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Economic crisis means tough start to 2018 for Venezuelans
CARACAS, Jan 9, 2018 (BSS/AFP) – Luis Briceno built up a small bottle
branding business over the last 25 years but in the maelstrom of Venezuela’s
economic crisis he and many like him are facing closure.
“This New Year is criminal,” he said reflecting the anguish of millions of
Venezuelans facing acute shortages sparked by falling oil prices, political
unrest and corruption. Socialist President Nicolas Maduro last week decreed a
40 percent increase in the minimum wage to try to contain the crisis, after
food protests broke out in several cities.
But Briceno believes it will only complicate things for his and other small
businesses.
“It seems criminal, because ask the workers themselves if they want the
government to increase the minimum wage and they say no, because the next day
everything increases.”
Although he tries to avoid thinking about it, the 70-year-old businessman
knows that the next few months will be crucial for his small firm, which is
already battling a shortage of supplies and a hyperinflationary spiral that
the government said reached 2,616 percent by the end of December.
To make matters worse, two of his three remaining employees are planning to
join the lines of young emigrants fleeing the crisis. Not long ago, his firm
used to employ 10.
– ‘Every time you buy less’ –
In the business district of the capital, 53-year-old housewife Raquel
Benarroch said she was saddened by the closure of scores of businesses that
“will never open again.”
“Before, we saw the bottom of the abyss, now we see things much blacker
than that.”
Despite Maduro’s announcement of a minimum wage increase, most Venezuelans
will still earn only about $7 a month in salary and food vouchers, based on
the commonly used black market exchange rate.
Bricelo said he pays above minimum wage to his employees, but he now has to
increase the food voucher quotient, which represents 69 percent of the total
wage. His costs will rise, and so will costs all along the chain of
production, he said.
MORE/MR/ 1018 hrs
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The government says 13 million Venezuelan workers earn the minimum wage or
receive the vouchers, out of a workforce of 19.5 million.
Ever-rising inflation means the basic income barely buys a basket of
staples like kilo of meat, 30 eggs, a kilo of sugar and a kilo of onions.
“Every time you go shopping you buy less and your budget is limited to
food,” 50-year-old tourism employee David Ascanio told AFP as he shopped in a
Caracas market.
On Saturday, the government forced more than 200 supermarkets in the
capital to lower prices, causing huge lines to form outside as Venezuelans
jumped at the chance to stretch their meagre incomes.
Experts say wage increases are needed to cope with hyperinflation, but they
are useless without other government measures, such as reducing liquidity.
Monetary liquidity increased 1,100 percent in 2017, according to the
analysts Rendivalores.
“The problem is not the pill that you take, but the one your are not
taking,” said economist Luis Vicente Leon, adding that the government needed
to free up and rationalize the economy and promote private enterprise.
The government said the increases are necessary to counter the runaway
inflation, which it has long insisted is part of an “economic war” aimed at
overthrowing Maduro.
– ‘For 2018, we have nothing’ –
Falling oil prices — in a country where oil contributes 96 percent of
state income — political unrest, and corruption have decimated the country’s
economy under Maduro, leading to chronic food and medicine shortages.
The Fedecamaras employers’ union says industry is working at 30 percent of
capacity due to state controls and expropriations.
Having once produced 70 percent of its food needs, the country with the
world’s largest oil reserves supplied barely 30 percent in 2017 and that was
because they could still rely on stores of fertilizers and seeds, said
Aquiles Hopkins, the head of the country’s agribusiness sector Fedeagro.
“For 2018, we have nothing,” he warned.
The IMF forecast a drop in GDP of 12 percent in 2017 and 6.0 percent in
2018.
The state as well as its oil company PDVSA have been declared in default
due to delays on capital payments and interest on debt.
BSS/AFP/MR/ 1018hrs