TV urges government to cut state spending as inflation hits 30.9 percent

Caracas Daily Journal (Jeremy Morgan): Inflation hit an annual rate of 30.9 percent last year, according to the Venezuelan Central Bank (BCV), almost half as much again as the already high 22.5 percent recorded for 2007.

Furthermore, the figure was above the forecast for inflation in 2008 of "about 27 percent" made by Finance Minister Ali Rodriguez Araque. Shortly after taking office, Rodriguez Araque raised the official inflation target from a never likely 11 percent set by his predecessor to 19.5 percent. In the end, both targets were holed well below the water line.

Price rises averaged 2.4 percent a month through 2008. As usual, inflationary pressures accelerated towards and during the festive season, with prices rising by an estimated 2.6 percent in December. The increase in the cost of living was led by food and drink (up 3.9 percent), bills in restaurants and hotels (3.8 percent) and transport (three percent). Confirmation that inflation shot up sharply last year came as both sides of industry prepared for the annual round of negotiations on collective bargaining agreements. Economists warn that seemingly inevitable large pay awards would boost inflation, which they already regard as the potential Achilles Heel of the government's economic policy.

President Hugo Chavez has urged workers to tighten belts, to which the obvious answer is why should they when gaining control of inflation is the government's task. Venezuelan Workers Confederation Secretary General Manuel Cova, who used to be a highly vocal critic of the government, returned to the fray. He said the government didn’t have the moral authority to demand austerity and cuts for the workers. Cova called for the government to cut presidential spending -- Chavez is a peripatetic traveler, always on the move to one part of the world or another -- and state expenditure. In particular, he centered on government spending for military aircraft and other war materials.

Unofficial estimates suggest that Chavez has placed orders for weapons worth at least $4 billion, and possibly half as much again, with Russian suppliers. The latest development is an agreement on three passenger aircraft, the purpose of which remains unclear. The arms shopping list is almost endless, starting with 100,000 assault rifles and extending to jet fighter bombers, helicopters, tanks, radar systems, and navy vessels. Chavez also intends to purchase three submarines from Russia.

The inevitable 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.

Chavez 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 Chavez will continue to depict the United States as a foe when Barack Obama assumes the presidency later this month.