Chavez trims budget, adds debt to counter crisis

CARACAS, (Reuters) – Venezuelan President Hugo  Chavez on Saturday almost tripled his government’s borrowing  plan and trimmed his budget to offset a slide in oil revenues,  but resisted pressure to devalue the local bolivar currency.

Chavez, a socialist who rails against capitalism, had been  widely expected to announce a package of measures to counter  the impact of the global economic crisis, which has battered  demand for the OPEC nation’s vital petroleum exports.

“These are anti-crisis measures in the socialist spirit to  protect social programs, the people and the workers,” the  former army officer said, promising government austerity.

Chavez, who won a referendum last month allowing him to  stay in office as long as he keeps winning elections, is  popular for spending oil revenues on health and education  programs for the poor majority.    During 10 years in office he has nationalized much of  Venezuela’s economy including major oil projects as part of his  drive to build a socialist state.

On Saturday, he cut the 2009 budget by 6.7 percent to $72  billion, raised the minimum wage 20 percent and increased  planned government financing to $16 billion from $5.6 billion.  And he increased a sales tax to 12 percent from 9 percent.

He vowed to reduce the salaries of top officials and slash  often lavish ministerial spending on cars and entertainment. Chavez ignored economists who recommended devaluing the  fixed rate curency, a measure that would help cover the budget  shortfall but would also increase inflation.       Instead, he said the government will further tighten  currency controls, restricting dollars destined for imports of  luxury items.

Economist Luis Vicente Leon described the package of  measures as moderate but said the government was gambling crude  prices would recover later this year.

“These are not truly deep measures, they don’t attack the  fundamental problems of the economy,” Leon told Reuters. Faced with Latin America’s highest inflation, Chavez has in  recent weeks increased pressure on business to lower prices by  taking over farms and rice mills and threatening to nationalize  the country’s top private employer, which makes food and beer. Since winning the February referendum Chavez has moved to  weaken opponents who govern key states and cities by moving  control of ports and airports to the central government.

On Saturday, he reduced Venezuela’s budgeted oil price  estimate to $40 per barrel from $60 and lowered the oil output  estimate to 3.17 million barrels a day from about 3.67 million.  More than half of government spending is financed by crude oil  revenues.

The measures need congressional approval but Chavez  loyalists dominate the legislature.

Chavez recently complained that subsidies on water,  electricity and gasoline — which is among the cheapest  anywhere in the world — unfairly helped the rich, suggesting  price inceases. He said on Saturday gasoline was too cheap at  $.03 a liter, but left the price unchanged.

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