Chavez Announces New Economic Initiatives for Venezuela

President Chavez made several important economic announcements that aim to raise production in strategic sectors of the economy and encourage private business owners to get involved in the economic development of the country.
Venezuelan President Hugo Chavez urged private business owners to take part in the economic development of the country. (ABN/Marcos Colina)

June 13, 2008 (– Venezuelan President Hugo Chavez made several important economic announcements at an event in Caracas Wednesday night. In the presence of various Venezuelan business leaders, the president announced economic initiatives that aim to raise production in strategic sectors of the economy and encourage private business owners to get involved in the economic development of the country.

Chavez called on Venezuelan business leaders to make a “strategic national productive alliance” with the government in order to raise national production and reduce inflation. The event, called “Productive Re-advance: Investment is Venezuela”, was held in Caracas with more than 500 of the country’s most influential business leaders and televised on all the major TV channels.

As a part of a series of economic changes in order to spur the industrialization of the country, Chavez announced plans to create a fund to invest in strategic sectors of the economy.  The fund will have a total of US$ 1 billion, half of which will come from the Venezuelan development fund FONDEN, and the other half from the Chinese Strategic Fund, a joint investment fund set up between the governments of Venezuela and China.

The strategic sectors that President Chavez named for investment are: food production, agro-industry, manufacturing, petrochemicals, machinery, energy production, and public works for housing and urban development. Chavez called on the private sector to team up with the government and invest in joint projects with the state in these areas.

“Start preparing projects,” he said to the business leaders. “The conditions will be very easy and flexible.”

Chavez said the Central Planning Committee will be in charge of receiving proposals from the private sector and directing the programs. The planning committee hopes to have some joint projects to present to the country in the next couple of weeks.  Although the financing will be strictly for the installation and initiation of joint projects between the state and the private sector, Chavez said the conditions will be very flexible in order to get the projects off the ground.

“I want this fund to motivate business owners, from the biggest ones to the smallest ones, so that they will become partners with us. Come together and build important companies, and make alliances with the state,” he said.

In addition to joint projects with the private sector, President Chavez also announced new advances in the government’s industrial program “Fabrica Adentro” (Inside the Factory), a program that has worked with thousands of Venezuelan firms.

“In these companies the workers have joined in with some business leaders, they have transferred shares to the workers, have received financing, and they have brought in technology,” Chavez explained.

President Chavez also commented on the advance of the second phase of the program, which consists of the creation of over 200 socialist factories by the end of 2009, all of which will belong exclusively to the state.

“But there will also be a third phase,” said Chavez. “In this phase we’ll open the doors to joint projects between the private sector and the state.”

The Venezuelan president also tried to motivate the private sector by making it easier to import raw materials and capital goods such as machinery and parts. He announced changes in the currency controls that will make it easier for Venezuelan firms to import these goods.
He also announced the elimination of the tax on financial transactions. Chavez said the tax was slowing down the productive process, and was no longer needed.

“We don’t need it any longer, thanks to the tax on oil,” he said, in reference to the recent increase in taxes on oil profits. “This year we aren’t planning on any more taxes,” he assured.

Chavez also announced plans to continue raising agricultural production in the country. In recent years, the agricultural policies have managed to raise production of key goods such as corn, soy, rice, beef, and others, but President Chavez announced additional measures to increase production.

“We are going to increase the agricultural subsidies,” he said. “To give more solidity and security to the farmers, and continue increasing national production.”

The agricultural polices, called “Plan Harvest”, have been designated 76 million bolivars (US$ 35 million) and include increased subsidies for corn, rice, sorghum, and coffee, price guarantees for sunflower and soy crops, and debt relief for small farmers, among others.

“We hope to get a good response, a serious commitment to the country,” said Chavez to those who will benefit from these policies.

Chavez went on to discuss the current economic situation of the country, and summarized the following investments that are being made in 2008:

•    Agriculture: 116 projects with an investment of Bs.F 1.3 billion (US$ 605 million)
•    Housing: 1,001 projects with an investment of Bs.F. 8.8 billion (US$ 4 billion)
•    Infrastructure: 85 big projects with an investment of Bs.F. 6.9 billion (US$ 3.2 billion)
•    Healthcare: Bs.F. 1.5 billion (US$ 700 million)
•    Education: 125 projects with an investment of Bs.F. 557 million (US$ 270 million)
•    Energy and Oil: 94 projects, Bs.F. 36.9 billion (US$ 17 billion)
•    Total: Bs.F. 1,743 projects with an investment of Bs.F. 56 billion (US$ 26 billion)

Chavez stated that the nation’s total oil income this year would reach US$ 75 billion, a number that is double Venezuela’s total external debt.

“Add it all up so you can see how strong our economy is. There are countries whose external debt equals 5 years of their GDP.  Not us. Just with our oil income we could, if we wanted, but we won’t of course, pay all of our external debt in one year,” he said.

He went on to assure business leaders that the Venezuelan economy is not in a crisis:

“There are people who get confused and think that Venezuela is sinking, but that’s completely wrong. Now is when Venezuela is beginning to walk, as Mao Zedong said, on its own two feet.”