With a currency reform and increases in the petrol price, the government is trying to get the severe economic crisis in the handle, but just the increase in the fuel prices is tricky.
“To say that we are giving away gasoline, is still being formulated. We pay to throw it away”, ranted Venezuales President, Nicolás Maduro, recently, at the Congress of his United Socialist party of Venezuela (PSUV).
Currently, it is in Venezuela is theoretically possible to buy at the black market rate for the equivalent of a US $ 4.5 million liters of normal petrol. Now Maduro has announced to increase the price of petrol significantly. “Gasoline must be sold at international prices, in order to stop fuel smuggling to Colombia and in the Caribbean,” he said in a televised address. The petrol smuggling, the country cost an estimated 18 billion dollars in the year.
Subsidy with a long Tradition
For decades, Venezuelan governments subsidize fuel. It also economic crisis and Hyperinflation have changed nothing. The international monetary Fund IMF expected for this year in Venezuela, a record inflation of a Million (!) Percent; the economy could shrink by 18 percent.
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Petrol but a delicate topic increases in the country. Almost-Free gasoline is not an invention of the Chavism, but has a long history in oil-rich Venezuela. In the collective Psyche the idea that almost free petrol is a right of Venezuelans. As of 1989, the government of then-President Carlos Andrés Pérez agreed to in the framework of the adjustment plan of the IMF, an increase in the price of Petrol, it came to a violent revolt, which became known as the “Caracazo” in the story. Since then, every Venezuelan government will think twice whether it will not increase the price of petrol.
Gradually increasing the price of Petrol
The Maduro announced increase is to be phased in over two years and will not affect everyone equally. So it will be for all those who leave your vehicle on the so-called Carnet de la Patria (father of the country ID) register, a state-backed price. The Carnet de la Patria is next to the identity card valid, a voluntary identity document was introduced by the government of Maduro in January 2017 and for the respect of state social services to eligible. According to the government, 17 of the 30 million Venezuelans have just such a Carnet. The Opposition criticised it as a political tool for social control.
The Venezuelan Economist Luis Vicente León, of the economic consulting firm Econalítica described the measure as “predictable”. “In reality, it is a common (and necessary) increase in the petrol price in a subsidy debate, which focuses on those who have two unusual things: the Carnet de la Patria and a car. Discriminatory populism”, he tweeted. For León, the target of the Maduro announced procedure is, first, to increase the revenue of the state. The retention of subsidies for the owners of the father of the country’s identity card was “a measure to reduce the political costs of the action”.
Venezuelan President Nicolas Maduro is trying to stabilize the economy of his country
Plan for the recovery of the economy
At the end of July, Maduro had stood in the face of Hyperinflation, and four years of recession, a Failure the previous production model. The petrol price increase and now is part of a government plan for the recovery of the economy. Next Monday (20. August), he enters into force. Then there will be a new currency. The currently circulating Bolívar Fuerte (Strong Bolívar) is replaced by the Venezuelan Bolivar Soberano (Sovereign Venezuelan). Specifically, five zeros are to be deleted. In a transitional phase, the two currencies are circulate the “as long as necessary” in parallel. Maduro said that the Venezuelan Central Bank has sufficient reserves for the currency changeover. In addition, strict foreign exchange is repealed after 15 years.
The new currency Bolívar Soberano will be on the state of crypto currency Petro-coupled. The state-owned oil company PdVSA will run from Monday all its operations in Petro; prices and wages should be based also on Petro. This will lead to a “substantial improvement in the income of workers,” assured Maduro. So far, the increases in the minimum wage by the government had been to eat alone this year, with three – by Hyperinflation in the blink of an eye.
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Inflation in Venezuela
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Inflation in Venezuela