There must be some doubt about this hope. There is little sign that the long-running political crisis that has crippled the economy will end. Our guess is that President Hugo Chávez will not have to face a recall referendum. The refusal of the international observers to take up the opposition's claims that the government is putting pressure on the Consejo Nacional Electoral (CNE) suggests, as some in the opposition have already realised, that the opposition did not secure enough valid signatures to force the referendum.
If this turns out to be the case, the opposition is unlikely to concede gracefully. Already a range of (albeit second-rank) opposition figures have asserted that if there is no referendum the government has cheated and must be overthrown by other means. Yet there is absolutely no evidence to suggest that what is going on at the CNE is anything but fair and scrupulous.
The only good news is that the US government, facing what looks like being a tricky re-election in November, will back away from encouraging its chums in the Venezuelan opposition to square up to the Chávez government. Whether they will take the advice, and thus give the economy some breathing space, is far from clear.
Polarisation
The problem is that the government and its supporters are constantly raising the stakes and backing the opposition further into a corner. An example of this is the arcane dispute over whether the government can collect US$1bn from the central bank to spend on boosting agriculture. It is clear that the government cannot do this directly. Equally, it is clear that the central bank's reserves are probably too high and a source of potential monetary instability. Using some of the reserves to pay off more of the (expensive) foreign debt, and then borrowing from a multilateral to fund the expansion of agricultural lending, would appear to be the most sensible way forward. It is unlikely to be taken.
The agriculture minister, Arnoldo Márquez, raised the stakes on 26 January by saying that the government's investment in agriculture between 2004 and 2006 would be only Bs14bn (US$8.7m, at the official rate). He said that this is only 3% of what the sector needs. The government is pushing for the central bank to disgorge US$1bn from its US$21bn in reserves to boost agriculture. It argues that the money should be used to increase domestic production and thus lower imports. In particular, the government wants to increase production of black beans, maize, soya, cotton, rice, sunflowers, potatoes and sugar cane.
Domingo Maza Zavala, the most outspoken member of the bank's board, argued that the currency would plummet if the bank handed over any money. President Hugo Chávez said that if the bank does not hand the money over, he will ask the national assembly to sack the whole of the central bank's board. The central bank is one of the few independent institutions in the country.
Chávez 's chief economic adviser and planning minister, Jorge Giordani, claims that the bank has too much money in its reserves, which now stand at almost US$22bn. He argues that US$15bn would be quite enough. Other orthodox economists argue that there is a case for saying that the build-up in reserves, and the consequent issuing of bolívares, has inflated the money supply. The problem is that if the bank hands over the US$1bn, the money supply will be further inflated, as the dollars are switched into bolívares and spent. The financial markets are getting nervous. The black-market rate for the dollar crashed through the Bs3,000 level to Bs3,200 in the second half of January before falling back again to around Bs3,000.
In the real economy
The power struggle between the government and its opponents for the past two years has wrecked the economy. Calculations from the consultancy Datanálisis show that purchasing power in Venezuela fell by 13.5% in 2003. According to the consultancy, the poor were hit hardest while the rich managed to escape the worst effects of the mismanagement of the economy.
The poor are defined as a family of five that has to get by on an income of less than 293,550 bolívares (US$183, at the official exchange rate of Bs1,600 to the dollar) a month. They have seen the purchasing power of their income fall by 16%. Datanálisis claims that its research shows that people are being paid much less than the statutory minimum wage, which stands at Bs320,000 a month. The consultancy maintains that in each family, on average, 1.6 people work.
Datanálisis pointed out that in dollar terms the income for the poorest levels of society has fallen sharply over the past couple of years: in 2001 it was US$211 a month. In dollar terms, the rich have been hit hard: in 2001, the rich, defined as people with incomes of over Bs4.8m a month, took home US$6,830 after they had turned their pay into dollars. Now the rich, defined as people on more than Bs7m a month, get only US$2,185 for their trouble, on the unofficial or parallel market.
Another indication of the collapse of domestic demand is the halving of the sales of new cars in 2003. Last year only 63,726 new cars were sold, according to figures from the Cámara Venezolana Automotriz. This was 50.5% fewer than were sold in 2002. In turn, 2002's sales were 40% down on those of 2001. That was a banner year for the car assembly industry, since more than 200,000 units were sold, thanks to government programmes to encourage poorer people to buy new cars.
In December 2003, new car sales were 7,152. Locally assembled cars accounted for 77% of the total sold in the whole of 2003, up from 59% in 2002. This is due to the imposition of exchange controls after the ending of the general strike in February 2003.
End of preview - This article contains approximately 1267 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
