Mérida, February 26th 2009 (Venezuelanalysis.com) — Venezuelan Finance Minister Alí Rodríguez announced Wednesday that Venezuela is in a strong position to weather the global financial crisis for at least three years if oil prices remain at their current level, and that Venezuela will propose a new reduction in oil production at a meeting of the Organization of Petroleum Exporting Countries (OPEC) next month.
"In comparison with other countries, Venezuela is in much better conditions to confront the crisis, although this does not mean that we are unaffected by the crisis," said Rodríguez in a televised interview. "We can sustain the economy for three more years without great sacrifices."
Rodríguez said Venezuela's bi-national investment funds with China and Iran, its $42 billion in international reserves, and the $57 billion already earmarked for projects through its National Development Fund will help the country sustain its growth in coming years.
Regarding the viability of the government's extensive public works and social programs, Rodríguez said, "The socialist policies of the national economy do not depend on the price of oil or if the country has a lot or a little income."
Venezuelan President Hugo Chávez has also asserted that Venezuela will make the necessary adjustments in order to maintain its commitment to social programming even if the price of oil drops further.
Possible adjustments that are being considered are a devaluation of Venezuela's currency and an increase in domestic gasoline prices. Since 2003, Venezuela has kept a pegged exchange rate and exchange controls on its currency to cheapen imports and prevent capital flight, and subsidized domestic gasoline to stimulate the economy and keep oil accessible to all Venezuelans.
However, changes to these policies must be considered with great caution, said Rodríguez. "If we decide to devalue, automatically imports get more expensive, at a time when we still have high levels of inflation," the minister explained.
Rodríguez said a key component of the government's economic policy in coming years will be to increase national food production. He said the private sector is "necessary" for this endeavor, and that "it would be good to develop a dialogue" with private businesses that are willing to accept the "social character" of the government's economic policies.
Venezuela's greatest vulnerability will be volatile oil prices, which peaked at close to $150 per barrel last July but have averaged $36 this year and recently rose above $40, said Rodríguez. Oil accounts for more than 90% of Venezuela's exports, and the government's 2009 budget is based on an estimated $60 average price per barrel of oil.
To stabilize the price of oil, Venezuela will propose an OPEC supply reduction, Rodríguez affirmed. "In the next meeting of OPEC, jointly with other countries and in accordance with what the supply monitoring committee reports, Venezuela will propose new cuts if necessary," he said.
Since the onset of the global financial crisis with the collapse of U.S. mortgage firms last year, OPEC has cut back its supply twice, by 1.5 million barrels per day last October and 2.2 million barrels per day in January.
Minister Rodríguez is one of the Venezuelan Left's main oil industry experts, having served on the oil issues committee in congress before Chávez's election in 1999, and as Minister of Energy and Mining, OPEC President, and president of the state oil company PDVSA under the Chávez administration.