Venezuelan President Hugo Chavez hands out seeds to peasants in Yaracuy, west of Caracas.
Venezuelan President Hugo Chavez hands out seeds to peasants in Yaracuy, west of Caracas. - 
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Kai Ryssdal: Try this on as stimulus package: Venezuelan President Hugo Chavez has been pouring hundreds of millions of dollars into social programs, like free health care clinics and subsidized food stores, for more than a decade. He can do that because he holds most of the political cards down there. But also because Venezuela is South America's biggest oil producer. Oil revenues are falling, though, sharply. And with elections coming up in September, Mr. Chavez could have something of a problem.

From Caracas, Reese Erlich reports.


Reese Erlich: Here in the poor barrio of La Vega, residents wait patiently in line at the local Mercal, a government-subsidized food market.

Day laborer Delicia Abroacho says by shopping here, she saves about 20 percent of what she would spend at a regular supermarket.

Delicia Abroacho: I think Chavez is doing good things here. The Mercal is great for this country.

The Venezuelan government says such programs have helped reduce the poverty rate by two-thirds since Chavez was elected. He's diverted revenues from oil production to pay for social programs. But over the past two years, such revenues have dropped by 67 percent, creating a big budget deficit.

Nora Casteneda, president of a government-owned bank, says the government won't balance the budget on the backs of the poor.

Nora Casteneda: Our president said that even if oil drops to zero, we will not adopt neo-liberal policies or those handed down from the IMF and the World Bank. Our policies will never favor capital over the people of Venezuela.

But opposition activists say the cost of the social programs is no longer sustainable. Inflation is running at 30 percent so far this year, one of the highest rates in the world.

Self-described anti-Chavez political activist Rafael Enrique-Beroes sharply criticizes the government for creating rampant inflation.

Rafael Enrique-Beroes: Before, we ate well and lived well. Now, we have more money in our pockets, but everything costs more. So, the quality of life is worse.

Enrique-Beroes says government mismanagement has also led to electricity brown outs, water shortages and increased crime. The opposition plans to make the economy the major issue in this September's parliamentary elections.

Pablo Medina is a leading opposition candidate for the National Assembly.

Pablo Medina: There is a big possibility that the opposition will win the parliamentary elections. It's the beginning of the end for Chavez.

Well... maybe. The government is confident it can improve economic conditions before September. Chavez increased the minimum wage by 25 percent, which should help galvanize support from the poor.

Music and noise from a pro-Chavez rally

Here at a pro-Chavez rally in Caracas, Christina Gonzales, who cleans rooms for a living, says, sure, there are water and electricity shortages. But she also points out that inflation is lower today than before Chavez was elected. Back in the mid-1990s, it peaked at 100 percent a year. Gonzales says she, and everyone she knows, will vote for President Chavez's political party in September.

Christina Gonzales: Today, we enjoy benefits we didn't have before. We enjoy Social Security and can get cheap loans. House cleaners now get pensions. We get free medical care. Our president has always defended the working class, the least protected.

Upper-income Venezuelans say that's just the problem. Chavez focuses disproportionately on the poor while ignoring inflation and alienating the very business interests who could pull the country out of crisis.

In Caracas, I'm Reese Erlich for Marketplace.