Written by UST Venezuela
Saturday, 30 November 2013 03:10
Dollars and profits for business owners, high prices and low wages for workers.
It is mostly in the economic field that Nicolas Maduro’s government has taken the measures constantly required by the rightist opposition and corporate sectors, causing devastating consequences for workers.
The inflation – a serious problem
The economic situation has not been that easy, because, first of all we have to deal with an inflation rate that had already accumulated in the first nine months of the year an increase of 38.7% and in the last twelve months, 49.4%. All of this isclearly shown in the extremely high prices of basic needs such as beef, chicken, pasta, corn flour, rice, eggs, among others. Not to mention clothing, medical services, recreation, the construction materials and home appliances.
The current minimum wage that most Venezuelan workers receive is not enough to buy a staples food, which exceeds US$ 1,272, while the announced wage increase as from November 1st, with which the minimum wage would reach US$ $ 472 is ridiculous towards the cost of the afore mentioned staples food. The high inflation rates also erode the salary raises achieved in labor collective bargaining agreements, even further if those agreements already overdue. It is estimated that the inflation will reach 50% by the end of this year.
The government loosens controls and frees up prices, but the shortage continues
The easing of controls on prices of certain products and the release of others, measures required by business owners and granted by the government, were not useful for solving the shortage problem, on the contrary, the latter has remained at an overall average of 21%. For products such as toilet paper, the shortage reaches 70%. A notorious example is the corn flour, which has vanished even after Maduro’s meeting with Lorenzo Mendoza, of Polar Foods Company, and granted him the price rise. It has been proved that the employer’s argument to justify the shortage due to the controls on prices is totally false, and, at first no businessmen respect such controls and set prices according to their own will, and secondly the government does not compel them to comply with price controls.
Hunger for dollars and the devaluation
Other short legs lie used by the business owners to ‘justify’ the shortage is the lack of foreign currency to import goods or raw materials to produce in the country. The truth is that this is nothing but blackmail against the government so that it frees up more dollars and the business owners can increase their profits with speculative business.
However, in face of these pressures, the government responds by providing more foreign currency to speculators. Only for the period from January to July this year the Central Bank of Venezuela approved the issuance of US$ 20.3 billion, a figure that represents an increase of 0.6% compared to the amount authorized for the same period in 2012.
Up to February 2013, the SITME [1] System (Securities Transactions in Foreign Currency), allocated US$ 180 million weekly, currently the SICAD (Foreign Currency Administration Ancillary System) auctions off weekly US$ 100 million, 97 million of which are directed to private companies and 3 million to individuals, additionally the CADIVI [2] (Commission for the Administration of Currency Exchange) has allocated US$ 33 million until the end of the year. These allocations had the participation of companies from the food sector and 392 companies from the automotive and rubber sectors, 132 from metallurgical sectors, 136 from paper manufacturers and products for graphic arts purposes, as well as chemical sectors for paints, 71 from chemical sector, 7 from the export sector and 25 from the commercial sector.
It is clear that the lack of dollars is not part of the reasons for shortages, but what causes the shortage is mainly the drop in production and the ravenous appetite of the bourgeoisie to take ownership of the largest possible part of the oil revenue through speculative arrangements. However, the measures announced by the government in face of this situation is to grant more concessions to the corporate community, such as the announcement of the Finance Minister Nelson Merentes, to implement a third system of foreign currency allocation, where the price would be set by the exchange offices according to the availability of foreign exchange in the market. In other words, it is a new devaluation, with their respective effects of increase in the price index to the consumer.
Economic crisis and anti-worker measures
In general, despite the high oil prices (although it has been falling for several weeks), the Venezuelan economy is slumping, the GDP growth was a meager 2.6%, sectors such as construction, transport and communications fell 6% and 0.9%, respectively.
Although the manufacturing sector has experienced a growth of 5.7% this is a very small sector and contributes very little to the overall GDP. Another aspect in deficit is the foreign reserves which currently amount to US$ 21.5 billion, several million below the optimal level set by the Venezuelan Central Bank of US$ 25 billion.
In short, the measures such as the ones adopted by the government, i.e., depreciation, increased money issues, elimination of requirements for access to foreign currency exchange and implementation of new fiscal systems; easing of controls, releases of prices and small salaries raises; measures demanded and applauded by the business community and the rightist opposition (they only complain that the measures are insufficient to satisfy their interests and businesses) will help neither to bring the country out of the economic debacle nor to meet the workers needs. Rather, they are deeply anti-workers and unpopular and will keep workers as victims of capitalist greed, will decrease investment in health, education, housing, state-owned basic industries.
[1] The SITME is a system administered and controlled by the Central Bank of Venezuela (BCV) through which government securities are bought and sold in bolivars, denominated in foreign exchange.
[2] Is the Venezuelan government body which administers legal currency exchange in Venezuela.