Middle class is bearing the load

[NewsWhore]

The owners of private cars received a little breather over the weekend when the Ministry of Industry and Commerce announced six and ten peso reductions in the prices of gasoline and diesel fuel. This relief should be taken with a grain of salt, because for the rest of the year and for 2009, there does not seem to be anything promising on the horizon for the Dominican middle class, especially the private sector employee. Meawhile, government jobholders have already begun to receive their 15% increase in pay. According to El Caribe, if we stick to the public announcements, starting with President Fernandez' speech, the social and economic perspectives for the middle class point towards a tightening of the belt. In his 17 July speech, the President said that although the government wanted to maintain the generalized nature of the various subsidy programs, when they put pencil to paper they realized that it was not sustainable over the medium term. Such a generous position would produce a large public deficit. Because of that reasoning, the government decided to assist the "most vulnerable." As a result their policy has been to broaden the Solidarity Card welfare program that primarily benefits the very poor. However, the deficit in the energy sector, expected to reach US$662 million by December has forced the government to look for other alternatives, and among these alternatives is an increase in the cost of a kilowatt/hour of electricity. The source of the money needed to cover this deficit is not clear. The government has said it could come from a renegotiation with the sectors involved in the Madrid Accord. It could come from a rescheduling of debt payments. It could also come from renegotiated contracts with the Independent Power Providers (IPPs), and finally, it could come from the consumers through a rate increase, that will primarily hurt the middle class.

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