Economy
In its 2008 economic report released on Wednesday, the Central Bank of Venezuela (BCV) admits that price increases reduce the purchasing power of workers' salaries.

"As a result of the acceleration of inflation, salaries in Venezuela showed, in real terms, the first fall since 2004, by experiencing an average year-to-year decrease of 4.8 percent," the BCV said,

The negative impact is strongly felt in the private sector, where the average purchasing power of workers declined 5.9 percent in 2008, while in the public sector the reduction of purchasing power has amounted to 2.6 percent.

It is unlikely that the erosion of salaries can be stopped this year. The Minister of Finance, Alí Rodrìguez, has said that according to his estimates the inflation rate will end the year at about 28 percent, which is very similar to the level registered in 2008 (30.95 percent).

Although the accumulated inflation until May this year has increased only by 8.9 percent, thanks to the loss of momentum in consumption and a decline in the price of imported foodstuffs, which is lower than the 12.4 percent increase registered in the same period of 2008, all indicators show that prices will gain momentum and, once again, they will leave behind salary increases.

Analysts consider that a key element is that due to the fall of petrodollars, the Venezuelan government has less foreign exchange available and a growing number of companies are using the unofficial market to buy foreign exchange; as a result, the wholesale prices of the imported products have climbed 15.7 percent in the first five months of the year, the biggest jump ever since 2003, when the oil strike disrupted Venezuelan economy.

Victor Salmeron
EL UNIVERSAL