Venezuela: 20% Minimum Salary Raise, Withdrawal from World Bank and IMF

Venezuelanalysis.com

Venezuelan President Hugo Chavez announced yesterday that the country’s minimum wage would be raised by 20%, to $286 per month, and that Venezuela would withdraw its membership from the World Bank and the International Monetary Fund. Also, Chavez said that by 2010 the Venezuelan work week will be lowered from 44 to 36 hours.

Chavez made the announcements yesterday evening, during a celebration on the evening before International Workers’ Day, May 1st.

“This is one of the highest minimum wages in all of Latin America,” said Chavez. “In many countries the minimum wage does not reach $100 today, we are at nearly $300 with the minimum salary.”

Opposition union leader, Manuel Cova, the General Secretary of the union federation CTV, said the

 wage increase was “insufficient” because it does not allow workers to afford to purchase the basic food basket, as calculated by the National Statistics Institute. Cova said what is needed instead is a both a greater increase and a general wage increase for all workers.

Chavez, though, emphasized last night that public sector workers also receive food stamps worth about $209, thus bringing the actual minimum wage for public sector workers up to $495.

The minimum wage raise will also affect retirees’ social security benefits, which are, according to Venezuela’s 1999 constitution, required to be at least as high as the minimum wage.

Chavez also pointed out that in 1996 the minimum wage was only $36, because of the over 100% inflation of that year. By 1998, the year before Chavez was elected, it was at $183, though. The low level of the minimum wage in the 1990’s, said Chavez, was due to the loan conditions that the International Monetary Fund (IMF) had imposed on Venezuela, which “imposed savage social policies” and did not allow for minimum wage increases.

Venezuela to leave IMF and World Bank

In this connection Chavez announced that Venezuela will withdraw its membership from the World Bank and the IMF. According to Chavez, Venezuela can leave these institutions because, “We do not need to go to Washington, to the Monetary Fund nor to the World Bank. We will withdraw. I want to sign the order this evening and ask that they return what is owed us.”

Venezuela’s foreign currency reserves are currently at $29 billion, plus it has a development fund, known as Fonden, which is estimated to contain another $13 billion. As such, Venezuela currently appears to have plenty of funds to cover a financial emergency.

An additional reason Venezuela can leave these two key financial institutions is that it is in the midst of setting up the Bank of the South, together with Brazil, Argentina, Bolivia, and Ecuador, which would be able to support member countries. Brazil indicated an interest in joining only recently, which would be able to provide significant assets to the new bank.

Work Week to be Lowered to 36 Hours

Chavez’s third major announcement for the International Workers’ Day was that Venezuela will begin to study how the work week can be reduced from 44 hours per week to 36 hours by the year 2010.

Vice-President Jorge Rodriguez and Labor Minister José Ramón Rivero would head up a commission, “for the study, activation, for constitutional reform and enabling law, on the new work day,” said Chavez.