Gas goes up 6000% and the currency is devalued almost 60%
What can you buy with your salary, even with a 20% increase when gas goes up 6000 percent and the currency devalues by 58 percent? Well, this is the reality of most Venezuelan people. The country not only suffers from food shortages and heavy government imposed restrictions, but its people are now scrambling to make their Bolivares go further.
The president of Venezuela, Nicolas Maduro, has announced a series of economic measures including the first increase in gasoline in the country in 27 years. Such an will reach 6,000 percent and the Bolivar will be artificially devaluated by 58.7 percent.
The popular 95 octane gasoline, which cost 0,097 bolivars per liter will cost 6 bolivars per liter, while 91 octane gas, which was at 0.070 will be priced at more than 1 bolivar per liter.
“We will impose this increase because we were paying it,” said Maduro during a mandatory radio and television broadcast from the Miraflores Palace as he announced the measures accompanied by government members.
The president said that the rise in fuel, the first from which, among other measures, sparked social unrest against the government of Carlos Andres Perez known as the “Caracazo” in 1989 is a “necessary measure”.
The new price of 95 octane gasoline, which will take effect on Friday 19 February, aims, according to Maduro, to guarantee “payment of what is invested to produce it” as well as the functioning of the state oil company PDVSA.
The head of state said that only 30 percent of the country’s vehicles need such petrol but, while 70 percent of them currently use it due to the low price difference it had with the 91 octane gas.
“We spend about 1 billion dollars in products for 95 octane gasoline, we could save 800 million with the new pricing system that can go to food and medicine,” he said.
Maduro said that 30 percent of the revenue generated by the new system of gas prices will be directed to the Transport Mission, including assistance programs to public transport.
Increasing the price of gasoline has been postponed for more than a year and is an issue that has always been handled with special care in the country by the memory of the “Caracazo”.
Among the expected package of economic measures to address the crisis, Maduro also announced a devaluation of 58.7 percent in the exchange rate of the Bolivar, reserved for imports of food, medicine and basic necessities. The currency will go from 6.3 to 10 bolivars per dollar in which Maduro calls a ‘preferential’ system.
The new exchange system suppresses one of three exchange rates that existed so far, intermediate SICAD which was at 13.5 per dollar and was used for some raw materials and industrial inputs.
Maduro has also introduced an exchange rate for a “floating dollar”, which according to Maduro will be based on a “transformation” of the current system called Simadi, the highest official rate, which is currently at around 200 Bolivares per dollar. The new exchange system comes into effect today.
The last devaluation of the official exchange rate of the Bolivar, in its ‘preferential’ rate, occurred in February 2013, when it went from 4.3 to 6.3 per dollar.
Also, to “protect jobs” and wages after the execution of these measures, Maduro also announced a 20 percent increase in the minimum wage with 2.5 percent being based on the calculation of the mandatory food aid bonus to workers.
The basic salary of Venezuelans stood at 9,649 Bolivars, and now it will go to 11,578 Bolivars.
Meanwhile, food stamps will increase from 6,750 Bolivars to 13,275 Bolivars.
The increase, which also applies to pensioners, will enter into force on the first week of March.
According to Maduro, the unemployment rate in 2015 closed at “six points” despite a decline in gross domestic product (GDP) which stood at five percent.
Maduro said that the income of the country on account of oil sales was of $12.5 billion in 2015 compared to $37 billion in 2014, a figure which represents a fall of 293.95 percent.
“The sharp fall in the oil market,” is the result of a “geopolitical war” that caused the end of the oil based model that characterized the country,” he said, adding that even “in these conditions,” the government has “maintained” social programs.
In his view, Venezuela has built a “tax culture” that will sustain the nation through these difficult times.
“Between 1997-1998 oil contributed to 70 percent of all expenditures for the operation of state and internal taxes contributed to about 25 percent (…) while at the end of 2015 domestic taxes are contributing to 90 percent of revenue,” he said.
In other words, not only do Venezuelans lack food to eat and water to drink, but their tax obligations have risen by almost 100 percent, while the currency continues to devalue to levels never seen before and the prices of gas, food and other basic resources have increased exponentially.
Two questions come immediately to mind. Is there a government that can perpetuate itself in power while predicating the privileges of social programs that do not provide the minimum conditions to live? Are there any type of social programs that can keep people so conformed not to demand that their government actually prepares for an impending economic disaster like the one Venezuela is living in today?
If readers want to preview the type of global crisis that is coming, they need only to turn their eyes towards Venezuela. America, Europe and the rest of Latin America are slowly and painfully crawling towards that scenario.
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