Inflation and dollarization in Venezuela worsen salary gaps between public and private employees

By Mayela Armas, Anggy Polanco and Mariela Nava

CARACAS/SAN CRISTÓBAL (Reuters) – Venezuela’s gradual switch to the use of the dollar is widening wage inequality between public and private sector workers, because those who receive salaries in foreign currency have greater purchasing power, while others face prohibitive prices, employees, retirees and economists said.

Foreign exchange transactions increased in the South American country after the government of President Nicolás Maduro relaxed controls on the economy in 2019, a measure that has given some companies some oxygen, but that still does not guarantee a full recovery of economic activities. , after eight years of collapse and annual inflation of 222%, according to official data.

Public sector workers are the most affected by the shift in the government’s economic policy, since their salaries are paid in the local currency, the bolívar, and increases are sporadic. In the private sector, at least 63% of salaries are paid in foreign currency, according to calculations by the Venezuelan Finance Observatory.

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“We have been suffering from low wages for some time,” said Seyyer Chacón, a 43-year-old nurse who works at a hospital in San Cristóbal, capital of the border state of Táchira, which suffers from frequent power failures. “I don’t earn enough to change the oil in my car,” added the worker who earns about 250 bolívares a month, which is equivalent to 55 dollars.

Low wages have a ripple effect, with public sector employees and retirees protesting weekly for higher wages near government offices in various cities across the country.

In the first quarter of the year there were 700 labor protests, 27% more than in the same period of 2021, according to the non-governmental Venezuelan Observatory of Social Conflict.

“The hyperinflation that led to the largest transactions in dollars and that has allowed a slight recovery in some activities, deepened the differences between the salaries of the private sector and the public sector,” said Omar Zambrano, economist and director of the local firm Anova Policy.

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“Everything was dollarized, except for the public sector, which does not generate enough foreign currency and with almost 2 million employees cannot pay higher salaries,” he added.

A limited government response has pushed some employees out of their jobs, said three unionists who asked to withhold their names, adding that the layoffs have impacted the provision of basic services and the operations of state-owned companies. , including oil company PDVSA, already battered by years of disinvestment, mismanagement and US sanctions.

The communications and labor ministries did not respond to requests for comment. In recent days, the vice president, Delcy Rodríguez, said that to the extent that more income is guaranteed to the country, the well-being of workers is improved.

THE SALARY IS NOT ENOUGH

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