CARACAS, Venezuela – The price of the world's cheapest gasoline – 5 cents a gallon – will start to creep higher for the first time in years if Venezuela's president has his way, as he usually does.
Speaking to newly elected mayors Wednesday, Nicolás Maduro said he favors raising gas prices that have been stuck at around 5 cents a gallon for nearly two decades.
According to at least one Venezuelan newspaper, Maduro is expected to initially hike the price of gas by 200 percent, or an added 10 cents a gallon.
But the price is expected to keep increasing over time.
"It has to be an advantage, not a disadvantage. What converts it into a disadvantage is when the tip you give is more than what it cost to fill the tank."
That's practically a giveaway, he said, and one that Latin America's biggest oil producer – the fourth-largest exporter of oil to the United States – pays for dearly in terms of lost revenue that the government could use to fight poverty or promote economic development.
"As an oil nation, Venezuelans should have a special price advantage for hydrocarbons compared to the international market," Maduro said. "But it has to be an advantage, not a disadvantage. What converts it into a disadvantage is when the tip you give is more than what it cost to fill the tank."
Successive Venezuelan leaders have balked at raising gasoline prices since an increase triggered days of deadly rioting in 1989 that forced a rollback. The price edged up to its current level in the late 1990s, and has stayed there ever since.
Not even the populist president, Hugo Chávez, who once said it pained him to subsidize the drivers of luxury cars, dared to touch the price in 14 years of rule that ended with his death from cancer last March.
Maduro told the mayors that an eventual price hike would come at an "opportune time," after a government-led campaign explaining to poor Venezuelans how much money is spent subsidizing motorists and assuring them an increase won't add to inflation – now running at nearly a two-decade high of 54 percent. Any increase should be phased in over three years, he said.
The government has been preparing the ground for a price rise since winning mayoral elections on Dec. 8, with cabinet members suggesting in recent days that the time had come to open a debate about the need for a fuel increase.
Maduro previously had been silent on the issue, and his comments Wednesday were the clearest signal yet that a price hike was in the works. Raising prices would free resources that could be used to build homes and schools and fund social projects, he said.
The government says gas subsidies cost upward of $12.5 billion a year, encourage smuggling of oil out of the country into neighboring nations where it can be sold at much higher prices. It also claims that the subsidies contribute to pollution by encouraging Venezuelans to buck a global trend toward cleaner vehicles.
"I welcome proposals," Maduro told the group of mayors, including some from the opposition, which has questioned the wisdom of raising domestic prices while selling crude to allied nations at prices well-below the market rate of nearly $100 a barrel.
The government estimates 300 people died in looting that was triggered in 1989 when Carlos Andrés Pérez raised gas prices as part of an austerity package pushed by the International Monetary Fund. The unrest became known as the Caracazo and is a haunting reminder of the political violence that can erupt when society is deeply polarized, as Venezuela has been.
Maduro said a gas price increase today would pose no risk of generating such a popular backlash because it's not being imposed by capitalist forces.
"We don't come from the neo-liberal school," he said, referring to the free-market economic policies that Chávez rallied leaders in Latin America to fight against.
Economists say a price hike, coupled with an expected devaluation of the bolivar, would go a long way toward reducing a government budget deficit estimated at more than 11 percent of Venezuela's gross domestic product. Rising spending demands to keep up with inflation at a time of falling oil production have strained public finances, forcing the government agency that manages the country's U.S. dollars to restrict access to hard currency to pay suppliers overseas.
That, in turn, has pushed the value of the dollar in the black market to 10 times its official rate and led to record shortages of basic goods from toilet paper to cooking oil.
Based on reporting by the Associated Press.