Venezuela tries economic fix before polls

March 22, 2013 at 9:27 AM
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CARACAS, Venezuela, March 22 (UPI) -- Venezuelan Acting President Nicolas Maduro introduced economic reforms, including a second devaluation in less than two months, as part of the caretaker government's effort to shore up the economy before presidential elections April 14.

Maduro is the current favorite of the large popular constituency that gave President Hugo Chavez a new term in office even as he was undergoing treatment for cancer that led to his death March 5.

But the Chavez portege, former vice president and foreign minister in the late firebrand's prematurely terminated presidency, is facing a growing challenge from opposition contender Henrique Capriles.

Capriles accused Maduro of undoing through his economic measures 14 years of work by Chavez -- an odd indictment of the acting president given Capriles' frequent vows to dismantle the late leader's Bolivarian revolution.

Venezuela's current fiscal state remains a mystery to most independent economists interviewed or writing in the media. A major oil producer, Venezuela is in recession for a third year running but the government says growth is showing an upswing.

Critics say large public spending that includes generous subsidies has kept the lid on public discontent. Defenders of the Chavez presidency say Venezuelans, with the exception of a small group of elites, are better off than ever before.

Maduro's latest fiscal fix also received mixed reaction, some very positive, from bankers and financial analysts. A Bank of America Corp. report on the latest devaluation said the new bolivar-U.S. dollar parity would help Caracas to narrow its fiscal deficit.

In February Venezuela devalued the bolivar by 32 percent, an action seen by ratings experts as a boost to government efforts to cut the 2012 fiscal deficit, estimated at 11 percent of national earnings by Moody's.

The Bank of America analysis indicated the February devaluation narrowed the deficit to 6.2 percent of Venezuela's gross domestic product and Maduro's new measures could reduce that further to 3.9 percent under certain conditions.

At the heart of new reforms less than a month before the election is a system of auctioning the U.S. dollar for access by the country's importers. Government analysts see the measure as helpful, the opposition disagrees.

"What the government of Maduro decided was another devaluation, another blow in the heart of Venezuelans," Capriles told an election rally.

"Once again the government which systematically lies every day to the people has implemented a new devaluation of the currency which means prices are going to be even dearer, and what you can't get now is going to be even more difficult to get hold of," Capriles said.

"Nicolas in a hundred days you are destroying what in the 14 years the president of the Republic achieved. Can you imagine another six years of this? They are not managing Venezuela, they are destroying Venezuela," he said.

Capriles, grandson of Jewish Holocaust survivors and a self-professed devout Catholic, is the governor of Miranda, the second most populous of Venezuela's 23 states, after Zulia. He challenged Chavez to presidency in last year's election but lost.

Capriles called on Venezuelans to elect him, arguing the poll "is not a match, it's the country which is at stake, the lives of our families and our children."

He said the election offered Venezuelans a historic opportunity to change the course of their country.

Capriles pledged to adjust minimum salary up by 40 percent and reverse Maduro's economic package, El Universal said on its website.

Venezuela "has everything" and the only thing missing is a fair government, Capriles said.

Addressing public servants, Capriles said, "Those who feel uncertainty must trust in me. The time will come for freedom rather than fear."

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