Some Venezuelans receive new minimum wage, but companies struggle to pay

CARACAS (Reuters) - Some Venezuelans began to receive their first salary payment since the government introduced a 60-fold minimum wage increase, though companies warned it was unaffordable and would add to the devastation of business in the country. Around a dozen firms and business associations Reuters spoke to in different parts of Venezuela said they could not pay salaries after the price hike, which formed part of a package of measures announced by President Nicolas Maduro in August to halt Venezuela’s five-year recession. To try to balance the books, companies are lifting prices and firing employees, the firms and associations said. That could impel more Venezuelans to flee the crisis-stricken country, adding to a mass exodus that has already seen over 2 million Venezuelans leave. For those that did get their wages the price of goods had already surged in tandem, leaving them no better off, according to around a dozen people Reuters spoke to as they waited in line to get paid. Annual inflation hit 200,000 percent in August, according to the opposition-controlled Congress, and the International Monetary Fund forecasts it will hit 1 million percent this year. In Puerto Ordaz, an industrial town known for metal-working in southern Bolivar state, the local chamber of commerce said a quarter of companies had shuttered this year and more were closing each day, unable to weather the hyperinflation and strict currency controls that strangle imports. The minimum wage rise would only accelerate this, the chamber’s head said. “We’re alarmed because what we hear is companies don’t have the funds to pay wages,” said Ramon Espino, a union leader for local manufacturer Carbonorca, which produces carbon anodes used to smelt aluminium. In Carabobo state, once the country’s industry hub and now full of abandoned factories, the head of the business group Fedecamaras said 80 percent of companies had frozen activity this year. In Carabobo’s capital Valencia, 36-year-old builder Jose Pereira stood in a queue outside a bank. He said his construction firm had told employees in late August after the wage increase that it could no longer afford to pay them. As severance, the company agreed to give them the new minimum wage until mid-September, he said. “This has turned into a disgrace. There’s no power, water, and now there’s no work,” he said, waiting to receive half the new monthly wage of 1,800 bolivars, or roughly $17. Maduro had said the government would cover three months of the wage increase for small and medium-sized companies to soften the blow. But he has not provided details and it remains unclear how his cash-starved government would afford such a hefty payout or manage the logistics. As part of the plan, which Maduro has said is intended to counter a US-led “economic war” against his socialist administration, the president ordered a 96 percent currency devaluation. He also pegged the bolivar currency to the state’s petro cryptocurrency and increased taxes. Some firms said they had not sent their pay sheets to the government, as required to claim the compensation, convinced they would never receive it. The companies Reuters spoke to said they had not yet received any funds from the government. Maria Uzcategui, president of retailers’ guild Consecomercio in Caracas, said companies the organisation had spoken to had lost at least 40 percent of their clients in the past month. “It’s a process of devastation,” she said in a phone interview. “Companies that have been around forever have vanished during the past two or three weeks.”