Economy
Official data suggest that Venezuelan households have started to experience an economic drama that includes spending cuts and other austerity measures.

As of the second half of 2008, the world crisis has not hit Venezuelans seriously -even though the government has not ruled out the possibility that the effects of the economic meltdown may appear in the future. Rather, inflation, a sort of monster that the government has failed to defeat, is having a dreadful impact on the Venezuelan economy.

At the end of 2008, the Central Bank of Venezuela (BCV) published some disappointing news: the purchasing power of the low-income sectors -which represent more than 20 percent of the population- fell 3.7 percent in real terms between November 2007 and November 2008.

However, the news was bad not only for low-income sectors, but also for all Venezuelan households in average.

According to the figures released by the official National Statistics Institute (INE) concerning the first half of 2008, the early warning signals on deteriorating purchasing power were apparent in that period. The average household income grew only 4 percent in real terms, compared to 11 percent in the same period of 2007.

Based on the data provided by the INE, the average household income in Venezuela is VEB 1,895 (USD 881.4). However, given the impact of inflation, the real average household is VEB 1,618 (USD 752.56).

According to the BCV report, Venezuela's inflation rate in 2008 was 30.9 percent, which is the largest increase in the last twelve years. Climbing consumer prices have overshadowed the economic boom recorded in recent years amidst the thriving prices of oil, which is Venezuela's major source of revenues.

The purchasing power of low-income sectors has vanished gradually in the midst of an economic boom. In May 2008, the government increased minimum wages by 30 percent. As a result, minimum wages amounted to VEB 799.23 (USD 371.73) a month, which only afforded 48.5 percent of basic expenses.

Just seven months later, one minimum wage affords only 40.3 percent of basic family expenses (including housing, food, health and education). The INE estimated that the basic family basket stood at VEB 1,979.8 (USD 920.83) in December 2008.

Under the present administration, minimum wages have increased, but inflation has climbed at a faster pace. As a result, wage raises have lost ground to skyrocketing prices.  

Under the serious impact of inflation, in December 2008, 365,592 people who had not shown any interest in working changed their minds and decided to find a job, as reported by the INE.

Translated by Gerardo Cárdenas

Suhelis Tejero Puntes
EL UNIVERSAL