Venezuela to Continue With Anti-Inflationary Measures

Mérida, July 10, 2007 (venezuelanalysis.com)— The Venezuelan government will continue its anti-inflationary measures in the second half of 2007, according to statements by Finance Minister Rodrigo Cabezas yesterday. Cabezas said the results of government efforts to control inflation haven’t been totally satisfactory but that they will continue with the economic policies that have given Venezuela consistent growth in recent years and the lowest unemployment rate in 30 years.

Venezuela’s minister of finance appeared Sunday morning on the television program of former Vice-President José Vicente Rangel on the private television channel Televen to talk about various aspects of Venezuela’s national economy, including the details surrounding Venezuela’s entry into Mercosur.  

Speaking about the inflation rate in Venezuela, which closed at 17 percent in 2006, Cabezas admitted that "the results up to now are not totally satisfactory," but he assured that the government "is not going to give up" with its anti-inflationary policies.  

"We are going to reinforce the anti-inflationary plan in the second semester of this year," said Cabezas. "We have the conviction that this is the correct road in terms of economic policies that we need in order to try to overcome other elements of the national economy that we experienced for 25 years, and we cannot abandon it in the fight against inflation."  

The minister said that the measures that will be taken center on fiscal responsibility in the second semester of the year, but also in a series of actions to normalize the food supply. Increased agricultural production along with increased food imports will be used to meet national demand.  

"The center column of our effort, particularly since 2004, is to not lose the path of economic growth," explained Cabezas. "We are going to reinforce everything that has to do, in terms of the real economy, with the food supply."  

Cabezas recalled that agricultural production fell significantly at the end of last year, ending at around 64 thousand tons, but that current production is at 112 thousand tons. The goal is to reach 150 thousand tons per month, by increasing production as well as importing needed items. According to Cabezas, the government is working on increasing national production but will meet any shortages with imports.  

"We are going to import more and produce more because there is a whole program in the Ministry of Agriculture that is aiming for an increase in production. They are giving significant subsidies in several important products and we have decided to cover the part of demand that cannot be met by national production," the minister explained.  

The minister rejected the latest statements from the International Monetary Fund that recommend Venezuela to raise interest rates to nearly 40 percent and reduce public spending 20 percent. Instead, according to Cabezas, the Central Bank of Venezuela will launch new policies next week to soak up excess cash and to control inflation.  

"There will be some decisions to increase savings, which is already significant, because there are already more than 2 million new savings accounts in Venezuela in the last 12 months," explained Cabezas.  "But we are going to increase that aspect."  

The minister, however, assured that the government would not end the current fiscal policies and would not apply any economic policies that would be harmful to the Venezuelan population. 

"The fact is that we are not going to stop our efforts. We will not apply any economic policy that makes our people suffer again," he said, referring to structural adjustment policies applied in the late 1990’s. "From the fiscal point of view, we are going to continue to take measures that allow us not to have a policy of fiscal discipline, but of important fiscal responsibility," he explained.  

Cabezas applauded the current economic situation that has allowed for an unemployment rate that will reach 7 percent by the end of 2007, a rate that "hasn’t been achieved in around 30 years." He also announced that Venezuela’s external debt has been lowered to the "manageable" level of only 17% of the GDP.  

The economic situation "favors us because it permits us to regain investment in order to distribute it in a meaningful way," he explained, pointing out that the national development fund Fonden has invested nearly 13 billion dollars in the last two years in trains, ports, oil infrastructure, new bridges, housing, scientific technology, and medical centers.  

"We have a budget where 40 percent is social spending," stressed Cabezas. "But that is the commitment of a revolution with the poor, with the humble and forever excluded, and that is why we have advanced in other indicators that are important to us."