Punto Fijo, December 20th, 2012 (Venezuelanalysis.com) – Venezuela added more than 800,000 people to the rolls of the state welfare system during 2012, according to a statement by government officials on Thursday. However, the continuous expansion in state spending has led some to predict a need for economic adjustments in 2013.
Almost BsF. 8 billion (US$ 1.8 billion) were invested in two new government welfare programs this year, with the purpose of expanding the number of people eligible for certain benefits. Officials expect to spend at least this much again next year on the programs.
Inaugurated in December 2011, the new programs are “Amor Mayor” (Love of the Older Generation), an initiative that seeks to aid low-income senior citizens who do not already receive a state pension, and “Hijos de Venezuela” (Venezuela’s children), which provides social benefits to low-income, single-parent families with younger children or disabled dependents.
Between the two programs, a total of 839,818 people received the new benefits in 2012, with 516,126 new senior citizen pensioners, and 323,692 single-parent households.
The total number of people benefitting from the new welfare programs with all household members included comes to more than 1.3 million people, all of whom must be considered to be among the poorest sectors to qualify, according to government officials.
“Not everyone that registered for the program was living in extreme poverty. They are poor, but not among the extreme poor, the poorest of the poor, so we have to be careful,” said Yadira Córdova, representative for social programs in the executive cabinet.
Since the programs are meant to target the poorest members of Venezuelan society, officials must verify the situation of the recipients before approving them for the program.
“We make house visits to verify their housing conditions, their living conditions, and the possible sources of income that the family may have,” said Córdova.
Venezuela’s state pension system has grown exponentially over the last decade under President Hugo Chávez, one of the many reasons for a significant decline in poverty in recent years.
When Chávez was elected in 1998, there were only 387,000 on the state pension rolls, and protests were common due to delays and missed payments.
Today, the number of pensioners reaches nearly 2.5 million, an increase of over 600 percent in total pensions paid by the state, all of which are indexed to the national minimum wage.
However, not everyone sees such an expansion in state spending so positively. Opposition politicians criticized the social spending in the 2013 budget when it was debated on the floor of the National Assembly last October, and private sector analysts warn of growing fiscal deficits.
Critics claim that ever increasing spending on the part of the government is not sustainable, and that adjustments will have to be made in 2013, including a devaluation of the currency, something they claim will cause a spike in inflation and a reduction in growth.
“It does not seem feasible to expect the economy to be able to grow by 6 percent with 12 percent inflation like the government plans,” said several Venezuelan economists from the Central University of Venezuela (UCV) in a report this week.
“Quite the opposite, in light of the expected fiscal and monetary adjustment, the economy should be expected to slow down significantly, and the inflation rate will be higher than in 2012, reaching 25 percent,” they said.
Critics have been pointing to an inevitable cut in spending since before the October presidential elections, but claim that the decision has been put off by the Chavez administration. They argue that adjustments will be inevitable in the coming year.
“We are going to be worse off, and that translates into social malaise, protests, and political difficulties,” wrote opposition pundit Teodoro Petkoff in a column this week.
However, more favourable analysts say that the fiscal deficit is not as high as claimed by opposition sources, and that economic adjustments in the coming year will not need to be as severe as some have suggested.
“It is not clear why a budget deficit would force the government to devalue the currency. After all, the government is mostly borrowing and spending in domestic currency, not dollars,” said Mark Weisbrot of the Center for Economic and Policy Research in a recent article.
Government officials have not ruled out a devaluation of the currency in 2013, but typically do not say when a devaluation will be carried out.