Venezuelan president defends economic emergency decree after confirming 141,5% inflation

Saturday, January 16, 2016

Maduro acknowledges ‘catastrophic’ crisis

Venezuela’s President Nicolás Maduro (front) addresses lawmakers in front of (left-right) Henry Ramos Allup, president of the National Assembly, Venezuela’s Supreme Court President Gladys Gutiérrez and National Electoral Council (CNE) President Tibisay Lucena, during his annual report of the state of the nation at the National Assembly in Caracas yesterday.

Venezuelan president defends economic emergency decree after confirming 141,5% inflation

CARACAS — Venezuelan President Nicolás Maduro delivered his first state of the nation address before the newly elected opposition-held National Assembly last night, just hours after he unveiled an economic emergency decree in an attempt to reboot the crisis-hit country.

Maduro’s three hour speech also came after the Central Bank published economic statistics for the first time in more than a year, showing annual inflation ended the third quarter of 2015 at 141.5 percent.

“We are in the middle of an economic storm in which two models are against one another,” said Maduro as he opened his long speech.

“The only model is the Socialist one, not the neoliberal one that looks to privatize our country. They will have to oust me to pass a privatization law.”

The Bolivarian leader defended the 60-day measure, claiming it is needed to kick-start the moribund economy. Maduro called the economicnumbers “catastrophic.”

According to the Central Bank Venezuela’s gross domestic product (GDP) fell 7.1 percent in the final quarter of 2015 compared with the previous year.

Maduro went on to say that Venezuela has found itself in “an unconventional type of war.” He added that this has intensified since the death of former president Hugo Chávez.

The ruling United Socialist Party of Venezuela (PSUV) on December 6 lost its majority at the National Assembly for the first time in nearly 17 years. Since then a legal battle between the opposition and the PSUV broke out, which threatened to freeze all legislative activity.

He acknowledged the present tense atmosphere between the different branches of power, such as the PSUV-led Supreme Court and the opposition-led Congress, and said it “won’t be easy to manage the conflict of powers.”

Maduro also called on Venezuelans to “maintain peace” even though they might be “skeptical.”

“The path is peace, and that is not (a sign of) weakness. Let us not fall to the temptation of disrupting the balance.”

Justice and truth

The head of state announced the creation of a committee of Justice, Truth, and Peace to investigate the anti-government protests that took place in Februrary of 2014, and ended with 43 deaths.

Although he said during his speech that he was open to dialogue with the opposition, Maduro also harshly criticized a recent measure imposed by them to remove all images of Chávez and international statesman Simón Bolívar from the parliamentary building.

When talking about the ailing economy, he opted for a conciliatory tone with the opposition.

“I call for a constructive dialogue with the opposition, I want us to build a new economy, to deactivate any mechanism linked to price and currency speculation so that savage capitalism doesn’t continue to swallow up our currency.”

The Venezuelan government has blamed the difficult situation the country is facing on an “economic war” waged by domestic entrepreneurs and foreign governments hostile to the Bolivarian Revolution.

Opponents to Maduro’s government say, however, that the economic crisis is largely due to what they consider misguided economic policies, particularly regarding currency exchange and price controls.

Currency headache

The Central Bank has accused websites that track the street value of the dollar of “destroying prices” and installing a “savage” form of capitalism in the country, adding that 60 percent of inflation was the result of currency manipulation.

The Central bank’s report was published just moments after the country’s newly appointed economy czar, Luis Salas, read an emergency decree signed Maduro that would grant him powers to dictate measures and controls they say will protect Venezuela from “speculation” and “fictitious” pricing.

Salas did not mention devaluation, altering the country’s byzantine three-tired currency regime or address Venezuela’s debt payment policies. The decree is to be handed to congress for debate within eight days of its publication.

Salas’s appointment has raised concerns that the president is doubling down on populist policies and the centrally planned economic model championed by his predecessor and mentor Hugo Chávez.

Oil prices

To make matters worse, the collapse in oil prices, which have already broken the floor of the US$30, have further reduced government revenues.

An orthodox economic theory would suggest Maduro has two complex options to address inflation.

One is to control public spending even more than he is currentlty doing, which would most probably have an adverse affect on the government’s social programmes.

The other would be to ignore the reduction in revenues and maintain the current level of public spending, which is likely to accelerate inflation and particularly hit the pockets of the poor.

Herald with AP, Bloomberg, online media