Venezuela’s Poor May Get Free Loans

The president of Venezuela wants state banks to grant interest-free loans to poor people looking to start small businesses.

“We want to give incentives. . . . Those who pay back on time will get a discount, and those who cancel before expiring will get a bigger discount,” President Hugo Chavez said Thursday during an economic forum. “This is necessary to pull people out of misery, poverty.”

Chavez said the idea was inspired by similar initiatives in Arab countries. Chavez, who returned early Thursday morning from a four-day visit to Saudi Arabia and Qatar, said details for the plan have yet to be decided.

Chavez has taken other steps recently to make credit more accessible to Venezuela’s poor, about 80% of the population. He created a People’s Bank, designed to grant low-interest loans to microbusinesses and announced plans to found a Women’s Bank and a Development Bank.

By promising to spread the country’s vast oil wealth and dismantle what he calls a corrupt political elite, Chavez has earned the adoration of poor Venezuelans.

Enrique Iglesias of Uraguay, president of the Inter-American Development Bank, told the forum that the interest-free loan initiative had no precedent in Latin America but would be “perfectly viable” if backed by genuine funds.

Iglesias said his bank is willing to lend Venezuela up to $600 million a year for the next three years. So far, the bank will lend Venezuela $300 million this year for projects ranging from reforming the judicial system to combating crime, Iglesias said.

“We would like to lend more to Venezuela, which has high credibility. It has one of the lowest foreign debts in Latin America. . . . It’s a perfectly solid country for loans. I wish they would ask us for more loans,” said Iglesias.

Buoyed by record-high oil prices, Chavez’s government spent its way out of a crippling economic recession last year. The economy grew 3.2% in 2000 after shrinking 6.1% in 1999. The government and the bank predict 5% growth this year.

Despite the economic growth, Chavez has not shaken bitter opposition from most of Venezuela’s business leaders, who predict the growth will collapse as soon as oil prices fall.

A former military officer who led a failed coup in 1992, Chavez was elected in 1998 with overwhelming support from the poor and deep resentment from the upper and middle classes, who feared his reformist zeal would alienate investors.