By Nicolle Yapur / bloomberg.com
- President decrees hike from 150,000 to 250,000 bolivars
- The new minimum wage pays for less than 1 kilogram of beef
President Nicolas Maduro ordered a 67% increase in Venezuela’s monthly minimum wage, the first this year and the eleventh in the past 24 months.
The presidential decree, announced by pro-government lawmaker Francisco Torrealba on Twitter, boosts the minimum wage to 250,000 bolivars ($3.61 at the official exchange rate), up from 150,000 bolivars. In addition, workers will receive a food bonus of 200,000 bolivars, for a total minimum income of 450,000 bolivars, according to Torrealba’s publication of an image from an extraordinary edition of the Official Gazette dated Jan. 9.
The new hike, which applies retroactively as of Jan. 1, threatens to refuel hyperinflation after restrictive monetary policies helped slow the pace of price increases in 2019. Still, the increase is well below the 275% hike of Oct. 2019, which lifted the minimum wage enough to buy about 4 kilograms of beef. The new salary, however, is not enough to buy one kilogram at current prices.
The country’s historic economic crisis has seen the annual rate of consumer price increases surge to at least quadruple digits. According to data from the National Assembly, the annual inflation rate was 13,476% in November 2019. Bloomberg’s Café con Leche Index estimates annual inflation at 9,900% as of Jan. 8.
Price increases quickly destroyed the value of the previous minimum wage increase in Oct. The government has directed its efforts to controlling the price of the dollar by reducing liquidity in the financial system and restricting bank loans. Maduro earlier this month vowed to lower inflation in 2020 to a single digit.
The broad dollarization of the Venezuelan economy has also contributed to making salaries in bolivars worthless. A dollar costs around 81,000 bolivars at the black market rate. According to local research firm Ecoanalitica, $2.7 billion in physical dollars are circulating in the country, three times the value of bolivars in both cash and deposits. Ecoanalitica director Asdrubal Oliveros expects greenbacks to make up 70% of commercial transactions in 2020.