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<h1><font size=4><b>Chávez Sweeps Away Budget Predictions of Venezuela's
Opposition</b></font></h1><font size=3>March 24th 2009, by Arturo Rosales
- Axis of Logic <br>
<a href="http://www.venezuelanalysis.com/analysis/4314" eudora="autourl">
http://www.venezuelanalysis.com/analysis/4314<br><br>
</a>The so called "economic adjustment package" announced by
President Chávez on Saturday was predicted by the opposition media to
look something like this:
<ul>
<li>Devaluation of the local currency, the Bolivar by some 40%
<li>A 400% increase in the price of gasoline
<li>28% tax on the purchase of new vehicles
<li>25% increase in gas and electricity prices
<li>Freezing of the minimum wage
<li>Cutting social programs
<li>Reintroduction of the tax on all bank transactions
<li>An increase of 10% in VAT (purchase tax) taking it up to 19%
</ul><br>
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. <br><br>
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. <br><br>
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.
<br><br>
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. <br><br>
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". <br><br>
President Chávez introduced the following measures as a mantle of
protection against the collapsing global economy:<br><br>
<ol>
<li><b>Budget: </b>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).
<li>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.
<li><b>Increase in taxes: </b>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%.
<li><b>Increased government borrowing:</b> Government borrowing in 2009
will be increased from 12 billion bolivares to 34 billion.
<li>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.
<li><b>Cuts in government spending: </b>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.
<li>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:
<li><i>"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."</i><b><br>
<br>
Priority to Social Programs:</b> 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.
<li><b>Increase in Minimum Wage:</b> 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.
<li><b>No reduction in dollars for Venezuelans:</b> 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.
</ol><br>
<b><u>Opposition predictions laid to rest</u></b> <br><br>
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. <br><br>
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. <br><br>
<b>Inflation</b> <br><br>
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. <br><br>
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. <br><br>
<b>Chávez Administration Vindicated:</b> 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. <br><br>
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.
<br><br>
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.
<br><br>
<b>© Copyright 2009 by AxisofLogic.com</b> <br><br>
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