The “Fedecamaras” (Federation of Entrepreneurial Chambers) understands that the economic plan announced by the president Hugo Chávez underestimated the crisis. The entity promises to present its own plan in the next 30 days.

For the entity’s president, José González, the effects of the world-wide economical crisis in Venezuela can only be solved by increasing the internal production. In its agreement, the measures announced by Chavez not only do they not solve the problems caused by the crisis, but they also put in danger the citizen’s economy.

 

Gonzalez positioned himself against the increment of 20% in minimum wage for considering it below expectations. He asked the entrepreneurs to provide a higher readjustment. In his evaluation, the inflation of 2009 will be of 35%. However, the Venezuelan government projects an inflationary index of 20%, les than 30.9% from last year.

 

Because of the inconsistency of the anti-crisis measures announced by Chávez, “Fedecamaras” will publish in 30 days an alternative plan to fight poverty and to improve Venezuelan’s quality of life.

 

Another criticized point by Gonzalez is the treaties of international cooperation, where the country offers economical aid to the less favored countries.

As the political success of the so-called “21^st century socialism” is associated to the expansion of oil exports in the latest years, international oil price drops may bring trouble to Venezuelan President Hugo Chávez. According to Financial Times, a question for those following Venezuelan politics is with which intensity oil price drops may jeopardize the nationalization-based economic model implemented in the nation.

 

Petroleum, which accounts for 95% of the country’s export income, finances half the State expenses. Thus, Chávez relies on such funds to keep his social programmes running and make up for the lack of private investment. Consequently, the Venezuelan Chief of State’s popularity depends on these programmes. According to think tank Ivad, Chávez approval rates have improved after an increase in expenses last month.

 

Financial Times quotes a presidential source as saying that basic social expenses (food, health, education) will not be reduced. If necessary, medium and long-term projects (less politically sensitive) will be diminished. 

Local entrepreneurs anticipate that local politics, specially in the economic area, will hurt because of the dismaying external scenario. Forecasts indicate that the financial crisis will reduce the influx of foreign currency from oil sales as a result of declining oil prices in international markets. This is likely to worsen Venezuela’s fiscal deficit.

 

In addition, local entrepreneurs anticipate a throttling supply of food in the domestic market. As if such scenario was not enough, data compiled by the Venezuelan Central Bank (BCV) show an annual inflation already at 21.8%.

 

This gloomy scenario has already caused grief in the local industry. In a recent survey launched by the Venezuelan Chemical and Petrochemical Industry Association (Asoquim), respondents stated that the industry’s production plunged by 40%.

 

The 100 companies comprising Asoquim evaluated that restricted access to foreign money, administrative bureaucracy and legal uncertainty all have negative implications on production.

 

With regard to export forecasts for the second semester, 50% of the respondents believe that exports will decrease, 27.3% said that exports will improve and 22.7% stated that export performance will remain the same. A vigilant observer of this new international environment, president Hugo Chávez has called the financial system a target and locked on it.

 

According to the Venezuelan leader, the International Monetary Fund (IMF) is to be blamed for the crisis. For that reason, says Chávez, the IMF should “dissolve itself”. 

A statement by Venezuela’s president, Hugo Chávez, that he will not leave office until 2021 even though his tenure expires in 2013 hints that the Venezuelan leader may attempt a new constitutional reform. Chávez sought to change the country’s constitution last December but was defeated in the process. According to current electoral rules, he cannot run for a third term because he was first elected in 1998 and re-elected in 2006.

 

Because no challenging nominees exist in the United Socialist Party of Venezuela (PSUV) that can replace him, and since his oppositionists are expected to emerge victorious in the next regional elections, it seems that the Venezuelan president will remain bent on changing the constitution before the end of his term in office.  

 

In an attempt to “choke” his opponents and force electors to vote for nominees who support the “21^st Century Socialism”, Chávez has announced that the “Regional Development Acceleration Program”, or PADRE, will only be implemented in Venezuelan states that will support his government in the next November elections. According to the country’s leader, this will be so because oppositionists are planning to throw a coup d’état in Venezuela. 

To President Hugo Chávez, the US financial crisis is also the result of a lack of ethics and of “unjust law”. His words came during the 3rd Summit of Presidents of Judicial Branches of the Union of South American Nations, taking place on the Margarita Island, off the Venezuelan coast.

 

Due to his stance since the beginning of the global financial crisis, Chávez will use the current scenario to extend his anti-American rhetoric and domestically strengthen the idea that capitalism “is a system in crisis”.

 

Based on that, he will try to reunite his allies around the “21^st century socialism” thesis. Since Chávez’s project relies on structures rather than conjunctures, the longer the crisis sustains, the better for him. That way, he can resume the discourse that fell into disrepute after his defeat in last-year referendum.

 

However, he may experience trouble if there is a sharp fall in international oil prices. Even with domestic unity, such a scenario can bring even more alarming economic developments.

 

Venezuelan president Hugo Chávez is trying out a new discourse. He is changing the typical left-wing rhetoric for one focusing on solving issues that are specific to his grass and roots – security and basic food supply. This change of posture aims at regaining the confidence of his “light” supporters who did not provide enough support during the referendum.

 

There is no doubt that Hugo Chávez’s image became strongly tainted with his defeat in the late 2007 referendum. Over the course of one year, confidence in president Chávez has dropped nine percentage points, as informed by the Datos institute. According to the poll, his approval rate has fallen from 39% to 30%. Re-building his image is a two-front effort: domestic and international. Domestically, Chávez has started to provide financial support to students’ centers in several universities and institutions across the country so as to bring them to his side. It should be noted that students took an independent stance during the movement against the referendum. If they were against the government, they didn’t either support the opposition. This uncertainty has created a silent battle between government and opposition in order to “conquer” the student masses. This is crucial for the government’s future, as it is certain that a new referendum will be held in approximately two years for the people to decide again on the same proposals put forward by Chávez.

 

Besides, Chávez has been obtaining significant support amid the population. If in direct proposals, such as last years’ referendum, Chávez did not achieve the victory he expected, we can notice that, in indirect terms, the population is lining up alongside him and trusting in the centralized government Chávez is creating. Venezuelans are the nationals to provide the lowest support for market economy, according to a Latinobarómetro poll. Even accepting that private enterprise is necessary for development, they believe that the State should be the sole responsible for solving the population’s problems, as only the State has the necessary means to do it. A total of 67% believe that “the State is capable of solving all the problems.”

 

Internationally, Chávez has put some effort into participating in the hostage release sponsored by the FARC. Given that many countries regard the FARC as a terrorist organization, Chávez did not help his cause by saying that they are not a terrorist group, but rather a people’s movement willing to fight in the name of the people.

 

Another important fact last month was the creation of another government-owned company – the PDVAL, in charge of producing and distributing food. It is a PDVSA subsidiary aiming at taking food directly to consumers. Initially, the company will produce milk, sugar, rice, cooking oil, chicken, and pork. The company is part of the government’s strategy to put an end to the shortage of basic food supplies in supermarkets. This is expected to increase the offer of products and regain the support of those voters who had chosen Chávez but failed to support him in last year’s referendum. This measure is related to a new attitude by the Venezuelan government, who shifted from an ideology discourse centered on structural reforms towards solving specific social problems by means of State intervention.

 

Despite the government’s particular solutions, fear of an economic crisis is stronger than ever. The stabilization of oil prices in the international markets will spark a crisis in the Venezuelan economy very soon. The advertence was made by economist Pedro Palma Durante. He recalled that a US recession will reduce the oil demand in all countries. As a consequence, oil prices will slow down. Palma does not rule out that oil prices may range around USD 30. Thus, the economist emphasized that funds from oil sales need to continue rising for Venezuela to keep their current growth rate.

 

However, Venezuela is shielded against the current US economy slowdown, even though the US is their main oil customer. The comment was made by the Venezuelan Finance Minister, Rafael Isea. Although he acknowledges that this crisis may impact the demand and prices of the nation’s main export product, he said that “the impact would be neither severe nor immediate.” According to Isea, trade relations between Venezuela and other nations create “a type of shielding.”

 
Welcome! Latin America is becoming consistently more important for the world. As the region becomes more stable, the world sees Latin America as a potential business area. In order to understand te potential Latin America has to offer, the world must understand the unique dynamics that the local politics function. This blog already exists in Portuguese since 2005 and is widely read. I believe it can be an important instrument to understand this amazing region. Suggestions, criticisms and opinions are welcome. + learn more

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