More money, more poverty?

from Latin America Press

Andrés CañizálezElsa Piña.

Consumption soars, but unequal distribution persists.

There is more money in the hands of the poorest Venezuelans, causing consumption to soar, but fundamental issues — such as a lack of shelter and other basic needs — are still far from being resolved.

Once President Hugo Chávez’s government took full control of the state oil company Petróleos de Venezuela (PDVSA) following a December 2002-January 2003 oil strike, the company’s priorities were rearranged.

According to their website, US$13 billion was pledged in 2006 to the nation’s social development. In fact, it is common to find announcements advertising that PDVSA will finance events ranging from children orchestras to food programs.

Luis Pedro España, head of the Poverty Project at the Andrés Bello Catholic University, says that thanks to the oil bonanza, the country is living an illusion, just as it did in the 1970s.

“There are people who consume more, but only because PDVSA has more income. When the oil market suffers a cold, we ourselves will die of pneumonia,” assured España in a recent interview.

Network against poverty
According to the government’s National Institute of Statistics, Venezuela has seen a spectacular reduction in poverty. Households living in poverty reduced from 54 percent in 2003 to 27 percent in 2007, while families in extreme poverty went from 25 percent to less than 8 percent.

David Velásquez, who was minister of Social Participation and Social Development until the beginning of this January, believes that government policies are responsible for the achievements.

“A network against poverty is developing. It is possible to reach the goal of Zero Misery [extreme poverty] in 2001 and Zero Poverty in 2021,” he remarked.

Furthermore, the Economic Commission for Latin America and the Caribbean gave Venezuela second place (after Argentina) as the country with the most successful policies for reducing poverty in 2007.

However, it is obvious for Mercedes Pulido, former minister of Social Development, that while Venezuelans have higher incomes, “basic problems continue without being resolved.”

“If income alone is measured, there is undoubtedly a positive change, but this does not resolve the structural problem of poverty. What we have, so to speak, are poor people with more money,” commented Luis Vicente León, director of Datanálisis, a market and politics research firm.

According to the Human Development Report 2007-2008 issued by the United Nations Development Program (UNDP), there is a serious situation of unequal distribution in Venezuela: the poorest 10 percent must share 0.7 percent of the country’s gross domestic product, while the richest 10 percent control 35.2 percent of the GDP.

For UNDP, a useful indicator for measuring income distribution is the Gini coefficient, which grew from 44.1 in 2006 to 48.2 in 2007 on a scale of zero (perfectly equal) to 100 (perfectly unequal).

The president of INE, Elías Eljuri, disregarded the UNDP report, which he branded as ridiculous.