MercoPress. South Atlantic News Agency

Oil prices slide controversy

Oil prices slide controversy

Venezuela Congress has commissioned an orthodox Argentine economist to design a fiscal austerity package contemplating falling oil prices.

Venezuela is OPEC's third largest producer and depends on oil for 80% of its export income and half of its fiscal revenue.

Official expenditure plans for next year's budget are based on crude oil averaging 18 dollars the barrel, but given the current world turbulence and global economic slowdown, 15 dollars for Venezuelan crude seem more appropriate.

The orthodox economist and IMF consultant is Ricardo López Murphy, Argentina's Economy Minister before Mr. Domingo Cavallo took over. Mr. López-Murphy was forced to resign since his very sensible but orthodox plan lacked Congressional and political support.

If the 15 dollars scenario proves correct, and government does not cut spending, Venezuela could face a severe budget deficit, ranging between 5 and 8% of GDP. However the Venezuelan government insists the country will not suffer the impact of external conditions.

This stance is also indicative of the growing gap between government and private sector financial and budget estimates, which convinced Congress to contract an independent consultant.