Venezuelan finance minister: Law is to lower luxury consumption

While the Central Bank of Venezuela (BCV) predicted that the likely enactment of the Organic Law on Emoluments, Pensions and Retirement of Senior Government Officials will lead to "unwanted macroeconomic and social effects" similar to those resulting from the application of a "fiscal adjustment program," Minister of Planning and Finance Jorge Giordani believes that it will boost the economy.

Minister Giordani thinks that setting a ceiling of 12 minimum wages on the salary earned by the highest government officials and the possibility that the rest of public employees' salaries can be adjusted based on that ceiling "will lead to a downward trend in savings by top government employees earning more than 10 minimum wages. As a result, luxury consumption will decline."

Giordani also predicted that there would be less pressure on the foreign exchange market.

In its report, Giordani said that if the law is implemented in Venezuela's public administration, it will lead to a 16.1% reduction in the income of workers. However, the BCV said in a report that the income of workers would drop 21.7% and this would result in a 10.1% reduction in public spending, which would lead to a 1.5% decrease in Venezuela's GDP.

jalonso@eluniversal.com