[News] Chávez Sweeps Away Budget Predictions of Venezuela's Opposition
Anti-Imperialist News
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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
http://www.venezuelanalysis.com/analysis/4314
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.
Inflation
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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