Facing a recession and plummeting crude prices, Venezuelan President Nicolás Maduro on Wednesday said he was willing to take tough steps to steady the economy, including raising domestic gasoline prices — the world’s cheapest — and loosening a three-tiered exchange rate system.
The announcements come as Venezuela’s economy is expected to shrink 7 percent this year and shortages of basic goods and food have led to massive shopping lines and a surly mood.
In his annual address to the National Assembly, Maduro blamed his political foes for waging “economic warfare” in hopes of destabilizing the administration. But he also said he was willing to take measures to build a “firewall” around the socialist economic model.
Among the measures is a proposal to raise gasoline prices this year. Cheap gas is considered a birthright in a country that sits on the world’s largest crude reserves, and attempts to tamper with it in the past have fueled social unrest.
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But Maduro said selling gasoline at 5 cents a gallon was no longer sustainable and that he was willing to be “crucified” if necessary but “we need to move to a regime where the prices are balanced and just.”
He also announced the liberalization of the three-tiered exchange rate system that critics say has driven corruption and speculation. The government will still exchange bolivares at 6.3 to the dollar for critical imports, such as food and medicine, but it will move all other transactions to free-floating exchanges.
The shift will essentially formalize the black market dollar rate — which the vast majority of individuals and companies already rely on, and which has been trading near 177 bolivares to the dollar.
That change could be another source of unrest as it implies a devaluation for individuals and companies who hoped to exchange funds at the preferential rates.
It’s still unclear, however, how Venezuela hopes to make up the budget shortfall produced by the collapse in crude prices. Venezuela’s crude hit $39 this week, down from $98 in 2013. The administration had created its 2015 budget at a price of $60 a barrel.
But Maduro said there would be no budget cuts or other economic measures that would hurt Venezuelans. Instead, he suggested that tax reform, import substitutions and loans from China and other allies would fill in the gap.
He also announced he was raising wages and pensions by 15 percent and expanding scholarship and housing programs.
“Yes we have fewer dollars,” he said. “But God will provide.”
Maduro defended the country’s socialist model, saying it had helped protect the nation’s neediest even during these dire economic times. Although the economy shrunk 2.3 percent in 2014 and inflation hit a record 64 percent, Maduro said the country’s pro-worker policies had reduced unemployment from 5.9 percent in 2013 to 5.5 percent last year. In addition, the gap between rich and poor also narrowed, he said.
In the more than two-hour speech, Maduro struck a defiant tone, warning his opposition foes to quit trying to undermine the country. He blamed food shortage on speculation, hoarding and an international plan to unseat the 15-year-old socialist administration.
He also said that plummeting crude prices are part of a U.S. campaign against Russia, Iran and Venezuela.
“Imagine if the United States of America controlled Venezuela’s oil fields again,” he said. “They use oil as a geopolitical weapon to gain a dominant position in the world.”
Maduro said that on Thursday he would step up inspections of distributors and producers.
“Whoever tries to sabotage us, we will squeeze them with the full force of the law,” he said.
The opposition has been itching for a fight and has called for protests beginning Friday.
“Today more than ever, the conditions exist for this regime to leave the country,” National Assembly Deputy Juan Pablo García said in a statement before Maduro’s speech. “Venezuelans want to rebuild this country which has been destroyed by those who are in power.”
Maduro dared the opposition to present cogent plans rather than take to the streets. Last year, anti-government protests lead to 43 deaths on both sides of the political divide. He also predicted that the ruling PSUV party would emerge victorious in congressional elections later this year.
“We have not been defeated and we will not be defeated by any conspiracy or economic war,” he said. “We have the capacity to be reborn.”