[News] Chávez Sweeps Away Budget Predictions of Venezuela's Opposition

Anti-Imperialist News news at freedomarchives.org
Tue Mar 24 18:07:27 EDT 2009

Chávez Sweeps Away Budget Predictions of Venezuela's Opposition

March 24th 2009, by Arturo Rosales - Axis of Logic

The so called "economic adjustment package" 
announced by President Chávez on Saturday was 
predicted by the opposition media to look something like this:
    * Devaluation of the local currency, the Bolivar by some 40%
    * A 400% increase in the price of gasoline
    * 28% tax on the purchase of new vehicles
    * 25% increase in gas and electricity prices
    * Freezing of the minimum wage
    * Cutting social programs
    * Reintroduction of the tax on all bank transactions
    * An increase of 10% in VAT (purchase tax) taking it up to 19%

In other words, the opposition predicted a 
traditional neoliberal package of measures 
designed to shore up government coffers and stop 
the country "falling off the cliff" at the 
expense of the public. Not surprisingly, the 
measures they predicted would have followed a capitalist model.

In Venezuela the word "package" harkens back to 
the 1989 economic package imposed by the then 
Pérez government on February 27th of that year 
which sparked countrywide riots and looting and 
almost overthrew the regime. Thousands were 
slaughtered in the streets as the Pérez 
government used fully armed troops to quell the 
rioting and protect the sacred cow of private property.

The opposition was hoping for something similar 
to take place and get rid of the president they 
love to hate. Their visceral, anti-government, 
private media campaign, predicting economic 
"crisis" and "catastrophe", began after the fall 
in the oil price began in July 2008. They have 
demonstrated time and again their willingness to 
destroy their own country in order to regain control of whatever remains.

It also has to be said that the economists based 
in the opposition camp can think no further than 
neoliberal, market based policies when 
considering the above list. It is all they know 
and they have never learned to think outside their capitalist box.

All the predictions by the opposition and the 
media arm were swept away in the one hour 
broadcast when a self-assured Chávez addressed 
the nation on Saturday. He pointed the finger at 
capitalism and neoliberalism as the cause of the 
world's economic woes and asked President Obama 
to join him on the "socialist path".

President Chávez introduced the following 
measures as a mantle of protection against the collapsing global economy:

    * Budget: The 2009 national budget in 
Venezuela will be cut by 6.7% from approximately 
167 billion bolivares to 156 billion (US$77.7 billion to US$72.6 billion).
    * The original budget was based on an oil 
price of $60/barrel when the price of oil was 
well over US$100/barrel last year. This newly 
adjusted budget will be based on average of 
US$40/barrel for 2009. This is far more feasible 
within the current economic context of global recession/depression.
    * Increase in taxes: To make up the projected 
shortfall of approximately US$17 billion in oil 
revenues Chávez is raising the VAT (value added tax/sales tax) from 9% to 12%.
    * Increased government borrowing: Government 
borrowing in 2009 will be increased from 12 billion bolivares to 34 billion.
    * It is important to note that the total 
Venezuela debt represents only 13.6% of GDP. 
Compare this to the U.S. national debt which 
represents 70%+ of GDP. Borrowing a further 22 
billion bolivares (about US$10 billion) is 
perfectly manageable and sound economic policy. 
The remaining US$7 billion shortfall will come from the 3% increase in VAT.
    * Cuts in government spending: The recent 
bailout packages in the U.S. left $billions in 
the pockets of the corporate thieves who stole 
the U.S. economy and hundreds of millions more in 
the electoral "war chests" of politicians who 
support the the bailouts for future re-election campaigns.
    * President Chávez is doing the opposite. He 
is eliminating certain "luxury spending" by the 
government. Please note that in scale and 
purpose, this "luxury spending" cannot compare 
with the continuing waste of taxpayer funds by 
many corrupt politicians in Washington. On 
Saturday, President Chávez explained this cost-cutting measure:
    * "We are preparing a decree to eliminate 
luxury costs - the acquiring of executive 
vehicles, redecorating, real estate, new 
headquarters, promotional material and unnecessary publicity, corporate gifts."

    Priority to Social Programs: Ever since the 
price of oil began dropping last year, big 
government media hammers from the NYT and BBC to 
the opposition media here in Venezuela have been 
pounding away at their forecasts that Chavez' 
would have to cut social spending, thus losing 
his electoral base among the poor. It was wishful 
thinking on their part. Besides reducing 
unnecessary "luxury" expenditure in all 
ministries, the new policy gives priority to all 
social programs which remain unaffected by these 
reforms and the reduction in the national budget. 
For a socialist oriented economy, social programs 
are an absolute priority. Laughably, the lame 
response of the opposition is that Chávez is 
"buying votes" with social programs. It's a 
throwaway answer. Making it a human right and 
constitutional guarantee for every citizen to 
have basic foods, a decent education and housing 
and quality health care is not "buying votes". 
Rather, it is an economy in which the government 
is giving the people what they demand in exchange for their vote.
    * Increase in Minimum Wage: Chávez also 
announced a 20% increase in the minimum wage to 
be awarded in two tranches of 10% - May 1st and 
September 1st. He also confirmed the 
nationalization of the Banco de Venezuela - 
Santander Group from Spain, at a price reflecting 
the new economic reality, so as to strengthen the 
government's banking network.
    * No reduction in dollars for Venezuelans: 
Venezuela limits the numbers of dollars available 
to its citizens who travel abroad or make 
internet purchases. This limit is designed to 
curtail capital flight. In his address to the 
nation, Chávez did not mention further reduction 
in dollars to the general public. Prior to 
Chávez' address to the nation, on their TV shows 
and print media, the opposition had been 
predicting that the government would reduce these 
dollar amounts, hoping to whip up the ire of the middle classes.

Opposition predictions laid to rest

The list of predictions by opposition economists, 
who have got virtually nothing right in economic 
terms since 2002, was left in its rightful place 
in the wastebasket of media fiction.

All the talk about a terminal crisis in the 
Venezuelan economy were laid to rest along with 
these predictions and just after the president's 
address, the two economists interviewed by 
Globovision were lost for words. They are still 
incapable of thinking "outside of the box" and 
will likely continue espousing the "free market 
mantra" which has virtually doomed the capitalist 
system, or at least put it on hold for the next couple of decades.


In nearly every report on the Venezuelan economy, 
the capitalist media in the U.S. and Europe have 
made 2 factors the centerpiece of their dire 
predictions of a collapsed Venezuelan economy and 
thus, the ouster of President Chávez: (1) the 
drop in the price of oil and (2) "runaway 
inflation". Inflation is the main concern for the 
foreseeable future in Venezuela. Elevated 
inflation has always been the first cousin of 
booming economies like that of Venezuela. It is a 
problem that does not go away until those 
economies settle down and measures are taken to 
control rising prices. Gradually, the Venezuelan 
economy will reach equilibrium and certain 
measures will be taken by the government. For 
example, a clampdown on price manipulation by 
hoarders of food and speculators can be expected 
in 2009. Hopefully some of the perpetrators will 
be jailed as an example to others.

If these measures prove to be insufficient - 
which is highly unlikely unless the oil price 
falls below US$30/barrel for many months - Chávez 
still has a box replete with tools he can use to 
generate more revenue and cut more costs, if necessary.

Chávez Administration Vindicated: Chávez and his 
ministers have been totally vindicated by their 
economic policies since 2003, after day-to-day 
attacks by "experts" who continue to believe in 
the totally discredited US system. These policies 
kept the Venezuelan economy at a safe distance 
from the excesses and greed of the commercial 
banks, insurance companies and Wall Street crooks 
which triggered the collapse of the financial system.

Politically, this is another triumph for Chávez 
which comes just after his successful referendum 
campaign to remove the constricting, undemocratic 
term limits on all elected officials on February 15th.

As usual, constructive criticism has degenerated 
into insults by opposition commentators and 
politicians. Will they never learn from their 
mistakes? Given their record, they are more 
likely to continue digging their hole deeper, 
rather than climbing out of it to face and accept 
new realities. But the Bolivarian Revolution 
continues to grow in it's depth and breadth among 
the majority of the people in Venezuela.

© Copyright 2009 by AxisofLogic.com

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