Venezuela Seethes Amid Economic Crisis

The shelves in Miguel Blanco’s small general store have been empty for eight months--since looters went on a rampage in February.

Since then Blanco has eked out a living selling meat at his store in Pinto Salinas, a tough neighborhood of shanties and public housing perched in the foothills overlooking Caracas.

“I hope to build my stock back up little by little,” Blanco, in a white butcher’s apron, said from behind the meat counter of his otherwise empty store.

But Blanco admits that he is uneasy. More and more of his neighbors in Pinto Salinas are without work, and others are struggling to stretch stagnant salaries against inflation to put dinner on the table every day.

“Yes, the fear is there,” Blanco said, voicing the underlying tension that persists months after Venezuela’s worst outbreak of violence in decades.

On Feb. 27 public transport fares rose 30% in one of the first steps taken by newly elected President Carlos Andres Perez to do away with the massive state subsidies that for decades had been paid by Venezuela’s oil bonanza.

For weeks, in anticipation of major price adjustments, merchants stockpiled basic food stuffs--cornmeal, rice, sugar and coffee--leaving store shelves empty and consumers desperate.

By nightfall on the 27th, hordes wildly roamed the streets, looting stores throughout the city.

On the 28th, Perez declared a state of emergency and called out the army. More than 300 people died as military police swept through the city, using the force of arms to restore order.

Perez, in a recent breakfast with journalists, said the economic strains, stemming in part from Venezuela’s efforts to service its $29-billion foreign debt, still pose “serious questions regarding social peace and, as a result, about public order.

“Violence is there. You can almost feel it,” Perez said.

But Perez said he also feels people understand that the sacrifice they are making is unavoidable--that by next year Venezuelans will begin to see the fruits of their efforts.

For others, however, Venezuela will be stuck in economic doldrums until 1992 as the state carries out the traumatic task of dismantling highly inefficient public enterprises and of forcing once-sheltered industries to adapt to a highly competitive world market.

Chi-Yi Chen, an economist at the Andres Bello Catholic University, said that for this year Venezuela’s economy will shrink by 8% to 10%.

“We aren’t very optimistic for next year either,” he said. “It also should have negative growth.”

More than half of Venezuela’s economy is formed by the state and in 1990 Perez’s government plans to reduce state spending by 25% to 30% in real terms, Chen said.

Leaders of Venezuela’s main labor group, the Confederation of Venezuelan Workers, claim that the state intends to dismiss 120,000 workers, cutting the state work force by 10%.

Perez, while admitting that the state employment rolls need to be cut by at least 10%, has refused to say what he plans.

Juan Jose Delpino, an influential former labor leader, said wages have lost 70% of their purchasing power while 20% of the work force is idle, with more firings expected soon when a decree prohibiting dismissals is lifted..

Foreign Minister Reinaldo Figueredo said recently that for Venezuela’s economic adjustment to work, the country needs to win a significant reduction of its foreign debt.

Figueredo, an economist, said banks regard 5% as a significant debt reduction while Venezuela is aiming for a 50% reduction.

Venezuela’s debt team has begun seeking relief in negotiations with creditor banks.

The country foresees a $1-billion annual financing gap over the next four to five years unless agreement is reached with creditor banks.

Chen said if banks agree to allow Venezuela to reduce its net transfers by 30% to 40%, the country could carry out its economic adjustment program.