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Last Updated: Sunday, 29 June, 2003, 16:41 GMT 17:41 UK
Venezuela's economic legacy
By Mike Ceaser
Cabimas, Venezuela

Last December oil workers went on strike in an unsuccessful attempt to force out leftist President Hugo Chavez. Six months on, BBC News Online takes a look at the economic legacy.

Business is back to normal at Ramon Gutierrez's candy and soft drink shack located outside the gate of the petroleum port here on Lake Maracaibo.

Ramon Gutierrez
Mr Gutierrez said his business almost went bust

"Things are great," said Gutierrez, as oil workers on their way in and out during a shift change stopped for sugar breaks. "There are lots of people working."

Indeed, Venezuelan petroleum production, much of it sucked from beneath the bed of South America's largest lake, has neared or even surpassed the 3.2 million barrel daily volumes produced before December.

This was the month when tanker crews and oil managers quit working in an unsuccessful attempt to force out leftist President Hugo Chavez.

During the strike, Mr Gutierrez said his 50-year-old business almost went broke as plants shut and fewer workers hurried straight home after long shifts.

The government broke the work stoppage and fired some 18,000 employees of the state oil company Petroleum of Venezuela, or PDVSA.

But the government amazed observers inside and outside of the country by restoring normal production within just a few months.

Soaring unemployment

But if Mr Gutierrez and the oil industry, which provides most of Venezuela's foreign exchange income, are working again, much of the rest of this nation of 24 million people is not.

Strikers in Venezuela
Unemployment has surged since the strike
Still reeling from the two-month petroleum strike, as well as what the opposition calls four years of economic mismanagement by Mr Chavez, unemployment has surged to about 25%.

Meanwhile, the oil strike shrank the economy by 29% during this year's first quarter - after shrinking 8% last year.

The bolivar currency, which just last December traded at 1,300 to the US dollar, has plummeted to nearly half that on the black market.

"There's no life here," lamented Leonardo Tapia, 34, who sells clothing in an outdoor market in the western city of Maracaibo.

A controlled economy

To limit capital flight, in February the government implemented exchange controls fixing the bolivar at an official rate of 1,600 to the dollar.

The controls also forced companies wishing to import products to purchase foreign currency through a government agency, Cadivi.

Foreign reserves have recovered, but businesspeople complain that the government has provided dollars so slowly that many imported items are running short.

Telephone shops say that some accessories are no longer arriving, while pharmacies report spot shortages of medicines.

"Every day, the inventory is running out," said the representative of a bicycle assembler who was waiting for an appointment in the exchange control agency Caracas office building.

"Until now there's (no dollars)."

No more imports?

Perhaps more worrisome for Venezuela's large Italian-immigrant population, several flour mills have had to shut down because they cannot buy dollars to import wheat.

Venezuelian President Hugo Chavez
Mr Chavez wants to reduce imports
Last year, Venezuela imported about US$12 billion in goods, but during its first four months of existence, Cadivi issued only a little more than $500 million in currency - a half-month's diet even at last year's recession-slowed rate.

While Venezuela's government is notoriously bureaucratic, some suspect a political motive behind the delays.

Mr Chavez has vowed that his government would not provide "a single dollar for coup-mongers" - and thousands of Venezuelan businesses shut down in support of the December petroleum strike.

The exchange crisis has even impacted Tapia, the clothing street merchant. He used to sell imported clothing, but the bolivar's plummet means he can no longer afford to.

That's fine with the Chavez government, which is advocating domestic production to replace imports and employ Venezuelans.

Already, the government has a launched an urban gardening program and announced plans to manufacture newsprint.

And while few dispute that Venezuela, a huge and fertile nation which nevertheless imports most of its food, would benefit by growing and producing more at home, a shiftover will not happen quickly.

Subsistence survival

While they wait, thousands of Venezuelans are crowding this oil-rich nation's sidewalks trying to earn a few bolivars by selling candy bars or renting telephones.

Until change comes, Venezuela will remain stuck with its traditional oil-dependant economy, which has made Lake Maracaibo one of the continent's most polluted and left two-thirds of Venezuela's 24 million people mired in poverty.

It is also unclear how much time Chavez will have to transform his nation.

While Chavez has promised to rule until 2021, the opposition is gearing up for a referendum on Chavez's rule which can take place after 19 August.

It's clear that the economic suffering will play an important role in deciding the voting's outcome.

Pact to end Venezuela violence
29 May 03 |  Americas
Country profile: Venezuela
24 May 03 |  Country profiles

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