Thursday, November 24, 2005

Chavez shows $100bn spending plan

Chavez shows $100bn spending plan

CARACAS, Venezuela (Reuters) -- Venezuela's President Hugo Chavez has
unveiled an ambitious $100 billion, five-year investment plan financed
mainly by windfall oil revenues to fund national projects from bridges
and infrastructure development to harbors and factories.

Chavez, a left-winger who advocates tight state control over the economy
of the world's No. 5 oil exporter, said the spending would be outside
the ordinary state budget and included $10 billion a year from state oil
firm PDVSA and $5 billion from a special fund also financed by oil income.

"The plan from 2006 to 2010 is for around $100 billion for those five
years, and that is apart from the budget," Chavez told supporters in the
western oil city of Maracaibo. "With this $100 billion, or $20 billion a
year, we are going to push special projects."

A self-proclaimed socialist revolutionary, Chavez has promised to use
oil revenues to finance projects for the impoverished majority. But
critics say his economic model is vulnerable to a slide in world oil
prices and has failed to create sustainable growth by copying Cuba-style

Chavez said the state-run petrochemicals firm would provide $2 billion a
year in financing while $3 billion will come from tax revenues above
those foreseen in the ordinary budget.
Rapid expansion

Venezuela, a key supplier of crude to the U.S. market, has seen its
economy expand rapidly, helped by soaring petroleum prices and
government spending, including funding for social, education and health
programs for the poor.

Earlier this year, lawmakers supporting Chavez approved the $6 billion
FONDEN development fund that is financed yearly by part of the dollar
oil revenues that normally go into central bank foreign reserves.
Critics worry local currency spending from the fund will quicken inflation.

A fierce opponent of the U.S. government, Chavez has often attacked the
central bank for not helping finance his projects for the poor and
blasts capitalism as the road to hell. He says he wants to introduce a
21st century socialism.

Strict state-run foreign exchange controls and a fixed exchange rate
have limited access to dollars and pushed the central bank's hard
currency reserves to more than $30 billion. Chavez says they should be
kept at around $25 billion.

Since winning a recall referendum last year, the former soldier has
accelerated his social reforms, including a land redistribution campaign
and worker co-management programs for failing companies. Critics say
those measures spook investors.

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