Venezuelan private sector's purchase power 26% down compared to 1998

Venezuelan private sector's workers get higher wages than 14 years ago, before President Hugo Chávez took office. However, their purchasing power has plummeted.

Considering the wages index prepared by the Central Bank of Venezuela (BCV) and soaring prices, the purchasing power of the private sector's workers has dropped 26%, between the first quarter of 1998 and the same period of 2012. The private sector employs 8 out of 10 workers in Venezuela.

Under Chávez's Government, Venezuela has been hit by skyrocketing inflation, which triples the average inflation recorded by the remaining Latin American countries and exceeds wages. Nonetheless, this is not the only cause for this decline in purchasing power.

The ability to increase productivity is the main factor in fostering wealth in the long-term. However, productivity in Venezuela has dramatically stagnated amidst declining investment. An academic research by economist Miguel Angel Santos shows that the current productivity rate is the same as in 1966.

Despite the reduction in the purchasing power, consumption has not fallen over the last 14 years thanks to booming oil revenues. Recent statistics by the BCV reveal that household consumption of good and services at the end of 2011 was 81% higher than in 1998.

However, consumption has somewhat slipped over the last few years, for example, household consumption in 2011 recorded a 1.8% fall in comparison with 2008, when the highest peak in 15 years was recorded. This electoral year, an increase in consumption is expected, but not at the same pace as in 2006, in the last presidential election, when a 15 percent rise was recorded.

Translated by Andreína Trujillo