Venezuela. Minister of Productive Economy talks about the raise in gasoline prices, expropriation and the exchange system

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Source Aporrea / The Dawn / January 17, 2015.

 

Since his inauguration as President of Venezuela in 2013, Nicolás Maduro has made public his intention of raising the price of the cheapest gasoline in the world. But after almost three years of administration, he has not fulfilled his promise, which could lead to facing a high political cost.

 

However, the Minister of Productive Economy, Luis Salas, has suggested that this could be one of the measures that the government takes in order to face the economic crisis.

 

“Among the measures that might be taken, it is possible (that there is an increase in gasoline prices)”, said Salas to Reuters on Friday night, after he affirming that “it is time” to increase it.

 

“The issue with the increase in gasoline prices is not economic, but a problem of political sensibility and social sensibility” warned Salas (who is also Vice President of the economic area) after he listened to Maduro’s annual speech of before the National Assembly.

 

The increase in the price of gasoline is a delicate matter. For Venezuelans, the memory of the social outburst known as the “Caracazo”, which left thousands of dead in 1989 after an unexpected increase in the price of gasoline, is still fresh.

 

From there on, Venezuelans associate any increment in the price of gasoline with protests and they assumed that it was their right to refill the tank of their vehicles for less than a dollar.

 

However, the descent in the income of foreign currency that the country is suffering, in the midst of a recession, scarcity of basic goods and a three-digit inflation, requires to change the subsidy on oil that prevents the country from receiving around 12,500 million dollars a year.

 

Besides, the ridiculously low prices (0.016 dollars a liter) have made contraband of oil to Colombia and the Caribbean islands very profitable, and the government estimates that this trafficking causes losses for 2,200 million dollars a year.

 

Salas clarified that there a decision has not yet been made on the increase of prices. But, among the several scenarios that they are being analyzed, he said that they could “discourage” the consumption of the most expensive gasoline, of 95 octanes, to encourage the use of 91 octane gasoline.

 

However, local analysts doubt that the increase in prices provides the government the extra income they need, because they are not sure of what is at risk if they manage to increase the price over the costs of production, which are 28 times higher than the current price.

 

“Venezuela always pays its debts”

 

Among the recipes that experts have proposed to the socialist government to exit the crisis there is also the exchange rate unification and the increase in prices of articles that are currently being sold cheaper than it costs to produce them.


Salas, a young hard-line sociologist recently appointed by Maduro, did not want to reveal if the exchange system will also be modified, and he rejected the idea of “expropriating companies” to better the supply of foods and medicines under the state of exception in economy that he dictated last Friday.

 

In the midst of the economic crisis, worsened by the abrupt drop in oil income, the chief of the economic team did not reveal any plan to refinance the payments of the external debt, which this year add up to 9,500 million dollars and would take up half of the reserves of the country.

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