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UPDATE 3-Chavez trims budget, adds debt to counter crisis

Published 03/21/2009, 10:12 PM

* Economy plan almost triples '09 debt and trims budget

* Rules out currency devaluation or gasoline hike

* Includes 20 percent minimum wage increase (Updates with details on economic plans)

By Frank Jack Daniel

CARACAS, March 21 (Reuters) - Venezuelan President Hugo Chavez on Saturday almost tripled his government's borrowing plan and trimmed his budget to offset a slide in oil revenues, but resisted pressure to devalue the local bolivar currency.

Chavez, a socialist who rails against capitalism, had been widely expected to announce a package of measures to counter the impact of the global economic crisis, which has battered demand for the OPEC nation's vital petroleum exports.

"These are anti-crisis measures in the socialist spirit to protect social programs, the people and the workers," the former army officer said, promising government austerity.

Chavez, who won a referendum last month allowing him to stay in office as long as he keeps winning elections, is popular for spending oil revenues on health and education programs for the poor majority.

During 10 years in office he has nationalized much of Venezuela's economy including major oil projects as part of his drive to build a socialist state.

On Saturday, he cut the 2009 budget by 6.7 percent to $72 billion, raised the minimum wage 20 percent and increased planned government financing to $16 billion from $5.6 billion. And he increased a sales tax to 12 percent from 9 percent.

He vowed to reduce the salaries of top officials and slash often lavish ministerial spending on cars and entertainment.

Chavez ignored economists who recommended devaluing the fixed rate curency, a measure that would help cover the budget shortfall but would also increase inflation.

Instead, he said the government will further tighten currency controls, restricting dollars destined for imports of luxury items.

CHEAPER OIL

Economist Luis Vicente Leon described the package of measures as moderate but said the government was gambling crude prices would recover later this year.

"These are not truly deep measures, they don't attack the fundamental problems of the economy," Leon told Reuters.

Faced with Latin America's highest inflation, Chavez has in recent weeks increased pressure on business to lower prices by taking over farms and rice mills and threatening to nationalize the country's top private employer, which makes food and beer.

Since winning the February referendum Chavez has moved to weaken opponents who govern key states and cities by moving control of ports and airports to the central government.

On Saturday, he reduced Venezuela's budgeted oil price estimate to $40 per barrel from $60 and lowered the oil output estimate to 3.17 million barrels a day from about 3.67 million. More than half of government spending is financed by crude oil revenues.

The measures need congressional approval but Chavez loyalists dominate the legislature.

Chavez recently complained that subsidies on water, electricity and gasoline -- which is among the cheapest anywhere in the world -- unfairly helped the rich, suggesting price inceases. He said on Saturday gasoline was too cheap at $.03 a liter, but left the price unchanged.

Chavez may tap into investment funds offered by China and Japan to stimulate the economy, which slowed to 4.8 percent growth in 2008 after many years of rapid expansion. (Reporting by Frank Jack Daniel; Editing by Patrick Markey and Peter Cooney)

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