Venezuela’s Maduro Announces More Currency Reforms

Puebla, Mexico, September 8, 2017 (venezuelanalysis.com) – Venezuela’s President Nicolas Maduro announced Thursday plans to tweak his country’s currency exchange system for the sixth time since taking office.

“Venezuela is going to … create a basket of currencies to free us from the dollar,” he said.

Under the proposal, Maduro said his administration will fix the value of the Bolivar to a basket of currencies. Currently, Venezuela’s controlled exchange system fixes the Bolivar’s value to the dollar, though Maduro has long accused the US of an “economic war” against Venezuela’s economy and currency.

“If they pursue us with the dollar, we’ll use the Russian rouble, the yuan, yen, the Indian rupee [or] the euro,” he said.

The change will affect Venezuela’s DICOM exchange rate, which currently sees the BsF trading for around 3,300 to the dollar, according to the Central Bank of Venezuela.

Maduro didn’t state whether the stronger controlled rate of BsF10 to the dollar will be impacted by the reform. The change is at least the sixth round of currency reforms announced since Maduro was elected in 2013.

He also announced plans to increase the minimum wage and price freezes for some consumer goods. Under the wage increase, the minimum income for a Venezuelan worker will be boosted 40 percent, from BsF250,531 to BsF325,444 per month, including food tickets. The new salaries will be implemented for public sector employees by Monday, Maduro said.

“The revolutionary government will never adopt a policy to leave the people [as] orphans,” Maduro said.

Meanwhile, the price freezes will affect around 50 basic consumer goods already subject to price controls. State media outlet AVN reported some of the products facing sale price freezes include powdered milk, canned sardines, soap, cheese, chicken, tuna, pasta and margarine. In recent years the prices of these goods have been periodically increased by price controllers, though Maduro said the current freeze will strike a blow to “speculative prices”.

He continued by describing the reform as “an agreed system of prices that marks, under an economic consensus, the maximum prices for the public sale of 50 fundamental products and services of the country, which at the moment is punctuated by economic war, liberalism and capitalism.”

Both reforms came as Maduro tabled a series of eight proposed pieces of legislation before the National Constituent Assembly (ANC). Along with proposing increased public spending on social programs such as school funding and senior pensions, Maduro also suggested increases on taxes for wealthy Venezuelans. In one of the bills, Maduro called for an expansion of the food distribution networks, the CLAPS, including allowing for the delivery of 12 million food packages to households each month. He also called for a renewed investigation into Venezuelans exploiting the country’s currency black market.

The reforms were largely welcomed by Maduro supporters, though the Communist Party of Venezuela (PCV) has argued deeper reforms are needed. In a recent article, the party’s newspaper Tribuna Popular reported it had estimated Venezuela has lost around US$18 billion in taxes since the 1990s, due to unfavourable trade deals with the US.

“Venezuela signed a set of treaties in the 1990s, which are neoliberal treaties, which establish that any transnational or multinational company based in North American territory and engaged in commercial, financial, administrative, scientific, and productive activity in Venezuela must pay utility taxes in American territory,” PCV spokesperson Yul Jabour said.

Jabour said this agreement likely affects around 300 companies operating in Venezuela that may not be paying local taxes.

“[These companies use] our territory, exploit our workers and profits and taxes just go to tax havens, which has caused a loss to the national treasury,” he said.