Venezuela's Maduro hikes wages, keeps multiple exchange rates

Ernesto Tovar, Jordi Miro
Venezuelan President Nicolas Maduro is greeted by supporters as he arrives at the parliament to deliver his annual message to the Nation in Caracas on January 21, 2015 (AFP Photo/Marcelo Garcia)

Caracas (AFP) - With Venezuela's economy in crisis, President Nicolas Maduro on Wednesday announced a 15-percent hike in the minimum wage, and plans to keep a multi-tiered exchange rate system in place.

"This whole exchange system is a transitional system," the president said in an annual address in which many Venezuelans -- exhausted by 64-percent inflation; food shortages and rationing -- had hoped for news of major economic policy changes.

Maduro did not give much detail on the exchange rates other than to say that one -- for food and medicine -- would be at 6.3 to the US dollar. The black market rate is about 177 bolivars to the greenback.

His economic team will speak on the rate system soon, said Maduro, the socialist successor of the late Hugo Chavez.

Venezuela was already mired in economic woes before oil began its recent slide, but the sharp downturn in crude prices has been especially punishing for a country that relies on oil for 96 percent of its foreign currency.

Analysts say the South American country, which sits on the biggest oil reserves in the world, needs oil to sell at $100 a barrel to maintain its budget.

Yet oil "is not going back to 100 dollars a barrel," Maduro acknowledged, also raising the issue of the need to discuss raising prices for subsidized gasoline -- the world's lowest priced .

In 2013, Caracas spent 15 billion dollars on that subsidy alone.

It is a highly sensitive issue in Venezuela where people feel a birthright to cheap gasoline (petrol).

The price has not been raised since 1989. Back then, a hike in gasoline and transport costs helped trigger a deadly wave of protests, rioting and looting remembered here as the Caracazo. Hundreds were killed, and some analysts say as many as 2,000.

Economist Jesus Casique tweeted that Maduro's three-hour address was "populism" and "disconnected from economic reality."

With the precipitous drop of oil in recent months, Maduro has traveled in recent days to Algeria, China, Iran, Qatar, Russia and Saudi Arabia as he makes an urgent appeal for cash.

In November, Caracas failed to convince the Organization of the Petroleum Exporting Countries, including top producer Saudi Arabia, to reduce production in order to halt the price drop.