By Jeremy Morgan
Latin American Herald Tribune staff

CARACAS – The oil-fuelled party looks to be well and truly over for the great bulk of people in Venezuela – and, as is usual, it’s going to be the poorer ones who stand to get it most in the neck. If anything, it would seem they already are.

Even as it struggled to adapt its own operations to a drastic cut in export earnings, the state oil corporation, Petróleos de Venezuela (PDVSA), last year slashed its contribution to “social development” by more than two-thirds.

PDVSA cut its budget for social spending – an important element of President Hugo Chávez’ populist attempt to convince the less well-off he’s on their side – by a massive 68.31%, from $7.341 billion in 2007 to $2.326 billion in 2008.

This was bad news for people who depend on Chávez’s “missions” or social welfare programs, which rely on PDVSA for a substantial share of their funds. However, as will be seen below, the missions aren’t actually on skid row, or at least not yet.

PDVSA also paid less in profit tax to the Treasury coffers, with its contribution falling by 14%, from $5.017 billion in 2007 to $4.281 billion in 2008. This was the first time in half a decade that the corporation actually handed over less in profits tax than it had a year before.

PDVSA of course pays other types of tax, not least royalties and a levy on windfall profits in the days of high oil prices, which started going sour late last year. Taking all sources into account, the taxman’s take from PDVSA came out last year at $23.5 billion against $22 billion in 2007.

But while this marked an increase of 6.7%, it was well below the accompanying 30.9% rate of inflation last year. In real terms, the tax collection agency, Seniat, most likely lost out on its account with its single biggest contributor, PDVSA.

Things could have been worse. Oil prices paid to PDVSA averaged $86.49 a barrel in 2008, although this included an ominous drop to barely $34 at the end of the year.

Oil prices have since climbed back from the brink, although there’s as yet little certainty that the worst is actually over and done with. At present, the outlook for PDVSA’s tax bill remains in doubt, amid awareness that the first half of last year included an oil price peak of $126 a barrel just before everything went pear-shaped.
However, there was one notable exception to last year’s cutbacks in PDVSA largesse. This was the National Development Fund (Fonden), the president’s preferred vehicle for off-budget state spending beyond the reach of any meaningful degree of public scrutiny.

As the pips squeaked more or less everywhere else, Fonden – whose critics claim it has yet to publish audited financial results and tend to se it as a bottomless bucket – got a thumping $12.401 billion from PDVSA last year. That all but doubled the transfer from PDVSA to Fonden of $6.761 billion in 2007.

For the missions, this is the upside to offset PDVSA’s downside. Fonden is the biggest direct source of funding for the missions, and there are no signs that Chávez is about to turn off the tap. The expectation in oil industry circles is that PDVSA will go on indirectly picking up the tab for Fonden.

But it would seem that Fonden and the missions will be the exceptions to the rule amid generalized entrenchment (excepting, of course, the very rich, of which there are still quite a few in Venezuela), as happened during the second half of last year.

The basic “basket” which the Center of Documentation and Analysis (Cenda) at the teachers’ union uses to measure the monthly cost of living for an average family, hit BsF3,360 in May. This marked an increase of one percent compared with April, below the comparable increase in the official inflation index.

That was the good news. The bad, at least for those living at or towards the lower levels of the income league: the basic minimum legal wage didn’t come anywhere near covering the bill.

Cenda calculated that a family depending on two minimum legal wages – which went up on May 1 in the first of two instalments scheduled for this year – would barely be able to buy 52.3% of the basket, leaving them with a lot more else to cover from other sources of income.