Hard landing
President Chávez’s spending cuts will bite deeper than he admits
THE revolution is bust. After five years of rapid growth, based on oil-fuelled public spending, Hugo Chávez’s Venezuela has run into the buffers. The president insists that the country is shielded by “21st-century socialism” from what is essentially a crisis of capitalism. But between the lines of the modest adjustment package he announced on March 21st can be glimpsed the true gravity of the situation.
I’m only cutting a little bit, honest
Venezuela’s original 2009 budget was based on oil at $60 a barrel. That has now been revised down to a more realistic $40, although independent analysts reckon the country is producing only about two-thirds of the 3m barrels a day the government claims. Budgeted spending is to be cut by 6.7%. But if compared with actual spending in 2008, the nominal cut is around 18%. When inflation is taken into account it is over a third.
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