The sizable 69.3 trillion bolívares budget is the product of huge oil incomes and internal revenues, a result of an “oil boom” in a country that, on the other hand, is not quite close to winning its war on destitution yet, according to recent reports from the Economic Commission for Latin America and the Caribbean (Cepal).

The amount of the budget is equivalent to 32.233 billion U$, at the 2005 exchange rate of 2,150 bolívares (Bs) per dollar, which reflects a devaluation from the 2004 rate of 1,920 Bs per dollar.
In nominal terms, the 2005 budget is 20% higher than the one initially approved of 50 trillion Bs for 2004 (26.042 billion U$ at the current exchange rate). To this amount, an additional stream of credit -authorized by the Assembly to cover several expenses- remains to be added.

As usual, in what has been the typical atmosphere in this type of discussions, the opposition deputies criticized the budget, deeming it “insincere”, while the “chavistas” praised its virtues and its focus on social spending.

For Rodrigo Cabezas, president of the permanent National Assembly Finance commission, the budget and the Act for Contraction of Debts, guarantee a spending policy that is linked to national economic growth.

According to the legislator, the growth rate will surpass 5%, since in the expense strategy, the investment budget is substantially increased compared to this year’s, thus stimulating added demand in the national economy and encouraging the private sector.

Figures, for what and for whom

And as Chávez has said, and I have repeated in several of my articles, the figures in the national budget are meaningless if the resources don’t reach the country’s poor majorities, who are part of unemployment and informal economy statistics, and who neither are able to, nor want to settle for handouts coming from the governmental missions.
After all, many of the missions, which can not be criticized in their ultimate purpose of providing well being and satisfying some needs that had not been addressed, are currently being supported by streams of petrodollars. And despite what the government might say, if this flow of dollars ever stops, the missions will be sacrificed in order to pay the foreign debt.

Cabezas noted that the 2005 budget is “tied up” to a process of deceleration of the inflation rate, that as a result of fiscal and monetary spending, will be 15% in 2005, which will also benefit the Venezuelan population, particularly employees and blue-collar workers.

This year’s inflationary index will be nearing 20%, below the 27.1% index for 2003, according to figures from the Central Bank of Venezuela (BCV), which have been criticized by some economists, claiming that they don’t reflect the real impact of price increases that diminish the common citizen’s buying power on a daily basis.

In declarations to Venpres, the state news agency, Cabezas added that the budget has a social orientation, since spending increased to 44%.
“This is an example of the commitment of this process of changes to the excluded, to the poor”, he commented, in total agreement with the line of the government, which has admitted to have failed in its struggle against poverty and corruption, after six years at the head of the world’s fifth oil producer.

...however, food prices keep rising

With a totally different point of view, legislators of the opposition criticized the project. Some of them, like Elías Mata, claim that it sets a price per barrel below the value that is really expected by the “revolutionary” government , which is handing out, in large sums and with few restraints, the surplus oil incomes.

For the 2005 budget, the oil incomes were calculated on the basis of both an average exportation price on all oil products at 23 dollars per barrel and a daily production of 3.5 million barrels per day, including the production from the Venezuelan state run oil company Pdvsa, and from the strategic associations with foreign companies.

The ex-minister of Finance, Tobías Nóbrega, has admitted that the estimated price is “conservative”, and that Venezuela could receive 4,000 million dollars in extra oil incomes if, as expected, the price of hydrocarbons reaches 5U$ above the official estimate. The ordinary incomes in the budget are 25.5 trillion bolívares for non-oil related tax collection, 26.1 trillion bolívares on oil business related tax collection, 3.1 trillion bolívares in current and extra incomes for profits and reimbursements, and 14.5 trillion bolívares for debt contraction.

These figures are difficult to understand for any common mortal. What is most important for the majority is their capability to afford food and other basic necessities.

For instance, according to the National Institute of Statistics, the monthly value of the official basic necessities list in October of 2004 was 335,959.69 Bs, which represents a 1,767.04 Bs increase over the value of this list September.
In total, the accumulated variation of the basic necessities list during the January-October period was 18.05%, a figure below that of 2003, which was 24.44%.

For citizens who earn below the official minimum wage (324,000 Bs), for the unemployed, and for those who work in the informal economy, these variations are considerable when they affect their capacity to afford food, not to mention the rest of their basic necessities.

Published in Quantum N.43

Maitane Larrañaga