unilateral coercive measures have targeted the oil industry and other sectors and have been described as “collective punishment.”
Nevertheless, the improved outlook has seen the Maduro government reintroduce some controls. Measures have included bringing back customs tariffs for nearly 600 products as well as a new law to tax foreign currency transactions that has drawn complaints from private sector guilds.
While policymakers have vowed to boost the bolivar amidst a de facto dollarization, Salas claimed the prospect remains unlikely with restricted amounts of bolivars in circulation.
“The dilemma is that by having more bolivars there will be pressure on the exchange rate which in turn undermines the anti-inflationary targets,” he explained. “You cannot have it both ways.”