Venezuelan president to curb fuel subsidies

Venezuelan President Nicolás Maduro

Venezuela’s president, Nicolas Maduro has said its subsidised fuel prices should rise to stop smugglers cheating the country out of billions of dollars.

“Gasoline must be sold at an international price to stop smuggling to Colombia and the Caribbean,” Nicolás Maduro said in a televised address.

Like many oil producing nations, Venezuela offers its citizens heavily subsidised petrol.

A fuel price rise in 1989 caused deadly riots in the capital, Caracas.

Increase government revenue
Venezuela’s economy is in free fall, with the International Monetary Fund predicting inflation rates will reach a million percent this year, but the price of fuel has barely changed.

The price of a litre of petrol in Venezuela currently stands at one bolivar. On the black market, Venezuelans pay more than 4m bolivares for one US dollar.

That means that for the equivalent of one dollar, Venezuelans can fill the tank of a medium-sized car about 720 times.

Smuggling the subsidised fuel from Venezuela into neighboring countries, where prices are much higher, is big business.

Venezuela loses $18bn to fuel smuggling annually, according to government figures.

President Maduro says adapting Venezuelan fuel prices to international levels will stamp out smuggling.

The move is part of a wider plan to increase government revenue in the face of falling oil production, Venezuela’s main export income.

How the scheme works
President Maduro said “only those individuals who don’t answer the call to register will have to pay fuel at international prices”.

According to him, all Venezuelans who hold the ‘Fatherland ID’, a government-issued identity card introduced by his administration in 2017, will continue to receive “direct subsidies” for “about two years”.

However, many Venezuelans opposed to Mr Maduro’s government have refused to get the ID cards, alleging they are used by officials to keep tabs on them.

The price rise is therefore expected to hit opponents of President Maduro in greater numbers than those who support him.

President Maduro said he would announce further details of how the new subsidies scheme would work in the coming days. It is expected to come into effect on 20 August.

Fatherland ID
President Maduro introduced the new ID card in January 2017 arguing it would serve to make his socialist government’s social programmes more effective.

Getting the ID is free and voluntary for anyone over 15 but those who apply have to answer a series of questions about their socio-economic status and what state benefits, if any, they are receiving.

According to government figures, by January 2018, 16.5 million Venezuelans out of 31.5 million citizens had applied for a “Fatherland ID”.

Only those who are in possession of the ID can apply to receive subsidised food parcels and other state benefits.

Government critics opposed the introduction of the Fatherland ID from the start, arguing that there was no need for it as Venezuelans already had government-issued ID cards.

They said that it was a way to restrict the hand-out of state benefits to government supporters. They also fear that the government uses the Fatherland ID to collect information on citizens.

Ending smuggling
This new measure is unlikely going to end smuggling as smugglers who hold a Fatherland ID or apply for one will still be able to buy fuel at rock bottom prices and sell it at a massive profit in Colombia and other countries.

Some opposition politicians fear that the measure will be used as a way to introduce petrol rationing through the back door by limiting the amount each individual can buy on his Fatherland ID. But so far no limits on the amount of petrol people can buy have been announced.

Controversial fuel price rises
Venezuelans are very car-dependent. It is not unusual for families to have multiple cars and for them to drive long distances to work.

For those who cannot afford cars, getting around has become increasingly difficult. Public transport is poor and has worsened in recent years as a lack of maintenance has led to a shortage of public buses.

Venezuelans complain about having to queue to get on trucks previously used to transport livestock. Many spend hours commuting to and from work.

A rise in the price of fuel would not just hit those who drive their own cars as companies running bus routes would likely pass on the price hike to their customers.

There have been very few fuel price rises since 1989 when such a rise, amid other austerity measures, sparked massive riots in Caracas and its environs.

BBC/Nneka Ukachukwu/Lateefah Ibrahim