Venezuela's President Announces $2 Billion In Social Spending [and 22 percent Budget Cut]

Some Yahoo ^ | Thu Feb 28,11:43 PM ET

[DeaconBenjamin]

CARACAS , Venezuela (AP)--President Hugo Chavez announced $2 billion in social spending -aimed at creating jobs, guaranteeing health care and education and building homes -to help compensate for a currency devaluation that has affected citizens' buying power.

In a late night television address Thursday, Chavez acknowledged that keeping inflation down would be difficult this year after the government abandoned a fixed-currency exchange system. The Venezuelan bolivar has plunged about 30% to the U.S. dollar after a free-floating exchange system took effect Feb. 13 .

Chavez, who was elected in 1998 with an overwhelming mandate to help the poor, has hailed controlling inflation as one of his key accomplishments. Last year, inflation was about 12%, the lowest level in more than a decade.

Venezuela 's economy has taken a downturn as a global economic slump dampens demand for crude oil. The impoverished South American country depends on oil for 40% of government income and 80% of export revenue.

Chavez said almost $900 million (900 billion bolivars) will go toward education, food and health care.

The government will spend $1 billion to construct homes for more than 130,000 families and repair schools and hospitals. It will also invest $190 million to support small and medium businesses, granting them loans under preferential financial conditions, among other measures.

The funds for small and medium businesses will come out of central bank foreign exchange gains, Chavez said, adding that the initiatives should create about 250,000 new jobs this year. The government estimates that unemployment is about 12%.

Chavez again promised to moderate his verbal attacks on critics such as the news media, Roman Catholic Church and business leaders. The opposition blames his combative, leftist rhetoric for spooking investors and prompting capital flight, which reached about $100 million a day before the free-float currency exchange system took effect.

Along with the new exchange system, Chavez announced a 22% budget cut and 7% public spending reduction to help bridge a projected $11 billion fiscal deficit. He has not provided many details on the spending cuts.

[DeaconBenjamin]

How come up with a 22 percent budget cut? Simple. Liquidate all government and military officials who cannot be proven loyal to the regime. Eliminate their mechanisms for illicit profit from government revenues. That should cover it.

The funds for small and medium businesses will come out of central bank foreign exchange gains. Neat trick.

[DeaconBenjamin]

PING

[JerseyHighlander]

The Venezuelan Central Bank shorted its own currency didn't they. I wonder how far out that contract was, $190 million is a large sum, the bank must have played the currency markets a week or two before going public with the conversion rate changes.

[Cincinatus' Wife]

With the polls showing his popularity around 20%, so he's trying to hold on to supporters.

Chavez said almost $900 million (900 billion bolivars) will go toward education, food and health care.

Chavez's Bolivarian school system, with his new and improved curriculum praising him
which includes military training ala Castro. I guess the govt. will be handing out rice and beans in a bag next.
Now the Venezualns will pay for those Cuban doctors (and intelligence officers) that Castro sent
there in exchange for oil. Won't be too long now and we'll have Cuba II.