Chávez's October takeover of the Metropolitan Police helped trigger the now 36-day strike. The Supreme Court later ruled the military takeover illegal, but the army began making gestures Sunday to defy the court order and regain control of the law enforcement agency. ''The officers are totally kidnapped,'' said Luis Delgado, chief of the police motorcycle squad.
Delgado said soldiers arrived Sunday afternoon and refused police officers' access to their motorcycles. Chávez has said he is considering martial law to try to break the strike and halt escalating political violence. ``Whatever moves we have to make, we'll make them. . . . Rest assured my right hand will not shake -- much less my left -- when I have to make these decisions.''***
PRIVATE FINANCE
Most corporations will be strongly affected by the aftermath of the strike; receivables will be difficult to collect, making payables hard to meet. Banking system is likely to collapse, as many credits will be either uncollectable or delayed. This will force the Banking system to create a physical reserve at the Central Bank to cover potential losses, draining liquidity from the system. It is expected that many companies will enter a payment moratorium process or declare bankruptcy.
PUBLIC FINANCE
The December strike represents 3 GDP points and the Government faces a strong financial crisis due to: · PDVSA not being able to produce & sell oil during December and the next 4 months. · VAT tax revenue reduction by 80% due to the lack of sales during December. This will be perceived in January, and should the situation extend to January then the following months will also result in a strong income reduction. · Income Tax proceeds for the period ending December 31st due in March will be reduced by the impact of corporations' losses in December, traditionally the strongest selling month. This may result in zero tax payable for many corporations. · Unemployment is likely to rise, increasing the negative impact on the Government's cashflow. · Fiscal measures will be required in order to restore the economic situation, thus reducing Government revenue. · Taxpayers are looking for ways to avoid or withhold payment of taxes due, including VAT. Many are calling for tax payment disobedience. The above factors create a very complicated situation for the Government, which does not leave many options open, among them: · Maxi devaluation to compensate internal expenditure · Application to WB and IMF for relief support (unlikely due to experience with Argentina's recent crisis) ·Issue of Venezuelan Debt papers at high interest cost · Deferral of payment of foreign and internal debt - It is noteworthy that the Government has decided to ignore the smuggling from Colombia - truckloads -, in particular via San Antonio, as a way to soften the shortage impact in the Andean region. In the long run, this will have a negative impact on the economy.
There is not a clear understanding by the Government Authorities of the predicament they face. They still apply short term strategies to maintain power (i.e. how to or what to do from now until January 6th. Then, to achieve this goal they sacrifice foreign currency reserves in order to pay and import fuel (Lula is paying back the economic support receive to meet presidential campaign expenses), food (rice from Dominican Republic who complies with the request despite the fact they import the grain, looking forward to a commitment in terms of oil supply) . Pressure is also applied to Multinationals in order to keep market supply i.e. Cargill has maintained supply and in cases, increased imports. Parmalat has opened plants in order to process and supply milk, Brink's has maintained their operation despite poor security and guarantee of fuel supply, not realizing that should Government succeed into maintaining power, the economy will be devastated and most likely free enterprise, like in Cuba will cease.***