Inflation Rages, Wages Crimped in Venezuela As Chavez Gives Away $53 Billion

Venezuela's inflation rate – reputedly by far the highest of any country in Latin America – hit an annual 30.9% last year, almost half as much again as the already high 22.5% recorded in 2007. The figure, announced by the Venezuelan Central Bank, was significantly higher than the estimate for 2008 of "about 27%" made by Finance Minister Alí Rodríguez Araque last month. Furthermore, it badly overshadowed his target of 19.5% for the full year – and it massively dwarfed the 11 percent set by his predecessor.

Economists have warned that unless the government gets a grip on price rises, inflation could implode the economy – and all the more so under the strains produced by a dramatic fall in oil prices and demand in the wake of the global financial crisis. Adding to the pressure, negotiations on the annual round of collective bargaining agreements are looming on the horizon. Many unions have already said they'll aim for 35%, and some are talking in terms of 40%.

Apparently aware of the threat posed by inflation, President Hugo Chávez has urged workers to exercise austerity and restraint in the face of the world financial turmoil. The robust answer to that from Venezuelan Workers Confederation Secretary General Manuel Cova was that the government should put its own affairs in order. Cova, a long-time critic of Chávez who cooperated in orchestrating a two-month national strike around the turn of 2002-03, said the government didn't have the moral authority to urge the workers to austerity. Instead, he said, the government should cut spending on the presidency and arms purchases and reduce the "gifts and donations" to Bolivia, Ecuador, Cuba and Nicaragua.

Julio Borges, head of opposition political party Primero Justicia, calculated that President Chávez has given away $53 billion to other countries as of the end of 2008. That amount includes what has already been given and promised money to other nations in the 10 years Chavez has held office.

In addition, Chávez is estimated to have placed orders worth at least $4 billion with Russian weapons suppliers. The Latin American countries cited by Cova receive oil at discount prices or on long-term credit and are governed by leaders that Chávez deems to be his closest allies in the region. The list of arms orders placed with Russian companies began with 100,000 assault rifles and keeps on growing, including jet fighter bombers, helicopters, tanks, radar systems, and navy vessels. Chávez also intends to purchase three submarines from Russia.

Inevitably, the question is what all this is actually for. Venezuelans see themselves as a people without enemies, so the arms spending spree raises more than a few eyebrows, and all the more so amid warnings of hard times ahead as the world financial crisis squeezes oil demand and prices.

Chávez has repeatedly claimed that senior officials in Washington are plotting to assassinate him, invade Venezuela and seize its oil riches. The Bush Administration just as often denied any such plan was afoot. It remains to be seen whether Chávez will continue to depict the United States as a foe when Barack Obama assumes the presidency later this month.