In Venezuela, Cheap Gasoline Prices Stir Debate

In Venezuela, Cheap Gasoline Prices Stir Debate

By Jim Wyss, The Miami Herald

BOGOTA — When Venezuela recently announced it was considering raising the price of the world’s cheapest gasoline, it didn’t spark a rush to the pumps. Such threats have come and gone in the past and still it’s cheaper to buy a gallon of gas than a bottle of water.

Even as fuel subsidies cost the country an estimated $12-$15 billion a year and have spawned powerful smuggling rings, the administration has been reluctant to budge.

At the root of the inaction is the political cost for an administration that has seen its approval rates plummet and told its followers that cheap gas is a birthright in a country with the world’s largest oil reserves.

There are also fears that increasing prices might spark a repeat of the 1989 Caracazo riots, which were brought on, in part, by fuel and transportation hikes, said Victor Alvarez, a researcher and economist at the Centro Internacional Miranda think-tank.

In reality, however, the subsidies are benefiting smugglers and the car-owning middle class even as they deprive the needy of resources, he said.

“What’s truly anti-populist and reactionary is to maintain a subsidy that is hurting the poor,” he said during a conference Thursday titled “Gasoline prices: the need and consequences of an adjustment” broadcast by the Ultimas Noticias newspaper.

Gasoline costs roughly five cents a gallon in Venezuela. A vehicle that might cost $60 to fill in the United States could be tanked in the South American nation for less than a dollar. By that calculation, a family that fills its car once a week benefits from subsidies of more than $3,000 a year, Alvarez said, even as “the people who really need it are those Venezuelans who have to walk — not families with three, four, or five cars.”

The debate comes as the administration is trying to deal with its subsidy problem amid a flailing economy. The socialist administration has price controls on a wide array of products, which has spawned widespread smuggling. The government estimates that from 40 to 50 percent of all goods are spirited into neighboring Colombia where they can fetch five times more money.

That’s led to hoarding, speculation, and shortages of even basic goods. It’s also contributed to the country’s punishing 62 percent inflation rate.

On Thursday, the government said that since it stepped up its efforts to crack down on contraband less than three weeks ago, it had seized 641 tons of food, 308 tons of cement and iron re-bar, and more than 100 gallons of fuel.

And more controls are in the works. The government plans to set up cameras along the border and roll out thumb-print scanners at grocery stores by November to cut down on hoarding. The plans for biometric control have raised hackles and drawn charges that the socialist administration wants to instate Cuba-style rationing.

Venezuela’s gasoline prices haven’t budged in 17 years, but rumors about an imminent increase are frequent. The latest round of speculation began early this month when the head of the state-run PDVSA oil company Rafael Ramirez, said the president was considering a “national debate” about raising prices.

“We’re the country that consumes more gas per capita in the world and we have the cheapest prices on the planet,” he said at the time. But Ramirez also assured the nation that prices would not match international levels.

With National Assembly elections slated for next year and Maduro’s approval rating already in the dumps, some believe the gas hike isn’t imminent.

“The government is unlikely to undertake politically difficult policy measures, including a gasoline price hike, given its fears over associated political costs,” Risa Grais-Targow, an analyst with the Eurasia Group, wrote in Thursday’s edition of the Inter-American Dialogue‘s “Latin America Energy Advisor.”

Photo via WikiCommons

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