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Venezuela to Cut Oil Contracts as Prices Fall
Venezuela said it will seek to renegotiate contracts with oil-service companies and force food producers to make basic items covered by the government's price-control policies -- moves that point to increased economic strain.More than 90% of Venezuela's hard currency comes from its oil production, which populist President Hugo Chávez has used to fund a splurge in consumer imports and underwrite social spending programs. * Statement from Venezuelan Government In the past few months, Mr. Chávez also spent freely on a political campaign to persuade Venezuelan voters to scrap term limits and allow him to run for president as many times as he likes. He won that referendum last month. But as oil prices have plummeted, Mr. Chávez is increasingly hard-pressed to pay for his programs. Adding to woes is falling production at state oil company Petroleos de Venezuela SA. Oil Minister and PDVSA President Rafael Ramirez said in a statement that the company planned to cut its spending on oil-service contractors by 40%. He didn't say how much money it intended to save. The company has built up huge debts with more than 6,000 contractors and suppliers, some of which have stopped work until they are paid. On another front, the Venezuelan government, which has been bedeviled by more than 30% inflation, issued new regulations that force the country's food producers to make products governed by Venezuela's severe price-control regime. For years, Mr. Chávez has been battling private food manufacturers and farmers, whom he blames for periodic shortages of foods ranging from chickens to coffee. Food producers blame the government's price-control regulations, which the producers say force them to sell items for less than they cost to make. Now, producers of 12 key food staples, including rice, sugar, milk, pasta, coffee and cooking oil, will have to make sure that at least 70% of their production is composed of products whose prices are controlled by the government. With the new regulation, the government is trying to counter what it says are efforts by food producers to avoid price controls by using basic food inputs, such as raw milk, to make low-fat milk rather than price-controlled whole milk. Indeed, last weekend, Mr. Chávez announced the Venezuelan government would take over the country's rice mills, which he said were making flavored rice instead of price-controlled white rice. Posted by: tipper 2009-03-04 |
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