Maduro hikes pump prices, devalues currency

OREANDA-NEWS. February 19, 2016. Venezuelan president Nicolas Maduro announced an increase in gasoline prices and a major currency devaluation during a rambling, hours-long speech marked by vitriol against his political opponents, the US government and the private sector.

"Charging for gasoline is a necessity," he said, acknowledging that Venezuelans pay practically nothing for fuel and calling for popular support for the increases to take effect on 19 February.

He said 91-octane gasoline would be priced at Bs1/liter, and 95-octane at Bs6/liter, large price increases that effectively make no more than a symbolic dent, however, and do not cover production costs. The revenue from the increase will go to social spending and to support state-owned oil company PdV, Maduro said.

Although he has suggested pump price increases on previous occasions, Maduro has never implemented an adjustment. The last significant pump price hike took place in 1989, sparking major riots that led to some 300 deaths.

Venezuela is in the throes of a profound economic crisis exacerbated by the plunge in the price of oil, which accounts for almost all government revenue. Shortages of food and medicine are acute. Maduro said all food production and distribution would be centralized in government hands.

In the ongoing speech, he said the "protected" currency exchange rate will drop to Bs10/\\$ from a current Bs6.30/\\$, with a second "floating" rate.

Venezuela currently has a three-tier exchange rate system marked by a huge gap with the black market rate which currently exceeds Bs1,000/\\$.

"We have to explain this to the people," he said, directing his remarks at his economic team.

He also said steps would be taken to protect employment, with targeted social subsidies and an increase in pensions.