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Opinion and Analysis: Economy | Oil and Gas

Venezuelan Voices, Part II: An Inflammatory Question

As Venezuelan president Nicolas Maduro combats corruption, reassigns half of ministry positions, launches “a new stage of the revolution,” and even hints at a minimum wage increase for November, the question remains what economic steps will be taken to reverse the high inflation that critics are quick to associate with his leadership.

In Venezuelan Voices, Part I, we looked at causes for the current economic strife, the following is a look at a recently proposed solution.

Gasoline in Venezuela has been sold at the fixed price of 0.09 bolivars per liter since 1997, despite numerous currency devaluations and even a refurbished monetary system since that time. At this point, with the amount of money it takes to fill the tank of a large SUV, about 5 bolivars, you cannot buy even the smallest bottle of water; with the small change it takes to fill a four-door sedan, you might get a single piece of hard candy at a checkout counter, and motorcyclists sometimes fill up for free.

After Maduro mentioned a possible increase in gasoline prices last month, social media went into disarray and an official debate was quickly organized by prominent Caracas newspaper Ultimas Noticias to highlight leading expert’s opinions on the subject.

Below venezuelanalysis.com has translated brief articles by two occasional contributors to news site and online forum aporrea.org, in the interest of sharing the trending positions within the revolutionary left.

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A Question of Dignity
Henry Ramirez- Aporrea.org

To adjust the price of energy, particularly gasoline, is question of strategy for the country… One could even say of dignity. It hurts the soul to see firsthand the disaster brought on by mafias kindled by the practically symbolic price this natural resource is given away for. Nobody needs telling in Zulia [border state with Colombia] what contraband looks like and the chaos it causes. To make matters worse, it makes us look likes fools to the international community. In the last few days, Maduro has begun the debate surrounding a possible increase in gasoline prices. It’s decades behind [the economy’s progression], to the point where it’s unbelievable what little can be bought with the money it takes to fill a tank. Additionally, it represents the looting of a nonrenewable natural resource, the disparaging of our way of life on the border, and a quickly diminishing public treasury from the money not coming in [subsidy]. The price has stimulated irrational and wasteful usage, equally harmful to the environment. These are among thousands of reasons to raise energy costs.

The debate has been opened and almost everyone agrees in the necessity of a raise, including the most hard-line opposition followers. Only from a certain sector of the opposition is there a complaint that the commercial agreements by which the State sells petrol to Caribbean and Central American countries should be revised before raising the cost for Venezuelan citizens. Even while calling those treaties handouts, in private they recognize that the national price increase is inevitable, in fact, they’d be happy to apply it themselves were they in power.

Those trade agreements are part of a long tradition of international cooperation which began in the mid seventies. At that time the First Program for the Financial Cooperation of Central America and the Caribbean was signed during a summit of those implied chiefs of state in Puerto Ordaz. This was the precedent for the San Jose accord, signed with Mexico in 1980 and ratified annually until the present, mediating the administration of hydrocarbons to countries in those regions within financially preferential conditions. It was not an invention of Chavez, although he maximized its potential within the framework of dignified foreign policy, and respect and solidarity with those countries we share geography, culture, and strategic interests.

All of the PETROCARIBE contracts were made within the framework of the San Jose accord. As it is written, “additional to the benefits established in the San Jose accord and the Energy Cooperation Accord of Caracas, the Bolivarian Republic will extend special terms for those least developed Caribbean countries, based upon the quotas that will be bilaterally established…”

The terms handout and give-away more aptly describes how the territorial and historical rights of the nation were concealed during [previous] administration of the land’s resources. The politics of sovereignty truthfully rescued the [country] from the 40% discount that Citgo used to enjoy, and on most gasoline and derivatives that the United States bought. Additionally, we recuperated the national right to subsoil, charging 33% for access instead of the 1% of previous accords- in order to invest that money into social development.

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An Inflammatory Question
Freddy J. Melo

At this time, the discussion has been opened in regards to the opportunity and conveniences of raising the price of gasoline, a question that should be treated with the caution one reserves for flammable produce, in this case perhaps more inflammable politically than in its physical form.

Nobody doubts the proposal’s convenience, considering the enormous negative balance between the cost of production and price of sale jumps out absurdly to all of us. There is an immense and continuous loss that the country must redeem.

Within this opportunity are hidden demons. Those who call for this immediate change have succeeding in aligning the masses, making a show of those wild comparisons (e.g. bottled water more expensive than gasoline!) and offering visions of satisfactory outcomes, to the point that yawning an different opinion is to go swiftly against the current.

Nevertheless, I feel watchful of these demons, and choose to throw myself against the current, though I recognize the weakness of my stroke.

I think the increase in gasoline prices in our current condition will generate overwhelming inflation. The impact it will have on the transportation of goods, as well as passenger travel…will be a chain reaction, and if today’s [price] regulations are so easily laughed off, how will it be then. The price of bottled water does not influence the greater [economy], but gasoline certainly does. No matter the additional income, substantial though it may be, it will not be able to compensate the damage the people will feel. And those politicos [the opposition’s] demagogy will find a good playing field.

It is necessary to prepare those conditions that could make this decision viable and politically correct. I think, and I share these thoughts with many steadfast comrades with whom I’ve discussed the issue, that the following measures be adopted, and opposition to such should be confronted in turn;

Reprogram for extended diesel usage, installing the necessary service network, and ensuring all commercial and public transport, leaving gasoline just for individual automobiles; increase and improve public transportation services including auto, train, sea and air transport; reestablish a blackout day and prohibit daytime circulation of commercial trucks in cities; and have the governmental and community support needed to administrate these changes. Additionally, it is of equal necessity that we accelerate the advancing our our productive capacity.

We cannot run the risk of overpowering inflation, which will feed eventually off of any changes of the official exchange rate (which could be equally inopportune), plus possible [price] increases in the electrical sector. This will sway large sectors of the population who, until now, have been loyal to the revolution, driving them directly into the arms of the opposition. What isn’t possible?
Why then have certain oppositional parties change their position, though they’d always been in favor of the increase, if not to prepare their demagogic blow acting as the champions of a people overwhelmed by outrageous inflation?

What is not opportune, in not revolutionary in any right. Prepare the path then, and only then, can a fair price of combustible be levied, once released from its political inflammability.

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Introduction and translations by Z.C. Dutka for venezuelanalysis.com.

The articles in their orginal form may be found at the following links;

Una Cuestion Inflamable, Freddy J. Melo

Sincerar el Precio de la Gasolina es una Cuestion de Dignidad Nacional, Henry Ramirez