Makes Poverty Top Concern
By Ronald J. Morgan Aug, 2000
CARACAS, VENEZUELA -- Fresh from electoral victory and flush with increased oil revenue the government here, has turned its attention toward combating poverty and resuscitating the moribund economy.
The brash get-the-people-involved approach of President Hugo Chavez and his left Fifth Republic Party contrasts with the low-key approach of previous Venezuelan governments. This is being called an historic change in attitude by some.
But critics contend it will take more than government job programs and fiscal pump-priming to reduce poverty permanently. Seventy percent of Venezuela´s population is poor. This is despite the country´s great oil wealth with 76 billion barrels in proven oil reserves and the largest natural gas reserves in Latin America with 146 trillion cubic feet.
Oil price ups and downs, inflation, recurring recessions and government mismanagement have lead to a 20-year-long decline in national wealth. Poverty has tripled from its 23% rate in 1980 and the middle class has shrunk dramatically.
Private sector investment has steadily diminished from 32% of Gross Domestic Product in 1978 to 5% in 1999.
The historic decline of Venezuela´s economy is most visible in the number of street vendors that line the streets. Some 52% of Venezuela economically active population works in the informal sector: an economy made up of car trunk merchandise salesman, used booksellers, artisans, prepared food vendors -- thousands of operators of sidewalk stands that sell everything from batteries to inflatable swimming pools. In Venezuela they are known as buhoneros.
In the central Caracas Libertador zone there are an estimated 60,000 vendors which support 240,000 dependents. One study estimates that nationally the informal sector contributes 8% to GDP. But it is vastly more important as a last source of family income. Now President Hugo Chavez and his Fifth Republic Movement are vowing to reverse the trend and put street vendors back into salaried jobs.
An intergovernmental commission is conducting a census of the informal sector. Under study are plans to offer street vendors construction, agricultural and manufacturing jobs. It also plans to finance set up of micro-businesses, and promote formation of sevice-based cooperatives formed of electricians, plumbers and mechanics.
Previous Venezuelan governments have channeled aid to the poor through the schools. Following severe anti-liberal adjustment riots in February, 1989 President Carlos Andres Perez created the Program to Confront Poverty. President Rafael Caldera (1994-1999) created Agenda Venezuela. Both involved small subsidies to the poorest families and promoted private sector involvement and use of non-governmental organizations. Nutrition, prenatal care and child care were the focus along with programs to prevent school dropouts.
From the start the Fifth Republic has promised the poor much more. Its focus has been on jobs for the poor. A dramatic improvement in education and healthcare has also been pledged.
After taking office in February 1999, President Hugo Chavez, a former army colonel who launched a failed 1992 coup attempt in part because of disgust with perceived social inequalities, established Plan Bolivar 2000. The 35 billion Bolivar ($U.S. 50.7 million) program is a mix of military and civilian-managed programs to provide jobs throughout the country. As a result some 26 military bases have now become social service centers. In its second year of operation, the program has a goal of creating 100,000 jobs.
The previous government´s 14 social programs have been kept and 21 news ones have been added under the management of the Sole Social Fund, known as FUS which coordinates anti-poverty efforts and is head by Chavez comrade-in-arms William Farinas, a former Air Force Officer. This year the FUS has a budget of 234 billion Bolivars ($U.S. 339.1 million).
Carmen Alicia Nieto, a psycologist who works for Plan Bolivar 2000, providing counseling for victims of the December 1999 Vargas state floods, says the difference in commitment of the government to social programs is obvious. Nieto was working with Caracas street children in a government shelter when the Chavez Administration was elected . ¨There was a change immediately. They injected money so the project could succeed. There was a visible change, better food, better beds. The bathrooms were fixed and they painted the center. Employees were paid more. In the past there has been a great lack of concern for the social area. The lowest strata has always been the hardest hit.¨
The Caracas barrio of Valle-Coche has been one focus of government anti-poverty activity. The area of 320,000 people has 43,000 unemployed. An estimated 400 families earn an average of 100,000 ($U.S. 145) to 180,000 ($U.S. 260) Bolivars a month. During July 30 elections the Fifth Republic party won handily in the zone garnering 63% of the votes.
¨We´re going to reconstruct everything that is the parroquia Valle-Coche,¨ says Fifth Republic City Councilman Asdrubal Henriquez. ¨And the employees are going to be from the neighborhood.¨
The ambitious program of improvements to schools, the Valle-Coche hospital and street and stair improvements will spend 1.5 billion Bolivars ($U.S.2.2million). The objective is to create 3,000 jobs, Henriquez says. Plans also call for a new daycare center.
¨What we want is for this community to participate with us. In the past they´ve always had their political space limited.¨
One way the Fifth Republic plans to do this is by creating community cooperatives which identify improvement projects and receive financing from the city to carry them out. Henriquez says this approach will also improve the transparency of city expenditures.
¨Before they would say a pedestrian bridge cost $80 million Bolivars ($U.S.115,942) and $5 million Bolivars ($U.S. 7,246) would be stolen. Now that´s not going to happen because everyone is going to know how much things cost.¨
One of the first anti-poverty programs established by the Chavez Administration was a system of discount markets. Currently there are 322 Bolivarian Markets. In Valle-Coche the market is open Friday through Sunday from 6 a.m. to 4 p.m. and serves an average of 4,000 to 5,000 a week. Operated by the Popular Neighborhood Association of Valle, it also provides minimum wage employment to area residents.
¨We are lowering the prices 35% to 40%. In the area of meats we are lowering the cost 22% to 28%,¨says Valle-Coche alderman Jose Gregorio Blanco. ¨What has most helped the less protected classes has been the popular markets.¨
Plans are under way to begin a similar network of soup kitchens. Typical of those targeted for help is Maria Torres, 31. She began selling cigarettes from a stand outside a Caracas metro station three months ago after quiting her job at a beauty salon. ¨They wanted me to be a slave and get paid every three months,¨ She complains. Now she takes her chances in the informal economy eking an average of 3,000 Bolivars ($U.S. 4.34) a day from the cigarettes.
Her husband Antonio Torres, 31, obtained a 140,000 ($U.S. 203) Bolivar per month minimum wage job through Bolivar 2000 and works cleaning the streets. ¨At least it pays something,¨ Maria said. ¨It helps the poor people.¨
Nearby Maria Cristina Pena, 27, sells ice cream bars for a 40% comission. Her husband Antonio Jose,30, sells lights from a street side stand. Together they earn 120,000 Bolivars ($U.S.174) a month. Not enough to support four children in school, Pena complains. She and her husband plan to investigate establishing a micro-business with government assistance. In addition to the jobs programs, the Chavez administration has increased the minimum wage by 20% in July against an expected annual inflation of 15% to17% and imposed a now ended two-month firing freeze. The value added tax was also lowered from 15.5% to14.5%.
Flush with an expected $U.S. 22 billion dollars in oil revenue for the year 2000 and with government hard currency reserves at $U.S. 16.5 billion the Chavez administration has launched a massive six-month spending plan to stimulate the economy.
Dubbed the Quick Time program the goverment plans to spend 1.46 trillion Bolivars, ($U.S. 2.1 billion) on social programs, housing, highway and airport construction, new schools and industrial, agricultural and toursim development projects.
Chavez has pledged to spend the next six years rescuing Venezuela´s economy. As part of the preparation he has convened an Economic Constituent Convention which is calling for major private sector, civil society and government agencies to present recommendations on Venezuela´s economic policies.
The Fifth Republic has already moved to have its 60% congressional Patriotic Pole alliance approve enabling legislation to allow the executive branch to write some 30 new laws affecting land reform, poverty programs, hydrocarbon laws, bank and Central bank laws.
A new mixed public and private pension plan system is expected to debut within a year. It may be the most powerful addition to economic growth if it increases domestic savings as similar plans have done in Chile and Uruguay.
But not all are sure that the Bolivarian Economic Revolution has the fix for Venezuela´s economy. Some U.S 3.6 billion dollars has fled the country during the year because of uneasiness about Chavez´s policies, and fears the Fifth Republic has become too powerful. Critics lambast his often three-hour long televised populist speeches and his friendship with Fidel Castro.
¨Some government policies function on wishful thinking without the institutions to successfully carry them out. There´s desire but we have not seen reforms in institutions so they can function better with improved quality,¨ said Luis Luengo, a poverty specialist at the Andres Bello Catholic University. Luengo and other social scientists are carrying out a three-phase study of Venezuelan poverty the first part of which has been published as Project Poverty.
Luengo faults the Fifth Republic approach for being emergency program based. ¨Social policies can´t be based on battle plans. A social policy has to be based on programs that are articulated by institutions and that are present overtime and subject to evaluation.¨
Plan Bolivar 2000, Luengo contends, will have little impact on reducing poverty. ¨It´s a little less than useless. It´s an operation to attack situational problems in health and temporary employment, but not quality employment.¨
Luengo said the Chavez Administration´s pension plan proposal is its best idea in the social policy area. But he cautions an unviable plan in the financial sense could expand the informal sector rather than reduce it by increasing employee compensation costs.
Real progress in combating poverty will require better economic performance. "If there´s not sustained economic growth the perspective for a reduction in poverty is not very optimistic.¨ Luengo stresses.
For the Federation of Venezuelan Chambers of Commerce (FEDECAMARAS) the goverment needs to implement policies that increase private investment to 20% of GDP and obtain a sustained growth of 5% per year. For Neoliberal Economist Carlos Sabino such sustained growth seems unlikely because the Fifth Republic programs fail to go to the heart of Venezuelas sick oil dependent economy.
¨They´ve become involved in an economy that´s dependent on petroleum and state intervention. The idea that the state promotes economic growth with oil income. Almost all the previous governments have followed this. Chavez has not change that.¨
###
