Venezuela Crisis 2002-2004

INTRODUCTION

Four years after Chavez´s election, there was no evidence of any economical improvement. Since the beginning of 2002, he has received a lot of critics from the middle class and from media. He was accused of imposing an authoritarian system. After the fail of the coup d’état in April 2002, the opposition supported a strike for the 2nd of December with the aim of forcing Chavez’sresigning. This strike was prolonged for months having serious economical consequences (Tucholski, 2004).
Because of this, this crisis can be considered more political than economical (Gavin, 2002)

THE BUILT-UP OF THE CRISIS

The strike which started in December 2002, affected most of the economical sectors which saw their activity reduced (Petroleos de Venezuela SA, 2005). This fact wasspecially reflected on the petrol production and on the natural resources. The main reason was that this country was highly dependent on the petrol sector (Gobierno Bolivariano de Venezuela, 2012). Due to this fact, this crisis is known as “paro petrolero” (Perez, 2009). Because of this it is interesting to analyse the petrol production and the price of the barrel during this period:
Volume of petrolproduction:
In this graph which dates from 1970 to 2005, it can be seen the trend of the petrol production. In general, the production has been highly irregular with a huge drop in 1985. If we focus on the period which took place the crisis, it appreciates a downward trend if we compare it with the previous decade. From 2004 onwards a recovery can be seen.

Data: Banco Central de VenezuelaPrice of the petrol:
As the price of the petrol is very volatile it is difficult to appreciate the effects of the crisis and the price of the petrol. Anyway, it is interesting to have a view of the trend of this issue. During the period of the crisis the price of the barrel doubled the price of the previous decade. Furthermore, from 2001 the prices of the barrel increased substantially.

Data:Banco Central de Venezuela
The “paro petrolero” (petrol strike) is considered to be more an effect than a reason. In other words, it is a political reaction to changes in the wealth fare state politics (Perez, 2009).
Some of the more relevant changes which must be taken into account are the tax reform and the hydrocarbon new law.
Focusing on the tax reform, this measure was necessary in orderto solve the structural problem which was affecting the country. Actually, Venezuela’s tax problem represented a 5% of the GDP. The main aim of the reform was to obtain the macroeconomic stability in which is necessary to control the incomes, public expenditures and the national debt (Velázquez, 2002).

Historically, Venezuela based their tax incomes on the production of non-renewableresources. Consequently, the Government did not give any importance to the tax system. As a fact, the population was against this new reform because the Venezuelans were not familiar with the tax payments (Tolosa, 2003). This reform was based on the following measures: fixing the VAT on 14.5%, luxury tax (24.5%), “monotributo” by which the minimum based to avoid paying taxes was erased and a bank debit tax(paying 0.65% over the amount withdrawn monthly) (Sulvarán, 2002).
According to Velazquez, an important Venezuelan economist, the expansion of the country in the short term must have been tied to the petrol, due to the high dependence on this sector (Velazquez, 2002). So, a reform on this factor must have been developed, that is why it was necessary to establish a new reform.
Thus, in 2002 anew hydrocarbon law was enacted and it considered the following issues (Campodónico, 2004):
* The main objective was to restablish the national sovereignty over the ownership of the hydrocarbon.
* Freedom to determinate the prices in the gas hydrocarbon products attending to the production chain.
* Fix fares for final costumers are fixed by the National Department of Power and Mines....