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Venezuelan Opposition Economic Plan to Roll Back Public Services Revealed

Barinas, August 23 2012 (Venezuelanalysis.com) – An internal document has been leaked to Venezuelan press revealing the economic policy of Venezuela's political opposition, the Roundtable of Democratic Unity (MUD), should they win the presidential elections in October. The plan includes the deregulation of banks, opening up the economy to private investment and the reduction of state funding for public services and communal council projects.

MUD candidate Henrique Capriles Radonski is standing against two-time incumbent President Hugo Chavez, with voting set for 7 October.

Referring to the current global financial crisis, the MUD document states that it would be unable to maintain the current social spending levels of the Chavez administration and predicts a decrease in the demand for oil from countries such as China and the USA – Venezuela’s largest trading partner.

The opposition document states that based on current spending levels, the government’s public sector deficit as a proportion of GDP (gross domestic product) will be 8% in 2013. The document classifies this figure as potentially dangerous in the event of a global economic downturn and states that the MUD would aim to reduce this figure to 3-4%.

In order to respond to the “crisis” caused by a potential decrease in the global demand for oil, the opposition says that it would take “concrete steps to decrease, in the medium and long term, the heavy load of goods and services” provided by the current government in a bid to reduce its social spending budget and in turn the public deficit.

Other steps to decrease the government budget for social spending would include the decentralisation of the provision of social services to municipal governments, who the MUD argues would make services “more efficient”.

The government’s social missions, including the Barrio Adentro health program and the children’s educational centers knows as “Simoncitos,” would also be transferred over to municipal government. Health and education missions, including the maintenance of school and hospital infrastructure and the provision of food, would be opened up to “private initiative”.

Charges for some of these services would also be implemented in a “controlled” manner, an action that the opposition argues would allow the new government to reduce the financial burden on the state.

This process of decentralisation would reverse actions carried out by the Chavez government to put the administration of services under the control of central government. The government argues that it has done this in order to minimise the possibility of corruption and to ensure that access to health and education is universal, regardless of geographical location or local government politics.

Ex-governor of Anzoátegui state, David de Lima, was one of those who received a copy of the document.

In comments to Venezuelan television on Wednesday, the political independent said “there are two discourses [in the Capriles campaign], there is the economic discourse that’s used to get votes, and the real one, that aims to place the economic policy of the country back in the hands of the  two or three sectors that always controlled it”.  

Other areas that would be affected by the opposition's proposed cutbacks are food, housing and transport. The document states that a governing MUD administration would put an end to current government subsidies on housing built as part of the Great Housing Mission, although those already receiving the subsidised housing benefit would not be affected by the measures.  

Subsidised food sold through the government´s MERCAL scheme would be provided and delivered by private companies, whilst funding available to communal councils for the construction and renovation of housing would also be “gradually reduced”.

Overall, the opposition states that it would aim to decrease the amount of government food subsidies by 60% over the next 3 years or potentially sooner.

Equally, subsidised transport would be eliminated. The price of travel on the Metro in Caracas, Valencia, the Ferrocaril del Tuy and Maracaibo would be raised by 5% every 4 months, at least until the service is able to meet its running costs. According to the document, the same policy would also be applied to other forms of transport such as buses, where children under 4 and adults over 65 can currently travel for free.

Current government policies, such as universal access to social security, would be rolled back. Social security for old age pensioners, currently pegged to the national minimum wage and tending to increase each year, would be frozen from 2013.

Likewise, the new government would retract the current government policy which allows old age pensioners to access social security regardless of whether they have paid their social security contributions in full.

All expropriated land and property would be returned to their previous owners within a maximum of 2 years.

Energy, Oil and Mining Policy

Whilst there are few details relating to the opposition's proposed oil and mining policy, the document states that the MUD would create a new framework for these areas which would no longer be based on a “nationalist ideology”. The subsidised provision of electricity would also be cut and opened up to the private sector, and electricity rates would be raised.  

At the end of the document, the MUD states that it will release a separate document outlining its new oil policy.

Banking and Price Controls

The document, titled First Ideas of Economic Actions to Take by the National Unity Government (2013), strongly criticises the current government for its “excessive regulation” of banks and interest rates, as well as a policy which requires banks to designate a certain amount of their profits to social programs.

The opposition argue that current regulation, which states that 25% of a bank’s profits must go towards agricultural projects, 15% towards housing, 3% to micro-businesses, 10% towards manufacturing activities and 2.5% towards investment in national tourism, adversely affects the profitability of banks and their ability to allocate credit to “profitable activities”.

MUD policy recommends the immediate establishment of a “Committee for Banking Sector Reform” in order to begin the process of eliminating the banks’ obligatory social contributions, with the possible exception of regulations on mortgages, which would be made more flexible.

The government’s price control measures, implemented in 2011 in order to combat the adverse effects of inflation and hoarding are described as “absurd” in the document, which states that the measures produce “fear and anxiety in the productive private sector”. All price control mechanisms would be eliminated within a year.

Finally, the plan says that it would consider using the power of presidential decree in order to “dismantle the socialised and collectivised state model that has been created by the so-called revolution”.

Private bankers and members of Venezuela’s business association, FEDECAMARAS, will be invited to the next MUD meeting to discuss the party’s potential economic policy further.

The document can be read in full in Spanish here.

Published on Aug 24th 2012 at 10.57am