Zero hour to the revolution
The Venezuelan government will start a new term with debts that amount to USD 232 billion and eight million citizens awaiting the government's help, whereas 47 labor sectors in trouble go for their concessions
By following Cuban President Fidel Castro's advice, Venezuelan President Hugo Chávez has concluded that "it is not affordable to give Venezuelan resources away out of frivolity; there is the need to maintain sustainability." He said so to his ministers last October 26 during a Council of Ministers, in which new resources were granted contradictorily- to maintain Mercal, a social food network, and other emblematic welfare programs developed by the revolution.
After the election, the Government will start a new term with a debt which amounts to USD 232.5 billion and eight million Venezuelans who wait for the promises -offered to them during the election campaign- to be kept.
The issue, however, is where to get the money from as resources are more and more constricted, and, at the same time, to take the Socialist Plan 2013-2019 to the next level, which maintains on track thanks to oil income, with a loss-making budget and after an electoral year when Venezuela's government has virtually pushed the boat out.
Labor sectors with expired contracts, jobless, homeless looking for housing, welfare programs recipients, communal councils and regions delayed their hopes and goals by awaiting President Chávez's reelection. During the election campaign the candidate-president asked for patience; he offered to improve governance and even gave his word to labor sectors like Guayana's, which in the midst of the election campaign pushed around so that their expired conventions were acknowledged, and therefore be assisted after the elections.
The management inefficiency, acknowledged by Hugo Chávez, as well as a policy of control and expropriations that has deteriorated the country production system, play against both the goals held by a wide population which seeks a benefit in return and the desire of a government, which consists of incorporating a commune system mainly based on public expenditure.
The public debt amounts to USD 93.58 billion, whereas the Chinese fund reached USD 32 billion and the debt owed by oil holding Petróleos de Venezuela (Pdvsa) amounts to USD 43 billion. Add to this due payment of pensions worth USD 14 billion and foreign requirements at USD 50 billion.
Where to get resources from
Economist José Guerra indicates that Hugo Chávez's victory in the 2012 presidential election with 55% of the votes will be taken as a conferred power to keep on developing his socialist state-based project, just as we have been experiencing it so far.
It appears that there will be an escalation of seizures. The government seeks to enlarge its share in the economy, a policy intended to take room from the private sector. The question is: which of those sectors will the government use at its convenience?
Record in expense
In 2012, the Government broke the historical record of public expenditure in Venezuela. It is estimated that it could have reached up to 50% of the GDP (Gross Domestic Product). "This is a huge number because Chávez got it at 26% when he took over," economist José Guerra maintains. What raises concern regarding this expense is that there is no way whatsoever to finance it; therefore, the government needs to get into debt.
The government is currently facing a dilemma: if by any chance, it reduces the expense, such action may lead to a recession in Venezuela's economy, which seems to be the most probable outcome.
Guerra explains that such expense basically relies on two sources: the Central Bank of Venezuela (BCV), as it has become the financier of the tax deficit, and the finance market. In view of the exchange control, bolivars are stuck in sort of corralito (bank freeze). If the currency exchange was not restricted, people would not have bolivars but US dollars; however, they cannot do it. The government takes advantage of such tie and issues bonds which are bought by banks. For their part, banks purchase those bonds by using the deposits made by citizens.
Thus, liquidity is present there. The government counts on those two sources: the BCV and the public liquidity in order to fund itself with the finance corralito that exists in the country. Sure enough, such mechanism will cause the domestic debt to continue to increase, if the government keeps the current expense rate.
Total expense in 2012 is estimated to end up at USD 122.79 billion, versus the initial budget at USD 69.25 billion. According to think tank Ecoanalítica, the additional credits will end up at USD 53.69 billion.
Issues in the labor field
The national coordinator of the UNT (National Union of Workers), Marcela Máspero, foresees hard times in the labor field by 2013. She maintains that the budget recently presented made no provision for collective bargaining agreements in the Public Administration. A vast amount of expired contracts is not included in the budget.
Máspero points to 10,000 orders of rehiring in the public sector that have not been observed.This makes us think that, in case that no radical change and efficiency are exercised by the government and the organizations, there will be no possibility of peace in the labor field by 2013.
Translated by Adrián Valera Villani
President Nicolás Maduro is not only the heir to the throne, but also to an economic crisis which demanded urgent measures to rectify the course. The crisis showed up in two aspects: a 50% inflation estimate, and shortage of staples ranging between 70% and 98%. These issues might hit the President's poor popularity; considering his feeble electoral victory of 1% over his challenger.