Mérida, March 24th 2009 (Venezuelanalysis.com) – On Monday, the governing United Socialist Party of Venezuela (PSUV) declared its full support for the revised budget that President Hugo Chávez announced last Saturday. The Communist Party of Venezuela (PCV) said the measures will fulfill their purpose of helping Venezuela cope with the decline in oil prices brought by the world financial crisis, but are “insufficient” to construct an alternative to capitalism.
PSUV Vice President and former Venezuelan Finance Minister Rodrigo Cabezas said the measures contrast with the economic policy recommendations of the International Monetary Fund (IMF), which Venezuelan presidents implemented during the decades before Chávez was elected in 1999.
“The IMF packages were aimed at preserving capital, and the measures that the Venezuelan government has implemented are aimed at preserving the purchasing power of the workers,” said Cabezas, after meeting with the minister of planning and development, Jorge Giordani, to discuss the changes.
“The measures preserve the social element as the basis of the revolution for the Venezuelan people,” said Cabezas, highlighting that spending on social programs known as “missions” was kept intact, as Chávez had promised.
Cabezas also echoed Chávez’s demand that top government functionaries lower their salaries and bonuses and eliminate unnecessary spending in their institutional budgets. “We ask government functionaries to bring dignity to the policy of austerity toward which we are all oriented, and which cannot be purely rhetoric; it must be put into practice,” said Cabezas.
Currently, top officials in some state institutions, including the National Electoral Council (CNE) and the state oil company PDVSA, are reported to have monthly incomes of between 30,000 bolivars ($14,000) and 60,000 bolivars ($27,900), while the minimum wage in Venezuela, one of the highest in Latin America, is slightly more than 800 bolivars ($372) per month.
This week, legislators in the National Assembly revived discussions of a proposed law that would limit the income of top government functionaries to twelve times the minimum wage, a maximum of 9,600 bolivars ($4,465) per month at the present time.
In a press conference Monday, the general secretary of the PCV, Oscar Figuera, also reiterated the urgent need to put a cap on executive salaries in public institutions, and criticized the National Assembly for its “lack of political will” to pass income limits, which were first proposed in 2006.
Figuera praised the package of budgetary adjustments that Chávez announced Saturday, highlighting the 20% increase in the minimum wage and the decision not to increase the domestic price of gasoline or devalue the Venezuelan currency.
However, Figuera said the changes are “insufficient.” He pointed out that the sales tax, which was raised by 3%, “is a regressive tax that affects principally the popular sectors.”
Instead, the government should eliminate the sales tax, make income taxes more progressive, and maximize taxes on speculative profits, said Figuera.
Also, the government should nationalize Venezuela’s entire banking and financial sector and create a socialist council of workers to participate in the management of all nationalized companies, said Figuera.
Figuera concluded that the government must “take advantage of the crisis of the capitalist system of production in order to vindicate a proposal that breaks away from the known models of organization of the state and society, not just administer the crisis.”
Meanwhile, the conservative party COPEI said the government is “mortgaging the future” by tripling its domestic debt. COPEI President Luis Ignacio Planas also accused the Chávez administration of “letting itself be governed by the Cubans.”
In contrast, the fifty year-old Bankers Association of Venezuela (ABV) approved of the measures. ABV President Victor Vargas called the whole package of economic adjustments “not only opportune, but necessary to prevent the effects of the international financial crisis on our economy.” Vargas assured that private banks are prepared to finance the state without reducing loans to the private sector.
The president of the powerful confederation of private business associations known as FEDECAMARAS, José Manuel González, said the government’s measures should have included more investment in the private sector and legal guarantees to attract foreign direct investment. González also said the government should reduce its international aid and investment, including regional economic blocs in which Venezuela trades subsidized oil for goods and services.
In rebuttal Tuesday, Minister Giordani said the government will continue its investment in strategic productive sectors, including energy, construction, and agriculture. The government took control of the majority share of oil exploitation in the Orinoco Oil Belt in 2007, nationalized most of the cement industry in 2008, and now plans to focus its agricultural investment in the creation of state and community-run agrarian communes.
“We have clear objectives: social inclusion and defense of employment,” said Giordani, noting that the government has created important international investment funds with several countries including China, Russia, and the members of the Venezuela-led ALBA trade bloc.
The economic measures announced Saturday aim to reduce budgetary allocations in 2009 by 6.7% compared to the original budget that was approved by the National Assembly in January. The new budget is based on an estimated average price of $40 per barrel of oil this year, down from the original estimate of $60 per barrel of oil.
On Monday, the average price of oil from the Organization of Petroleum Exporting Countries (OPEC), of which Venezuela is a member, rose from $48.70 per barrel to $50.10 per barrel.