Venezuela says opposition strike cost $7.6 billion

reuters.com Thu February 27, 2003 03:57 PM ET By Pascal Fletcher

CARACAS, Venezuela, Feb 27 (Reuters) - An opposition strike against President Hugo Chavez has cost Venezuela's oil-reliant economy an estimated $7.6 billion in lost production and fiscal revenues, inflicting severe, long-term damage, the Finance Ministry said.

In a grim report on what it called the strike's "economic sabotage," the ministry said the stoppage that began Dec. 2 and fizzled out early this month had also closed down businesses, caused shortages of goods, hiked prices, reduced salaries and destroyed jobs.

"The damages caused are severe and long-term ... they will permanently affect the whole population," said the report by Finance Minister Tobias Nobrega, which reviewed the 2002 year but included a summary of the effects of the strike.

The report was sent to Reuters in Caracas on Thursday.

The strike, called to try to force left-winger Chavez to resign and hold early elections, sharply cut back oil production and shipments by the world's No. 5 oil exporter, forcing the government to slash spending and introduce foreign exchange and price controls earlier this month.

Nobrega's report estimated total loss of production in the economy caused by the strike at 9.9 trillion bolivars ($6.2 billion using the government's fixed exchange rate of 1,600 bolivars to the U.S. dollar that was introduced Feb. 6).

Of this lost production, 4.3 trillion bolivars ($2.7 billion) corresponded to the oil sector and 5.6 trillion bolivars ($3.5 billion) to the non-oil sector.

In addition, loss of fiscal income for the government as a result of the strike was estimated at 2.2 trillion bolivars ($1.4 billion). Oil exports normally account for around half of total government revenues.

BLEAK RECOVERY PROSPECTS

The effects of the strike are still being felt in the strategic oil sector, where the government has sacked more than 13,000 striking employees of the state oil giant PDVSA. It says it has restored oil output to just over 2 million barrels per day (bpd), about two-thirds of pre-strike levels.

Oil strikers put output at around 1.58 million bpd.

Energy Minister Rafael Ramirez said in Washington on Thursday the government hoped production would be approaching its pre-strike level of 3.1 million bpd by the end of March.

Condemning the strike as an "act of economic irrationality," Nobrega's report said its impact would severely constrain Venezuela's recovery prospects in 2003.

The economy shrank 8.9 percent in 2002, according to the government. Economists and analysts polled by Reuters this month predicted a sharper contraction this year of more than 13 percent. The poll saw inflation rising to 42.8 percent in 2003 from 31.2 percent last year.

Negotiations between Chavez's government and its political opponents have so far failed to produce an agreement on early elections to solve the long-running and often violent feud that has shattered investor confidence in Venezuela.

Tensions have risen again this month after authorities last week arrested one of the alleged strike leaders, business chief Carlos Fernandez. He is under house arrest facing rebellion charges and arrest orders have been issued for other alleged ringleaders of the opposition stoppage.

Bomb blasts badly damaged Spanish and Colombian diplomatic buildings in Caracas early on Tuesday after Chavez accused Spain, Colombia and the United States of meddling in his country's political crisis.

Citing a deterioration in the political climate, investment banks Merril Lynch and Credit Suisse First Boston this week downgraded their recommendations on Venezuelan sovereign bonds.

The Finance Ministry report said Venezuela's foreign debt at the end of 2002 stood at $22.3 billion, a 1.16 percent decrease from the previous year.