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“They Dollarized the Prices, I Oil the Salary”: Venezuela’s President Maduro Speaks on Reviving Economy

Nearly all French media discredits its “plan for restoration, growth and economic stability”, but what exactly are the various announcements made by Venezuelan President Nicolas Maduro?

After the announcement of a plan for the recovery of Venezuela’s economy by Nicolas Maduro on August 17, 2018, the French-speaking press echoed the measures decided to set up the head of state Venezuelan by using more or less objective titles, sometimes pessimistic. The only concern: instead of analysis, the articles in question are usually content to report the criticism of the opposition – forgetting even sometimes to explain what are these famous measures.

Few articles mention the “Plan 50” announced in 2016 by Caracas, the social programs that stem from the “Carnet de la Patrie” launched in 2017 or the manipulation of the exchange rate, yet largely responsible for inflation that Venezuela suffers. And yet, the objectives pursued by the Venezuelan President with his “plan of restoration, growth and economic stability” are long-term and are intended to be an extension of the achievements of the Bolivarian Republic in the social field, in an economic context. more than chaotic. To be able to form an opinion, it is necessary to know them.

Indexation of the national currency on petro

On August 20, 2018, the sovereign bolivar entered into force and officially became the new national currency. It has been announced at the rate of 1 sovereign bolivar for 100,000 bolivars strong. It is this mechanism that the press sums up in a slightly mocking manner by writing that Nicolas Maduro has “deleted five zeros”.

To compensate for this mechanical overvaluation, the Venezuelan central bank announced that it was devaluing the value of the new currency by 96%. The new rate is therefore 60 sovereign bolivars per dollar (the previous rate is equivalent to some 2.48 sovereign bolivars per dollar). As spectacular as it is, it is not a brutal devaluation undertaken in any disaster by Venezuela, as suggested by many titles in the press …

In addition, it should be noted that the change in the national currency was made by indexing the new sovereign bolivar on petro, the cryptocurrency issued by Venezuela  since February 20, 2018. This indexation means that the value of the sovereign bolivar is now directly related to the evolution of the famous cryptocurrency. This now corresponds to the benchmark index of the new national currency, with the rate of 1 petro for 3,600 sovereign Bolivars.

The petro is different from other virtual currencies on the market, being the only one to be based on tangible assets, namely the country’s oil reserves, but also those of gas as well as stocks of gold and diamonds. Another notable difference with most existing cryptocurrencies, the petro is centralized: it is the first cryptocurrency issued by a state that retains all power over money creation.

Moreover, last March, the Venezuelan government explained that generating more than 186,000 purchase offers, the presale of petro had allowed Venezuela to raise five billion dollars .

The minimum wage multiplied by 34

Nicolas Maduro announced an increase in the Venezuelan minimum wage. If he had not initially announced a date, the Venezuelan president finally said that this measure would be effective September 1.

While the new minimum wage should equal 34 times the minimum monthly wage in force today, the Head of State said the government would compensate the wage difference “in the small and medium industry” for 90 days, s’ thereby committing to help small and medium-sized enterprises experiencing difficulties in paying the new minimum wage to their employees.

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This policy for the poorest is also reflected in the area of ​​taxation. If the government announced that the value added tax (IVA) would increase by 4%, its standard rate from 12% to 16%, this increase will not affect the essential consumer goods that have a direct impact on the household consumption basket.

Adjustment of prices of goods and services

Faced with the imbalance between the price of consumer goods and production costs, the Venezuelan head of state deplored the fact that “all prices [are] dollarized”, so he pledged to target a “process of Balanced and fair adjustment “on the basis of international patterns and” with indexing on the Petro “.

Nicolas Maduro has indeed announced a rebalancing of prices for commodities of “Plan 50”. This was presented by the Venezuelan Head of State in 2016 and corresponds to a list of 50 products for which the government strives to guarantee access to the entire population, even in times of economic crisis.

As explained in an article published in June on the site of  Telesur (a Venezuelan chain with a pan-Latin American vocation that has branches in seven countries in South America), Caracas has already begun discussions with the sectors concerned, including agribusiness and distribution, to rebalance the prices of basic commodities needed by the Venezuelan population.

Among the products primarily concerned by the rebalancing of prices, the Venesolwebsite  , which presents itself as a “solidarity platform with the people of the Bolivarian Revolution in Venezuela”, mentions the following list: “Coffee, sugar, rice, beans, meat, milk, cottage cheese, ham, mayonnaise, corn, chicken, fish, wheat flour, oil, various hygiene and personal hygiene products. “

The Venezuelan president also announced the distribution of “coupons” to nearly ten million people. According to him, these conversion coupons, which should reach a value of 600 sovereign bolivars, should benefit, among others, holders of the “Carnet de la Patrie”, the latter corresponding to an electronic card that gives access to the aid of the ‘State. By launching the “Carnet de la Patrie” on January 20, 2017, Nicolas Maduro displayed his ambition to “fight corruption and reorganize missions”, the latter directly resulting from social programs set up by Hugo Chavez.

An ideological battle

Behind the numbers, the economic question is a particular issue in Venezuela. Indeed, several analyzes oppose to explain the causes and the implications, the French media usually refrain from relaying that of the government.

The Venezuelan president, commenting on the inflation rate that reached 82,700% in July 2018, said: “They dollarized prices, I oil wages,” implicitly referring to  the economic war that Venezuela regularly accuses the United States to deliver him .

For its part, Venezuelan economist Pascualina Curcio explains the phenomenon of inflation among other things by “manipulation of exchange rates”. Professor of Economics at Simon Bolivar University, Pascualina Curcio says, in a column of the sociologist Romain Migus on  speculation and rising prices in Venezuela  : “The manipulation of the exchange rate is the most powerful weapons of the economic war. “To this is added the impact of the black market of the national currency on its course, but also the dramatic consequences of the  economic sanctions imposed on Venezuela by some Western countries , including France, which regularly denounce the authoritarian drift “of Nicolas Maduro. 

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Written by How Africa

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