It should be noted that the words of the four trade unionists quoted in the last section of this article — Vilma Vivas, Stalin Pérez Borges, Ismael Hernández, and José Meléndez — are all part of the statement of Marea Socialista (mentioned but once in the article), so they should not be regarded simply as “Labor Reactions” as James Suggett of Venezuela Analysis put it. It would be more accurate to see their words as a reaction of just one Trotskyist labor current in Venezuela. — Ed.
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After officially devaluing the national currency last Friday, the Venezuelan government announced a series of measures to increase the country’s exports, substitute its imports, boost electricity production, and combat price speculation, as purchasing frenzies sprung up in several major cities on Monday. However, union leaders have reacted with concern to the devaluation and recommended wage increases.
From 2003 until now, the government had maintained a fixed exchange rate of 2.15 bolivars to the dollar and established tight regulations on the government-issued dollar supply in order to control capital flight.
Now, the government will exchange dollars at different rates depending on the product that is to be imported. For essential products such as foods, health care supplies, and machinery needed to boost national production, the rate will be 2.6 bolivars to the dollar. For non-essential products such as automobiles, telecommunications, chemicals, appliances, textiles, services, tobacco and alcohol, electronics, international travel, and remittances, the rate will be 4.3 bolivars to the dollar.
In a televised interview, Finance Minister Ali Rodriguez said the devaluation was necessary in order to “create a new economic order to give incentive to national production and steer away from dependence on imports . . . and move further and further away from oil dependence.”
In addition to the currency devaluation, the government announced the creation of three new investment funds; one that will triple the supply of dollars to non-oil exporters, a second that will direct $2 billion for new producers who can substitute imports, and a third to increase national electricity production and subsidize electricity rates for households that consume below 500 kilowatts.
Also, President Hugo Chavez announced that $7 billion will be transferred from Venezuela’s international currency reserves to the National Development Fund, which is the government’s principal fund for social investments in infrastructure, urban and rural development, and social programs such as free health care. The government will also transfer more funds to the Foundation for Training and Innovation to Support the Agrarian Revolution (CIARA) to stimulate urban and semi-urban agriculture, Chavez said.
In addition, Chavez reiterated his promise to maintain funding for his administration’s educational, health, and anti-poverty programs, a promise he originally made — and kept — at the start of the world financial crisis in late 2008.
SOURCE: Nelson J Merentes, “Mensaje de fin de año del Presidente del Banco central de Venezuela” [Year-end Message of the President of the Central Bank of Venezuela], 2009.
Rodriguez cited Venezuela’s $35.85 billion in international reserves, steady unemployment rate between 6% and 7%, and reduction in accumulated annual inflation from 30.9% in 2008 to 25.1% in 2009 as signs that the country is prepared to withstand the potential negative effects of the currency devaluation.
The minister contrasted the recent measures with a notorious currency devaluation which led to riots and financial collapse in 1983, saying that the past measures were enacted to cover the government’s budget deficit, whereas currently there is no budget deficit and there is a public investment plan to boost production.
“In our case the budget is sufficiently covered, and moreover, we have savings from the price of oil,” said Rodriguez, referring to the fact that the price of oil has consistently been higher than the government’s budget oil price estimate over the past nine months. “There are sufficient international currency reserves and funds to cover the importation of basic goods and those that the Venezuelan economy requires,” said Rodriguez.
Planning Minister Jorge Giordani said the dual exchange rate shows that “the government protects those who are weakest, it protects and will protect the Venezuelan people and the popular classes with investments, special attention, food, and health care, all with the dollar at 2.6 bolivars.”
Meanwhile, in some of Venezuela’s largest cities including the capital Caracas, consumers formed long lines outside of stores to buy non-essential items such as electronics and household appliances, the prices of which are expected to rise. Some stores closed their doors, presumably with the intention of marking up the prices on their inventory before re-opening.
During his Sunday talk show Alo, Presidente on Sunday, President Chavez ordered the National Guard, the tax and customs agency SENIAT, the Ministry for Trade, and the consumer protection institute, INDEPABIS, to launch an “offensive” against price speculators seeking to take advantage of the currency devaluation.
Chavez announced a new national hotline for consumers to report price speculation by businesses, and said the government will take custody of any businesses caught speculating.
“In this moment there is no reason to increase the price of anything. When there is a shortage of something, the government is the first to accept it, as we have done with some items [in the past],” said Chavez. “Nobody should let his or herself be robbed. Report the speculator and we will intervene in any business of any size.”
Trade Minister Eduardo Saman, who is also the former head of INDEPABIS, said the Ministry “will initiate an exhaustive process of inspection in which we will apply temporary closures to those who have marked up their prices.”
Minister Rodriguez recommended legal reform to strengthen INDEPABIS and “create mechanisms of intelligence” to control price speculation. The head of the Finance Committee of the National Assembly, Ricardo Sanguino, said legislators are willing to quickly carry out such a reform to the Law on Illicit Transactions or other laws, if necessary.
So far, the dollar has not seen significant price fluctuations on the parallel market, although traders and public officials have tried to guess whether the government’s measures will create enough incentive to obtain government-issued dollars to push the parallel price down, as the government hopes.
Several national labor leaders demanded that measures be taken to protect the working class from the negative effects of the currency devaluation.
“The workers hear a discourse that this measure will help with the development of production but in practice, what is happening is that we are already paying higher prices,” the regional coordinator of the National Union of Workers (UNETE) in Tachira, Vilma Vivas, commented.
The pro-revolution union current Marea Socialista, which is also a current within the United Socialist Party of Venezuela (PSUV) and is critical of the bureaucratic elements of the party, released a statement that said the devaluation of the bolivar has generated “enormous concern among the workers.”
“The first victim of this measure will be the working people, if the devaluation is not accompanied by measures that protect the quality of life and purchasing power of salaries,” said the statement, quoting Stalin Perez Borges, a coordinator of the UNETE from the Marea Socialista current.
Perez Borges recommended an immediate wage increase “similar in percentage to the devaluation,” more worker participation in the creation of the national development plan, a state monopoly on foreign commerce to replace the “bourgeoisie of importers,” and the complete nationalization of the financial sector.
He emphasized that it will take time for the country to end its dependence on imports and pointed out that, until now, the government has been unable to effectively control price speculation and inflation.
Ismael Hernández, a union leader from Carabobo, expressed skepticism as to whether corrupt bureaucrats would sabotage the process of punishing speculators and investing in new production. “The bureaucracy of the government itself often works in cahoots with the bourgeoisie, whether that is the Bolivarian bourgeoisie or the old oligarchy.”
Jose Melendez, leader of the steel workers union at Venezuela’s largest steel plant, made clear that “the workers and especially those in the heavy industries have given sufficient proof of our loyalty to the revolutionary process,” but he emphasized: “It is important that it remain absolutely clear that the capitalists must be the ones who pay for the crisis.”
This article was first published by Venezuelanalysis.com on 12 January 2010 under a Creative Commons license.