Maduro’s Answer for Venezuela’s Economic Woe: “God Shall Provide”

By: Sabrina Martín - @SabrinaMartinR - Jan 23, 2015, 1:18 pm

EspañolOn Wednesday, January 21, Venezuelan President Nicolás Maduro spoke before the National Assembly to lay out the national government’s plan for 2015. While the president was expected to present his administration’s 2014 report, he instead took the opportunity to address the country’s ailing economy amid decreased revenues from plummeting oil prices.

“There is less foreign currency [for Venezuela]: from US$96 per barrel to $40, but we’ll never lack God. God shall provide, and we’ll get the resources we need to keep the country going,” said Maduro, who blamed the US government for the drop in the price of oil.

The following day, “God shall provide” became a trending topic on Twitter in Venezuela, while cartoonists echoed the hopeful incantation.

In his speech, President Maduro revealed specific measures to curb food shortages and rampant inflation: a minimum wage increase, more social benefits, a restructuring of currency controls, and a potential increase in the price of gasoline.

In response to the long grocery-store lines that have marked the country’s shortage crisis, Maduro said the government plans to expand its biometric identification system and “safe provision” ration cards to limit “excessive purchases” throughout the country.

Maduro admitted during his speech that the basic basket of goods for Venezuelans has been “disrupted,” but urged citizens to “abandon consumerism” and become more mindful about the importance of saving. Likewise, he ordered government ministers to closely inspect “every distribution and stocking company in the country” to put an end to the alleged hoarding the president blames for shortages.

Venezuelan outlets and cartoonists react to Maduro's "God shall provide" speech
Venezuelan outlets and cartoonists react to Maduro’s “God shall provide” speech. (La Verdad@EdoIlustrado)

Boris Ackerman, head of the Economics and Administration Department at Simón Bolivar University, believes Maduro’s inspection strategy is a political ploy to confiscate products and redistribute them in order to win favor from the public.

Maduro acknowledged the 80-percent disapproval rate for his administration during the speech, but then dismissed it as unimportant. “I don’t care if it reaches 150 percent,” charged the president.

Ackerman told the PanAm Post that the president’s nationwide rationing system will leave it to inspector’s to decide whether or not someone is guilty of hoarding or other “speculation crimes.”

Bad News for Producers

Maduro also stated that the country’s official three-tier exchange rate for the bolívar will remain in place, with some modification, while the “economy stabilizes.” The government will maintain a 6.30 Bs. per US dollar rate for food and health sectors, a second rate resulting from the average of Sicad 1 (12 Bs.) and Sicad 2 (52 Bs.), and a third rate will be operated by brokerage firms.

Ackerman concludes the announcements mean a continuation of the government’s “socialist model,” imposing on the country “a series of currency restrictions, price, distribution, and sales controls.”

The analyst points out that the new exchange rates will mean a “severe” devaluation for the nation’s currency: “If a [non-food non-health] product goes from 12 Bs. per US dollar (Sicad 1) to, say, around 36 Bs. [with the new rate], we’re talking about a 200-percent cost increase and a 66-percent loss in value of the bolívar.”

In an interview with Radio Caracas Radio, economist Tamara Herrera lamented that maintaining the auction system to obtain foreign currency is “terrible news for the productive sector.” She says it creates an unfair and uncertain environment for businesses, preventing them from planning production and creating “completely distorted” prices.

President Maduro also announced a 15-percent raise in the minimum wage starting February 1, going up to 5,633.7 Bs. (US$31.47 at the black-market rate). Retirees receiving a Social Security pension will also get a “health bonus” this year.

Near the end of his speech, Maduro toyed with the idea of increasing the country’s highly subsidized gasoline prices and said he hoped the National Assembly would discuss a possible hike in 2015.

“The government is still afraid to come out and say gasoline will cost more because of the potential backlash among the population,” said Ackerman, “and they’re trying to come up with remedial mechanisms before marking up the prices.”

Lagging Economy

On Wednesday, January 21, the International Monetary Fund (IMF) cut its 2015 growth forecast for Venezuela’s economy to negative 7 percent. A $10 drop in the price of oil per barrel means a trade deficit equal to 3.5 percent of the country’s GDP, according to the IMF.

Economist Herrera said a “brutal” reduction in capital investment looms ahead and the GDP’s fall will be “very strong.” She points out the IMF calculated its pessimistic forecast even before Maduro’s “God shall provide” speech.

Both Ackerman and Herrera agree that an increase in the minimum wage and social benefits are measures that seek to partially compensate for the overall increase in prices following the devaluation.

Maduro’s announcements on Wednesday promote “uselessness, guile, and trickery,” said the analysts. “Bad times are coming, the measures are completely inappropriate and will only perpetuate the country’s problems,” Ackerman concluded.

Translated by Daniel Duarte.

Sabrina Martín Sabrina Martín

Sabrina Martín is a Venezuelan journalist, commentator, and editor based in Valencia with experience in corporate communication. Follow @SabrinaMartinR.

Sparring over Human Rights Defines Initial US-Cuba Talks

By: Adriana Peralta - @AdriPeraltaM - Jan 23, 2015, 12:39 pm

Español As the first round of historic talks between the United States and Cuba finished on Thursday, January 22, Washington and Havana made initial steps towards establishing formal embassies. However, a renewal of formal diplomatic relations for the first time since 1961 faces significant obstacles. In particular, tension arose when US officials called on Cuba to deliver greater progress on human rights, particularly with regard to freedom of expression and association. The Protagonists The first round of talks, designed to reset relations between the island nation and its North American neighbor, were kicked off by announcements by US President Barack Obama and his Cuban counterpart Raúl Castro on December 17. This first encounter in Havana was envisaged as an opportunity for both countries to present their conditions for strengthening diplomatic relations. Both groups of negotatiors were headed up by women, with the US delegation led by Roberta Jacobson and that of Cuba by Josefina Vidal Ferreiro. Jacobson is a specialist in Latin America, having represented the State Department's Office of Western Hemisphere Affairs since 1988, with postings in Peru and Mexico, and previously responsible for Cuban relations between 1994 and 1996. She currently holds the post of Assistant Secretary of State for Western Hemisphere affairs. Josefa Vidal Ferreiro, meanwhile, heads the United States Division of the Cuban Foreign Ministry (Minrex), following previous postings to France (1990-1997) and various responsibilities for US and North American affairs since her return. Joining the talks were members of civil society, religious groups, and business leaders, including the Cuban Commission on Human Rights and National Reconciliation. Human Rights: a Sticking Point Human rights were set to be a controversial issue during talks from the outset. On January 19, an anonymous official from within the US State Department confirmed that the US government would continue pressuring its Cuban counterpart to meet international human rights standards, including the prohibition on overseas travel faced by Cuban citizens. The official highlighted the importance of creating regular contacts between the two countries and increasing trade, particularly on the issue of telecommunications and tools which could further empower the Cuban population. However, during talks on Wednesday, the Cuban delegation bristled at US "pressure" on the issue, and they challenged Washington's authority on the matter, highlighting human rights shortcomings in emblematic cases such as the recent turmoil in Ferguson, Missouri. Immigration Obstacles Immigration also proved a contentious issue, with discussion on Wednesday seeing marked disagreement over the US policy on would-be Cuban migrants. Cuban negotiators argued that the "wet feet, dry feet" policy of its North American neighbor encouraged illegal emigration from the island. The Cuban Adjustment Act, which offers Cuban exiles permanent residence and work visas after being on US soil for a year and a day, was also singled out for criticism, as well as the Cuban Family Reunification Plan, which expedites the transfer of Cubans to the United States, at which point they can apply for permanent status. Talks also raised the possibility of the US accelerating the deportation of Cuban exiles convicted of committing serious crimes in the United States, currently 35,525 individuals in total. However, as yet there appears to be no legislative moment in the US on any of the above issues. An End to the Cuba Embargo? On the Cuban side, an anonymous senior official told CNN on Tuesday, January 20, that diplomatic relations would not be considered normalized until the Embargo was eliminated. Such a move would require Congressional approval, something which Obama called for during his State of the Union address on the same day. According to an article published in Cuban newspaper Granma on January 21, the Havana planned to enter the talks with a "constructive spirit aiming to maintain a respectful dialogue, based on equal sovereignty and reciprocity, without infringing national independence and the self-determination of the Cuban people." The interviewed Cuban official further added that the Cuban negotiators would emphasize the need for any reopening of diplomatic relations and opening of embassies to be based on fundamental international legal principles, such as the UN Charter, and the Vienna Convention which governs consular and diplomatic procedures. With regard to the lifting of the US economic embargo on the island, the Cuban delegation acknowledged that such a move would be in the hands of the US Congress. Both teams of negotiators, however, recognized that such problematic topics, along with immigration and human rights, would be taken up in future talks. Translated by Laurie Blair. Edited by Fergus Hodgson.

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