Alright, pay attention because we’re gonna go over this one time, and one time only: over these last two weeks, Nicolás Maduro has announced a series of economic adjustments that have everyone in Venezuela pretty concerned and confused. Last night, he threw us his economic one-two combo: the minimum wage, previously at BsF. 3,000,000, will increase to BsF. 180,000,000 (or BsS. 1,800), there’s a new fiscal policy (taking VAT from 12% to 16%) and gas is going to have a new “international” price and system of acquisition.
Most of this comes into effect in less than a month. It will affect everyone and nobody has a clue of how. Maduro released the Kraken and said he’ll explain later.
There’s a lot to cover here, but I will center today on a key aspect of Venezuelan daily life, and something that, to me, is at the heart of everything announced.
Today, you can pay a cargo truck full of gas for the equivalent of what you spend on a light breakfast. The last time a government considerably increased the price of gas, an apocalyptic myth was created, giving birth to an absurd but sacred subsidy. Chavismo is in dire need of dollars and not even the usual lenders are helping it out, so the proverbial extreme measures are taken. At a time when people are protesting daily for the progressive breakdown of national infrastructure, how do you sell, politically, a long overdue increase of fuel prices?
According to Maduro, gas subsidies represent “a loss of USD 18 billion per year,” considering both the money that could be made if domestic consumption were exported and potential savings if PDVSA wasn’t forced to import gasoline. To bring down that number over the next two years, the Maduro government will increase the price of fuel to meet “international prices.”
According to Maduro, gas subsidies represent “a loss of USD 18 billion per year.”
So, suppose your car uses 40 liters of gas and the price you have to pay is BsS 1 (or BsF 100,000 in oldspeak) per litre. That’s BsS 4. If you fill your tank twice a month, you’ll spend BsS 8. With the current minimum wage at BsS 3 (plus a food voucher of BsS 2.2), it would be The Viernes Negro Chainsaw Massacre and Venezuela would implode with only a privileged few having access to fuel.
And that’s why you get a new minimum wage, magnified beyond what it was. It covers a fuel price that’s magnified, too.
But that’s the economic side of the story. It has a political side:
In gas stations, people pay in cash (this is the only thing cash is worth for today), and that will continue to be so with the reconversión monetaria—if they do it at all, I remain a skeptic. To handle the new price, the government will give you a golden ticket, the chavista rationing card (the carnet de la patria) so you register in the motor vehicle census and get a direct subsidy, a sort of Bono Soberano to pay for gas.
I shit you not: allegedly, there will be a new device meant to scan your carnet at every gas station in the country, to make sure you deserve this subsidy. This means that every Venezuelan with a carnet (and there’s a lot of them) must provide the State with their bank accounts to get the bonus, if everything goes smoothly and chavismo doesn’t complicate things with its usual hilarity.
Allegedly, there will be a new device meant to scan your carnet at every gas station in the country.
Not impossible. A system like that isn’t even far-fetched, but it needs a lot of organization and infrastructure. D-Day is upon us and these are the same dudes that left their voters hanging when they offered money for votes. If the captahuellas to keep price-controls didn’t work for six months in Caracas, imagine electronic ports at every gas station and every dispenser in, I don’t know, Cazorla, Guárico.
And if you’re going to keep subsidizing the damned thing for two years, then what’s the point of even changing the system?
My friend: the cake is a lie. There will be no subsidy. This political pill is nothing but anesthetics so you don’t feel the economic pill. Scared fellas are going to get the carnet (falling into Maduro’s trap) and everyone will pay whatever the government says it’s the “international price,” subsidies be damned.
Now, you tell me what’s going to happen to that wonderful new minimum wage after it goes out for a walk with hyperinflation, and what that will do to the price of gas.
And tell Nicolás too, because he’s betting everything on that.
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