Venezuela's '87 budget slashes the role of oil
After railing for two years against Venezuela's ``oil dependency,'' President Jaime Lusinchi now has to slash the government's reliance on oil income, marking a dramatic change from oil-fueled spending sprees of the last dozen years. ``Venezuela is giving up its dependence on only one product, petroleum,'' says Labor Minister Sim'on Antoni Pav'an.
The government's proposed 1987 budget is based only 35 percent on oil revenues, down from 60 percent in 1986 and from as much as 80 percent in past years.
During the 1970s, the government's biggest worry was how to spend oil profits. Former President Carlos Andr'es P'erez promised to ``administer the abundance with the mentality of scarcity,'' but his government and that of his successor, Luis Herrera Camp'ins, were marked by extravagance and charges of corruption.
Venezuelan economist Robert Bottome estimates that as much as $100 billion was frittered away under Per'ez and Herrera. President Lusinchi, who took office in 1984, inherited a depressed economy, a devalued currency, a combined public and private foreign debt of $35 billion -- and tumbling oil prices.
``You don't need to be an economist to realize that a country like ours, which depends on oil for more than 95 percent of its foreign earnings and 60 percent of its budget revenues, is going to have enormous difficulties when the price is cut in half,'' says Energy Minister Arturo Hern'andez Grisanti.
The budget aims to reduce imports and boost exports of aluminum, steel, iron, and coal. Venezuela will seek $800 million in foreign loans to finance new investments in aluminum and steel.
The $17.2 billion budget leaves government spending unchanged, even though it assumes oil revenues will be 31 percent lower than the '86 budget projection.
Taxes would have to rise from 33 to 46 percent of revenues. This reflects Mr. Lusinchi's need for labor union support as Venezuela heads into a presidential campaign year. Although he can't be reelected, he wants to pick his successor and needs the help of the Venezuelan Workers Confederation. This means preserving a big jobs program in the budget.
The government expects to run a $3.2 billion deficit. Some economists say the deficit could spark higher inflation, but consider it necessary to ease an eight-year recession.