Faced with an economy in which purchasing power is falling, the Venezuelan government will provide a credit card to workers holding a payroll account in Banco de Venezuela, a state-owned bank.

Workers will get low-interest credit to purchase goods that can be paid within 24 months at "biceabastos," a state-run food distribution network that sells basic food basket products. President Hugo Chávez named the card "good living card."

It is understandable that the government has to take measures to relieve pressure on household budget. Prices are increasing at breakneck speed and in the first seven months of the year, the price of staples -which represent the bulk of products that can be purchased at state-run grocery stores, increased by 24.9 percent. This has had a significant impact on low-income strata.

In real terms, in April-June this year, the purchasing power of private sector workers, after inflation, has declined by 6.3 percent on average, compared to the second quarter of 2009. Meanwhile, the purchasing power of public workers has dropped 10.5 percent. Most of them hold a payroll account at Banco de Venezuela and will be given the "good living card."

The National Statistics Institute (INE) said that at the end of June the cost of the regulatory food basket, which measures the amount of money a five-people household requires to afford basic food on a monthly basis amounted to VEB 1,298.76 (USD 302 at the official exchange rate of VEB 4.30 per US dollar). Meanwhile, the minimum wage is USD 284.63.

Therefore, the amount required to afford food for a five-people household is higher than the minimum wage. In fact, the Central Bank of Venezuela (BCV) has reported that in the first half, private consumption fell 4 percent.

Domingo Maza Zavala, former director of the BCV, thinks that credits to buy food will become a subsidy, "because nobody will pay them." Maza Zavala said that the "good living card" does not come straight to the point.

"The government alone can not beat inflation, and much less becoming the most important provider of food," the economist said.
vsalmeron@eluniversal.com

Translated by Gerardo Cárdenas