[Opinion] Venezuela in 2010

[Opinion] Venezuela in 2010
Economic problems and their implications for upcoming elections

Alfredo Ascanio (askain)
Published 2010-01-26 12:11 (KST)

By the end of 2010, inflation in Venezuela will reach 45 percent. Who is harmed and who benefits from this mega-devaluation?

It most certainly favors the government, because has doubled its revenue in bolivars, of which 50% will be for PDVSA (Petroleos de Venezuela) to cover its financial deficit. But, to the population, this devaluation is terribly damaging.

The Central bank's operational reserves are just $22 billion, or 56% of the value of imports.

What happened in the past 10 years in relation to industrial activity in Venezuela? In 1998 this sector contributed 18 percent of GDP, and now represents less than 10 percent, because over 4,000 small and medium businesses have closed.

Why have they disappeared? Because Chavez's government is not interested in the private sector of the economy and has established several disastrous policies as: (1) labor immobility since 2001, (2) change control with 7 years of existence, (3) expropriation of industrial companies to the State.

The sale of oil abroad has not helped either. In 2009 $57.6 billion of oil was sold, but the tragedy is that foreign sales of no oil were, in 2009, to just 2.0 billion, and before the Chavez government were much more than 7 billion, then the reduction has been dramatic: from 5 billion. And the imports? They are only 39 billion or it has fallen by 22% over the 2.009.

In Venezuela there are 7 million people unemployed or informally employed. There are also huge numbers of workers receiving minimum wage: 3 million formal employees and 1.4 million pensioners.

The current minimum wage is 967.5 bolivar a month and it is estimated that by March of 2010 will be is 1064.25 per month and the month of September will be 1223.89. This means that the average increase will be only 26.5 percent.

If the average inflation in 2010 were about 35 percent, this would mean a real-terms wage loss for those already making the bare minimum.

Political Implications

How should one begin to forecast the election to the Legislature (set for the month of September), provided that there is not a great fraud? A recent survey found that, from the people who vote, the segment of the Ni-Ni (the undecided vote) is about 52 percent.

The Ni-Ni could vote for the opposition if they offer a new government program to combat insecurity and a new program to ensure improved health, housing and food (the social agenda).

The majority of the Ni-Ni are women (55 percent), and 52 percent belong to the lower social classes, are living in urban areas, and are under 35.

About 15 percent of the Ni-Ni blame Chavez for the country's problems, but this is rising and may reach 30 percent due to devaluation, lack of electricity and water and also because in this past year year 14,500 people have been killed.

The conflict for the opposition is: how to capitalize on the Ni-Ni discontent and convert it into votes for the election of deputies to the Legislative Assembly to come?

In 2006 66 percent of the NI-Ni voted for Chavez's reelection.

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Other articles by reporter Alfredo Ascanio