Venezuela biz leaders worry about energy rationingJanuary 4, 2010 7:38 PM ET
CARACAS, Venezuela (AP) – Energy rationing imposed by President Hugo Chavez as a means of coping with a severe drought could worsen Venezuela’s economic recession, business leaders warned Monday.
Noel Alvarez, president of Fedecamaras, the country’s biggest business organization, predicted economic troubles “are going to increase” as the government pushes to cut electricity use by 20 percent.
The economy shrank 2.9 percent in 2009 – Venezuela’s first recession since 2003 – as its all-important oil industry suffered a downturn due to lower production and crude prices. Inflation is running at about 27 percent.
A prolonged drought has drained hydroelectric dams that supply most of Venezuela’s power. The government has begun rationing, including staggered electricity cuts in some states and partial shutdowns of the state-run aluminum and steel plants. Other measures include limiting the hours of shopping malls.
Alvarez said that before the government announced plans last month to reduce energy consumption by 20 percent, his business group was predicting the economy would contract again this year, by 2.3 percent.
“I think these numbers are going to increase” as the result of electricity rationing, Alvarez said, noting that some businesses are cutting working hours in half because of the power cutbacks.
Venezuela’s retail sector, one of the country’s leading employers, suffered an 8.2 percent contraction last year.
Electric Energy Minister Angel Rodriguez denied that rationing would significantly hurt businesses, telling the local Union Radio broadcaster Monday that Chavez’s administration “is looking for equipment to deal with the emergency.”
The newspaper El Mundo quoted Rodriguez as saying the government is considering a total shutdown of aluminum and steel plants to reduce energy consumption.