Mérida, March 18th 2009 (Venezuelanalysis.com)- In response to speculation in the private media that the decline in oil prices will force Venezuela to make severe revisions to its national budget this year, Venezuelan President Hugo Chávez reiterated his administration's commitment to maintain current levels of social spending and construct a "socialist" economy to overcome the global economic crisis.
"For us, social spending is sacred. We have maintained the level of social spending so far this year, and we will continue maintaining it," said Chávez during a meeting of his council of ministers. "I want the whole country to know this, beyond the speculation, the psychological warfare, and the bourgeois media campaigns."
In Venezuela's 2009 national budget, a total of 83 billion bolivars ($38.6 billion) are allotted to social programs, which amounts to more than 10% of the estimated GDP, said Chávez. This spending includes the construction of six new hospitals, which is underway, and the construction of nine more hospitals in the future, he said.
The president's assurance came in response to a recent report in the Venezuelan daily El Nacional that the Venezuelan economy is headed for a crisis similar to that of the late 1980s, and that the Chávez administration is preparing severe budgetary cutbacks of the magnitude of a "classic economic package of the [International Monetary Fund] IMF."
On Tuesday, Chávez said the policies of his government contrast starkly with those of past Venezuelan presidents and the IMF. "We are constructing a socialist economy," he said.
Chávez explained that the IMF typically recommends de-regulating prices, freezing the minimum wage, and privatizing state-run sectors of the economy. The Venezuelan government, in contrast, continues to regulate prices and sanction or nationalize businesses that do not comply. Also, it increased the minimum wage last year, and has nationalized or purchased the majority share of strategic industries such as electricity, cement, oil, telecommunications, and steel.
Venezuela's national budget for this year is based on a $60 barrel of oil, and the price of oil hovered in the $30 per barrel range over the past month. The government says its $42 billion in foreign currency reserves and joint development funds with China and Russia will protect it from this deficit, but it has also taken steps to cut government costs in ways that do not affect social spending.
The state oil company PDVSA announced earlier this month that it will cut back its contracting of services by 40%, and Chávez recently consolidated his cabinet of ministers. Also, last Sunday Chávez mentioned the possibility of a moderate increase in the regulated price of gasoline in Venezuela, which is heavily subsidized.
Meanwhile, oil has rallied to its highest price in two months in New York stock markets. The basket of the Organization of Petroleum Exporting Countries (OPEC), of which Venezuela is a member, now hovers around $45 per barrel.
In spite of speculations to the contrary, OPEC decided not to carry out a new reduction in supply earlier this week, saying the 4.2 million barrel per day reduction OPEC has applied since last October is sufficient.
Venezuelan Energy and Petroleum Minister Rafael Ramírez said Venezuela has complied with 80% of its share of the OPEC supply reductions. He also announced Tuesday that Venezuela's proven crude oil reserves have increased to 172.3 billion barrels, ranking Venezuela second only to Saudi Arabia.
Published on Mar 19th 2009 at 11.46am
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