Tightening the screws

President Hugo Chavez said on 15 March that he will announce his regime’s economic adjustment measures as soon as this week.

While not providing any details, he repeated the post-15 February referendum mantra that “everyone must make sacrifices.”

Chavez also hinted the adjustment measures could include the first increase in gasoline/diesel prices in over 13 years, and higher rates for telecommunications, electricity and other public services.

It’s difficult to imagine that Chavez might consider applying orthodox economic adjustment measures.

His decade-long regime has always pushed for more controls, restrictions and state intervention/expropriation of every productive activity which catches the president’s eye.

Since the 15 February referendum Chavez has launched a new wave of expropriations focused for now on large agribusiness and food, targeting groups like Polar and Cargill, among others.

Chavez this week also ordered the military seizure of the ports of Maracaibo (Zulia), Puerto Cabello (Carabobo), and El Guamache (Nueva Esparta); states which, not coincidentally, have opposition governors. The intention is clear:

Chavez has cut off central government funds to these states, and now will strangle the port revenues the states were earning. He also has issued orders to the military to arrest any governor who tries to interfere.

The regime’s goal is to maximize fiscal revenues and halt the hemorrhage of dollars out of Venezuela by taxing the private sector more aggressively.

Will Chavez reduce the size of the state? Not likely. But he will refuse to pay the public sector’s workers past-due debts and will seek to behead the organized labor movement, possibly targeting some union leaders for neutralization.

Over 100 labor activists have been murdered in Bolivar state in recent years as parallel chavista unions struggled with the unions which have long existed in the CVG’s basic industries, for control of the labor movement in these industries.

Consumers also will get hammered. Cadivi foreign exchange for Internet purchases and international trips will be curtailed sharply or even suspended. Students abroad who depend on Cadivi foreign exchange are also likely screwed.

Venezuelans should expect growing shortages of everything over the coming year, because Venezuela imports practically everything it consumes. The country’s imports topped $50 billion in 2008, but Central Bank’s foreign exchange reserves total about $29 billion.

Foreign Minister Ali Rodriguez Araque (aka Jester) says the Chavez regime has $57 billion stahed in Fonden plus $8 billion in Chinese “contributions” (ie loans payable in oil) to the joint Venezuela-China infrastructure fund. However, Jester isn’t being truthful. At best, there could be about $12 billion.

The regime is now re-drafting its 2009 budget with an average oil price of $40-45/bl, or $15-20/bl less than the average oil price of $60/bl on which the original budget was based.

Chavez has pledged repeatedly that the revolution’s momentum will not ease. No social or infrastructure spending plans will be cut back in 2009, he said as recently as 15 March. But Chavez also is being untruthful, as he usually is.

Venezuela’s economy likely will contract between 5-10% in 2009. Inflation will range between 50-70% depending on how soon and how deeply the BsF is devalued. The black market exchange rate probably will be close to BsF10 per dollar by end-2009.

How will Venezuela’s populace react? Hard to say, but Chavez definitely has a major political headache on his hands.

About 68% of the public sector’s workers – over 1.1 million – have no collective contracts at present.

These workers, including over 35,000 in the power industry and over 60,000 in the oil and gas industries, have warned of conflicts in coming weeks if the regime continues to reject all union entreaties for serious negotiations.

Will there be strikes?

Again, hard to say, but the workers want more money and the Chavez regime has no money, hence it’s difficult to visualize a middle ground where both sides might achieve a consensus which avoids disruptive strikes, particularly in the power sector.


About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
This entry was posted in Uncategorized. Bookmark the permalink.

One Response to Tightening the screws

  1. Charly says:

    Maybe like in the old USSR, Chavez will pretend he will pay the workers who in turn will pretend they work. So much for XXI century socialism that looks like XX century SOS (same old sh*t) with a pinch of Bonapartism.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s