Pays de Gex, France, December 3, 2018 (venezuelanalysis.com) – Venezuelan President Nicolas Maduro announced Thursday a series of economic measures after his government’s Economic Recovery Plan completed its first 100 days.
During a live televised address, Maduro explained that the reforms introduced in August, which included a monetary reconversion, an exchange rate devaluation, pegging the currency to the Petro cryptocurrency, and a massive salary increase, were in need of a “correction factor.”
The minimum wage was raised by 150 per cent, from 1,800 to 4,500 BsS, while other bonus and subsidies, such as the Homes of the Homeland (Hogares de la Patria) and the Chamba Juvenil youth employment program, were adjusted by the same factor.
“This announcement should immediately be reflected in all salary tables,” he added.
The wage and bonus increases came alongside a currency devaluation. Rather than announce the raises on their own, the Venezuelan head of state framed them as an adjustment of the exchange rate between the Petro and the Sovereign Bolivar (BsS), from 1:3,600 to 1:9,000. The exchange rate between the Petro and the US dollar, set by the price of oil and other commodities, is at around 1 Ptr to US $60, which would put the US dollar at roughly 150 BsS. The exchange rate in the government’s DICOM auctions of foreign currency devalued from 96 to 172 BsS on Friday, after the announcements. The parallel market exchange rate markers currently hover around 500 BsS.
The Venezuelan president conceded that his government has failed to deter what he termed the “criminal dollar” black market, which Maduro singled out as the main factor driving hyperinflation. Nevertheless, he stressed that the new economic measures had managed to slow down hyperinflation and that 2019 would bring more stability.
Other announcements had to do with the holiday season, with a one-time bonus of 2,000 BsS made available on December 1st. Additionally, pensioners will be given a third month of Christmas bonus, that they can choose whether to receive in Bolivars or in Petros.
Finally, Maduro announced that the ingredients for traditional Venezuelan festive foods, pernil (roasted pork) and hallacas (a Venezuelan version of the tamale), had been guaranteed in advance and would be made available through the Local Supply and Production Committees (CLAPs) in the coming days. He added that 15 million toys for children are also to be distributed, and that 35 million items of clothing and shoes would be distributed via communal councils and other community markets.
Updated fixed prices
Maduro also offered an update on fixed prices of basic staples. After meetings with private businessmen in the food and personal hygiene sectors, new agreements had been reached, he announced.
“New fixed prices have been agreed. I ask that the people enforce them! I ask that businessmen respect them!” the head of state urged.
Maduro, who is due to start his second term on January 10, 2019, added that the government will continue to pay the salaries of private sector and self-employed workers. This measure had been introduced for the first three months after the August economic measures, but the Venezuelan government has opted to extend them so that “there is no excuse” for price hikes.
Venezuela’s vice president for economic affairs, Tareck El Aissami, elaborated on these latest announcements in a press conference the following day. He stressed that the prices had been agreed with 52 private companies and that there would be severe penalties for any businesses that did not respect them.
Additionally, El Aissami told press that 21 slaughterhouses were being intervened for 180 days after irregular practices in meat distribution had been detected.
The new fixed prices of 21 food and 8 hygiene items were published Monday in the Official Gazette (see image below). Compared to the prices that had been set after the August economic announcements, there is an average increase of 595% in food items and 217% in personal hygiene ones.
Venezuelan economist and former economy czar Luis Salas, director of the website 15yÚltimo, told Venezuelanalysis that he did not expect the new fixed prices to hold.
“In a hyperinflationary context, in principle you cannot keep 30 or 50 prices fixed while everything else is going up every day or every other day,” he said.
Salas added that prices will not be stabilized as long as exchange rate volatility persists. In addition, he contended that most of the private actors involved in the negotiations, are openly against the government and are thereby unlikely to honor any agreements reached.
“The government does not exert any kind of real authority over producers and retailers; therefore the cost of not obeying these prices is next to nothing. There are no sanctions and the government continues to subsidize the private sector,” he concluded.