The stage is now set for an unconstrained increase in public spending ahead of presidential elections in October. President Hugo Chávez used the powers conferred on him by the national assembly in late 2010 to legislate by decree the removal of the debt ceiling that can be contracted by the State. The opposition Mesa de la Unidad Democrática (MUD) contends that the Chávez administration will now ramp up spending even more to fund ever-more costly ‘missions’ in order to try and buy re-election, not to mention saddling the public, and future governments, with enormous debt.
Chávez used his ‘enabling powers’ to reform the ‘organic law for the financial administration of the public sector’ to allow the government to borrow beyond the limit imposed by the ‘law of annual indebtedness’ without consulting either congress or the central bank. The official gazette explained that the reform would enable the government to respond to “unforeseen circumstances or circumstances that are difficult to foresee.” In theory, the reform only permits additional debt to be contracted in order to guarantee food sovereignty, the preservation of social investment and security or integral defence, and the restructuring of debt. In practice, this provides sufficient latitude to justify any additional spending the government wishes.
The MUD argues that the reform contravenes the government’s own (1999) constitution, article 312 of which specifically states that the government must obtain special approval to contract new debt, which must be “at a prudent level in relation to the size of the economy”. Last year, Chávez promulgated the ‘Special Complementary Indebtedness Law’, allowing the government to issue an additional BF45bn (US$10.4bn) in debt.
The biggest concern is that the latest reform does not require the government to account for the money that it chooses to borrow. The government’s reputation for the transparent use of funds precedes it: the national development fund (Fonden) is probably the largest of all of the Bolivarian Revolution’s opaque funds, where billions of dollars are shuffled to and from the state oil company Pdvsa, for instance, and also into other smaller funds ostensibly created for more specific social development projects.
Confronting insecurity
“Where is there greater public insecurity? In Venezuela or the US? I ask you, look at the figures… The Yankee empire is working with the Venezuelan opposition again.” This was the reply President Chávez gave on radio and television from Havana this week to a decision by the US State Department to warn its citizens about foreign travel to Venezuela because of the levels of violence.
It is not quite sure what figures Chávez was referring to as even his own government has released statistics showing the murder rate in Venezuela to be higher than that in the US, but what is clear is that the issue of insecurity is the main front on which the opposition presidential candidate, Henrique Capriles Radonski, will mount his attacks on Chávez. Capriles quipped this week that “There is a curfew every night and not by the government’s decision”.
Chávez said that his government was working “incredibly hard” to confront insecurity, which he said was a scourge “inherited from capitalism”, in spite of the fact that the murder rate is higher now than before he came to power in 1999 [WR-12-13]. He also maintained that insecurity was not caused entirely by “the internal situation but by the international situation”.
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