Source: Correo del Orinoco International, 29 April 2011.
Taking advantage of an international rise in oil prices spurred by unrest in the Middle East and North Africa, President Hugo Chavez signed a new decree last Thursday that will direct a greater portion of state revenues to a range of social programs designed to improve living standards for the Venezuelan people. The decree, announced by the President during the television show La Hojilla, modifies current legislation, known as a Windfall Tax, that dedicates money generated from elevated oil prices to social welfare programs in areas such as housing, education, and employment benefits.
Previously, when the price of oil reached between $70 and $100 per barrel on the international market, 50 percent of the price difference was funneled to the government’s National Development Fund (Fonden) to be put to use for social projects. With the new law signed last week, 80 percent of the price difference between $70 and $90 per barrel will now be destined to Fonden, translating into more concrete benefits for residents of the OPEC nation. Ninety percent of the difference will likewise be handed over to social programs when the price rests between $90 and $100 and anytime the price reaches over $100, a full 95 percent of the revenue difference will be deposited in the nation’s development fund.
Last week, the price of Venezuelan crude reached more than $108, the highest level since August 2008. In 2011, the Venezuelan government formulated its budget with the price of oil calculated at $40. With the recent spike in prices, the average price for 2012 is now just under $95 per barrel. “This is a law that creates a new mechanism so that the people receive much more. It also brings us to terms with the reality of the exorbitant oil prices”, Chavez said of the new decree during a call to La Hojilla.
OIL FOR PEOPLE, NOT PROFITS
Venezuela, the fifth largest producer of crude in the world, exports some 2.5 million barrels a day and counts on the revenue generated from the oil industry for the majority of national income. Since Hugo Chavez came to power in 1999, the government has been using this wealth, traditionally concentrated in the hands of an elite minority, to fund anti-poverty and educational initiatives as well as a vast array of other social programs, known as missions.
Through these missions, the government has been able to reduce poverty by more than half over the past 12 years. Similarly, the Chavez administration has been responsible for eliminating illiteracy in the country, providing free health care to all residents, increasing university enrollment to one of the highest rates in the world, guaranteeing the availability of affordable food staples, and slashing unemployment rates. The new law, signed last week, will ensure that this trend of redistributing the nation’s oil wealth continues, Chavez affirmed, as billions of dollars will be directed towards social spending. Housing, food sovereignty initiatives and an increase in the nation’s minimum wage will form part of the costs that willbe covered by the higher oil revenues.
In addition to the signing of the new decree, on Thursday night, the Venezuelan head of state also reported that he has approved 422.8 million bolivars ($98.3 million) for housing construction across the country. Chavez also announced that the launching of the government’s new program, Mission Housing, will take place on April 30th. The new “Mega Mission” plans to construct 2 million affordable homes in the country by 2017.