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Venezuela's president tweaks currency exchange system, raises wages amid economic crisis

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CARACAS, Venezuela — President Nicolas Maduro announced a boost in wages Wednesday night and dismissed talk of currency devaluation as he tries to pull oil-dependent Venezuela out of a recession and quell mounting frustration with his socialist policies.

In a much-anticipated annual address to the legislature, Maduro avoided the dramatic reengineering of price and currency controls that economists say is needed to avoid a triple-digit inflationary spiral.

Through nearly three hours of optimistic rhetoric embellished by props and a video, he repeated accusations that the opposition is sabotaging the economy and urged Venezuelans to hold faith that government programs will continue despite a nearly 60 percent fall in the price of oil, virtually the country's only export.

He unveiled a new round of social spending, including promises to raise wages and pensions 15 percent, deliver 400,000 new homes for the poor and increase grants for students.

PHOTO: Venezuela's President Nicolas Maduro, left, speaks next to a framed poster featuring the late President Hugo Chavez, during the annual state-of-the-nation address at the National Assembly in Caracas, Venezuela, Wednesday, Jan. 21, 2015. President Maduro acknowledged the economic crisis wracking Venezuela during his annual address Wednesday night, but did not announce the reforms many had expected.  (AP Photo/Ariana Cubillos)
Venezuela's President Nicolas Maduro, left, speaks next to a framed poster featuring the late President Hugo Chavez, during the annual state-of-the-nation address at the National Assembly in Caracas, Venezuela, Wednesday, Jan. 21, 2015. President Maduro acknowledged the economic crisis wracking Venezuela during his annual address Wednesday night, but did not announce the reforms many had expected. (AP Photo/Ariana Cubillos)

The only hint that the embattled leader was considering a turn toward austerity were proposals to increase gasoline prices and add transparency to the multi-tiered currency exchange rate system blamed by economists for much of the South American country's economic troubles.

Maduro called Venezuela's lowest-in-the-world gas prices a "distortion," but stopped short of actually raising them. Gas costs the equivalent of 5 U.S. cents a gallon.

Venezuelan currency can currently be exchanged at three rates, and the bolivar will continue to be exchanged at three rates under the new system. The best rate will remain the same and will be used for essentials like food and medicine, as it is now. The other two current rates will be merged and a new, third rate is being introduced for the exchange of local currency through private dealers. Maduro did not provide details.

Earlier Wednesday, the International Monetary Fund predicted that Venezuela's economy would contract 7 percent this year, while the rest of the region sees moderate growth. Maduro said in his speech that the economy contracted 2.8 percent in 2014 and acknowledged worsening shortages.

He called on Venezuelans to "come together and work to overcome our economic difficulties," adding that while oil prices are unlikely to bounce back to the highs of last year, "God will provide."

Supporters in Congress chanted "They won't return" as Maduro began speaking, referring to previous regimes they say excluded the poor from political discourse and a share in the country's oil wealth. In Caracas' wealthy eastern district, drivers began honking their horns in protest when Maduro's address interrupted regular broadcasting.

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PHOTO: Venezuela's President Nicolas Maduro, speaks during the annual state-of-the-nation address at the National Assembly in Caracas, Venezuela, Wednesday, Jan 21, 2015. President Maduro acknowledged the economic crisis wracking Venezuela during his annual address Wednesday night, but did not announce the reforms many had expected. (AP Photo/Ariana Cubillos)
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