Venezuela hikes minimum wage 20 percent to mark May Day
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| Published on Tuesday, May 1, 2007 |
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CARACAS, Venezuela (Reuters): Venezuela raised the minimum wage 20 percent to mark May Day despite failing to tame Latin America's highest inflation in an economy driven by strong oil prices and government spending.
"Venezuelan workers deserve the best of the best," leftist President Hugo Chavez said on Monday at a workers' rights event.
The announcement follows a tradition in the OPEC nation to hike workers' income to celebrate the date leftists worldwide rally for labor rights.
The majority poor see Chavez as their champion and such increases have helped reinforce his popularity in the past.
Supporters dressed in the signature red of his self-styled socialist revolution cheered his announcement that the monthly minimum was being raised to 615,000 bolivars ($286).
Economists worry over wage hikes because they believe labor costs have dragged on the productive sector and that Venezuelans typically consume rather than save increases, driving inflation.
At the official fixed exchange rate of 2,150 bolivars to the dollar, Venezuela ranks highest in the region for its minimum salary, according to Venezuelan officials.
But with much of the real economy based on a parallel market, where the currency is worth almost half as much, the country could also be considered behind others in Latin America.
Chavez's biggest economic challenge is to control runaway consumer price rises.
In March, prices fell but economists estimate they have risen again this month, and most believe the government will fail to meet its target of 12 percent inflation for the year.
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