Venezuela: Anti-Crisis Measures without Devaluation or Higher Gas Prices: VAT Rises 3%, But Minimum Wage Rises 20%

No neoliberal package, to the disappointment of the Right!

President Chávez announced a series of “anti-crisis measures” to protect the country from the capitalist crisis, which are devoid of the typical neoliberal ingredients that the Right predicted.  The 2009 budget is revised based on $40 a barrel (previously it was based on $60).  Sumptuary expenses in the public sector will be eliminated, and the salaries of very high earners will be capped.

President Hugo Chávez announced on Saturday, in a simultaneous TV and radio broadcast, a set of measures, tactical formulas, and decisions that are being planned to address the crisis of world capitalism, which is sure to be one of the greatest crises in history.  He said: “The measures are designed to preserve jobs and the strength and stability of the country; they allow us to strengthen our economy and add to the strength we have gained, so we can continue to advance in the same direction.”


  • There will be no devaluation of the bolivar vis-à-vis the dollar.
  • No increase in the gasoline price, “even though the price of gasoline here is the lowest in the world.”  The president said that the price should be revised but this is not the time for that.  However, “we must accelerate the plan to use natural gas for vehicles, and we must lead by example,” Chávez told his ministers.  He asked the car owners to avoid waste.
  • There will be a 20% increase in the minimum wage in 2009: a 10% increase in May, and a 10% increase in September.  This will also affect the Madres del Barrio and the elderly (IVSS [Social Security] recipients), directly benefiting 2,631,643 people.
  • The VAT will be increased by 3 percentage points, from 9% to 12%.  He said that Argentina, Denmark, France, Spain, Portugal, and other countries are levying a VAT of 15, 20, or 25%.  “Our VAT, if not the lowest, is close to that.”  The president reminded the audience that the government reduced the VAT by 5% when the oil revenue was high and that now it is rising again, but not to previous figures.
  • Revision of the budget based on the oil price of $40 a barrel.  The president stated that the crisis didn’t affect Venezuela directly, “but indirectly through the oil prices.”  He recalled that the 2009 budget was planned on the basis of the price of $60 a barrel at a time when crude oil exceeded $100 a barrel, indicating that the budget will be redrafted on the basis of $40 a barrel.  The budget ends up with a 6.7% decline from 167.474 billion strong boilvars to 156.388 billion strong bolivars, saving about 11 billion strong bolivars.  A proposal to reform the Budget Act for Fiscal Year 2009 was developed.  The reform also adjusts the volume of oil production to 3.172 million barrels per day, implementing the cuts agreed upon by the OPEC, which Chávez says “have averted a disaster.”  There are actually three bills to be sent to the National Assembly for discussion and approval, including one document that spells out the changes in the budget, and another that defines the parameters of the budget revision.
  • Strict implementation of public spending.
  • Elimination of sumptuary expenses such as acquisition of executive vehicles, remodeling, furnishings, new offices, unnecessary PR and communications, corporate gifts, technological platform upgrades, unnecessary foreign missions, and entertainment.  “All these things must be eliminated,” and a presidential decree will be drawn up and signed in the coming hours.  “I sometimes see advertisements in newspapers, sometimes in the pages of the bourgeois newspapers,” Chávez said, recalling Alberto Nolia’s criticism of full-page multicolor notices in newspapers like El Universal and El Nacional.  The president said that in many ministries and public entities it is customary to divide up the unspent excess budget at the year’s end, distributing it as bonuses in addition to the Christmas bonuses, and he said that this has to stop.  For example, he explained that some employees at the Miraflores presidential palace were upset because they wanted a year-end bonus worth 4 months’ wages, in addition to the Christmas bonus of 3 months’ wages.
  • The domestic debt will increase in the 2009 budget.  Currently 12 billion strong bolivars, it will increase by additional 22 billion strong bolivars, rising to 34 billion strong bolivars.  It will be borrowed internally, i.e. through bonds or credits from the Venezuelan banks or public.  Earlier, Chávez emphasized the low level of indebtedness of the country, pointing out that its external debt is 9.3% of the GDP and its internal debt is 4.3%.
  • The maximum levels on the total compensations of employees of the central government and of the state enterprises will be established.  Adjustments will be made only at the senior levels of the employee payroll, and the president emphasized that only those employees earning very high salaries will see the adjustments.
  • The president called for the highest representatives of the (judicial, legislative, civic, and electoral) branches of the government to review their salaries and wages, suggesting that he cannot force them to lower their salaries.  “It seems that they went too far there,” he said, pointing out that some of them earn 15,000 strong bolivars or more.  He urged the mayors and governors to do the same and also be careful about hiring advisers who want the highest salaries.
  • Simplification of the structures of some organizations, and mergers of organizations, where possible, throughout the entire structure.
  • Centralization of the treasury of the public financial institutions.
  • Strengthening of the public banking system.  The president reminded the audience that the Bank of Venezuela will be nationalized.
  • Prioritization of the investment of development funds in strategic sectors such as agriculture.  Over the next four years, 100 billion dollars will be allocated to public investment in the real economy, and 125 billion to the oil industry.  In the first quarter of 2009, in the FONDEN alone, 5.502 billion dollars have already been approved. “This is only from the National Economy Fund, not including what’s in the budget”; nor does it include additional credits or the Chinese fund.

Among other matters, the president announced that a collective bargaining agreement was reached with the Metro de Caracas workers.

Background of the Crisis

The president began by recalling the explosion of the capitalist crisis last year, since the 14th of September when the financial giant Lehman Brothers filed for bankruptcy.  “In Venezuela, no one has felt a direct impact of the crisis.  That doesn’t mean that we won’t feel it in the future.”

The president described the conditions of unemployment in the United States as chaotic, recalling that in that country 650,000 jobs were lost each month during the last three months.  In contrast, unemployment fell in Venezuela, and about 273,000 people have been added to the labor markets.

The president also reminded the audience that “tent cities” are springing up in the United States, as thousands of Americans, who were evicted from their homes due to their inability to pay mortgages, now have to live in tents on the outskirts of cities (see “Crisis económica: ‘Ciudades Carpas” surgen en los EEUU” [Economic Crisis: “Tent Cities” Spring Up in the United States] and “Nickelsville: Cientos de personas sin casa viven en carpas y buscan nuevo hogar” [Nickelsville: Hundreds of Homeless People Live in Tent Cities, Seeking New Homes], as well as cases of people living in their cars in the United States).

The president recommended Atilio Borón’s article “De la guerra infinita a la crisis infinita” [From the Endless War to the Endless Crisis], from which he cited an excerpt:

First, remember and apply the classic axioms of Leninism (don’t be afraid, Chávez interjected) which recommended, in conjunctures like this, intensifying the efforts to organize and to raise the political consciousness of the people’s camp.  The victims of the current situation span a wide spectrum in the universe of the exploited and dominated classes, and they are precisely those social groups who were atomized, disorganized, and fragmented by the neoliberal policies of the last thirty years.  The social, political, and ideological reconstitution of the people’s camp is, therefore, an urgent imperative today.  Regarding the matter of ideology, that means convincing the public that there is no solution to the current crisis within capitalism, only palliatives.  Only a socialist alternative can offer the fundamental solution.  And emphasize what the Russian revolutionary said: the only weapon on which the proletariat can count is its organization.

The president also read excerpts from Joseph Stiglitz’s article “How to Fail to Recover.”

They Tried to Damage Venezuela’s Banking System with the Complicity of Bankers

Chávez said that a variety of economists and private media have claimed that his government would dictate neoliberal measures.  The president pointed out that they were seeking to sow panic among the population.  “They have even wanted to cause bank runs,” he said.  The president said: “We will not protect any banker if a banking problem happens as a result of these maneuvers. . . .  I won’t defend bankers.”  “Tell the truth, Mr. Bankers.  Mr. Escotet.  Tell the truth: your friends are provoking these troubles,” Chávez said.

The president ended by thanking the Council of Ministers and called upon all Venezuelans to make the greatest possible effort to implement these anti-crisis measures.  He also recommended that Venezuelans watch the World Baseball Classic game between Venezuela and Korea.

The original article “Medidas sin devaluación y sin aumento de gasolina: IVA sube 3% pero sueldo mínimo sube 20%” was published by YVKE Mundial on 21 March 2009.  Translation by Yoshie Furuhashi (@yoshiefuruhashi | yoshie.furuhashi [at]