Venezuela shuffles economic team, keeps forex rate

Reuters
Venezuelan President Maduro addresses lawmakers during the annual state of the nation in Caracas
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Venezuelan President Nicolas Maduro addresses lawmakers during the presentation of his annual state of …

By Eyanir Chinea and Brian Ellsworth

CARACAS (Reuters) - Venezuela's President Nicolas Maduro named an army general as the new finance minister in a reshuffle of his economic team on Wednesday and said there would be no currency devaluation this year despite a soaring black market for dollars.

The cabinet changes do not suggest any major shift in the country's state-dominated economy, as the new economic team retains many of the same policy-makers that helped the late Hugo Chavez advance the OPEC nation's drive toward socialism.

Venezuela in 2013 saw slowing economic growth and soaring inflation that Maduro blames on an opposition-backed "economic war" but that critics call the result of decaying price and currency controls now widely linked to corruption.

Maduro tasked new finance minister Rodolfo Marco with "building a new financial model that can allow for all these investments we need, that will allow the expansion of a financial system at the service of the country."

Marco, who participated in the failed 1992 coup that thrust Chavez to fame and did jail time with him afterwards, previously held the post of Public Banks Minister, which will now be merged with the finance ministry.

He rose quickly through the ranks of government officials after Chavez personally called on him to bring order to a state-run bank following a corruption scandal, said one source who knows the incoming finance minister.

Pleased with his work, Chavez later put him at the helm of Banco de Venezuela after it was purchased from Spain's Banco Santander, and later created a ministerial post for state run-banks that grew in number amid a wave of nationalizations.

"He's held major posts for a long time and has not been tainted (by corruption)," said source, who asked not to be identified. "He's also good at negotiating and has good relations in the bank sector."

He is considered a pragmatic man of action who tends to avoid public spats with opposition figures or hostile confrontations with reporters.

NEW FACE, OLD PROBLEMS

Marco faces the same challenges that confronted outgoing finance minister Nelson Merentes, whose designation a year ago was widely hailed as sign that Venezuela would move toward market mechanisms that many economists say are necessary to boost productivity and stimulate investment.

Merentes's efforts, including a stalled plan to allow private citizens to buy dollars through a legal market, ran up against the resistance of economic hardliners who see pro-market reforms as a betrayal of Chavez's socialist legacy.

Merentes will return to a past role as president of Venezuela's central bank, the third change there since Maduro won an April 2013 election to replace Chavez.

"He's going backwards and forwards. He's not clear what to do," local economist Asdrubal Oliveros said of Maduro.

Rafael Ramirez, one of Venezuela's most powerful officials and a protege of Chavez during his 14-year rule, would keep his roles as head of state oil company PDVSA, minister of energy and vice president of economic affairs.

Maduro's supporters back his efforts to maintain Chavez-era social programs that helped vastly lower the country's poverty rate over 14 years by expanding access to health care and providing subsidized food.

Maduro said more than two-thirds of oil revenues went to social sectors in 2013, with poverty now down to 19 percent from 40 percent before Chavez took power in 1999.

During his four-hour annual presidential address to the nation before Congress, Maduro stood next to a vast photo of Chavez who just two years ago gave a record-breaking nine-and-a-half hour speech there. He died of cancer in March last year.

'NO DEVALUATION'

Economists have been widely predicting a devaluation to shore up state finances amid inflation of 56 percent and a thriving black market for currency where dollars now fetch more than 10 times the official rate.

Consumers are struggling to find goods ranging from toilet paper to flour due as importers are unable to obtain dollars through the currency control mechanism.

Maduro said a new agency called the National Center of Foreign Commerce, would assume the role of state currency board Cadivi, which is widely discredited due to corruption.

The existing mechanism allows the well-connected to buy cheap dollars and flip them for a huge profit on the black market, costing Venezuela tens of billions of dollars each year.

Cadivi sells dollars for 6.3 bolivars to importers for essential items such as medicines and some basic foods. But the government is pushing more items into the Sicad system in what many economists are calling a "stealth devaluation."

Wall Street analysts have long been saying that Venezuela, which has the world's largest oil reserves, needs a radical overhaul of its statist model rather than tinkering with the existing system established by Chavez.

"The measures don't deal with the fundamental imbalances we are dealing with today," said Alberto Ramos, a Latin America analyst at Goldman Sachs in New York.

"It's not a question of merging ministries or shifting figures. We need a change in policy rather than putting the same actors in different chairs."

(Additional reporting by Diego Ore, Girish Gupta, Deisy Buitrago and Andrew Cawthorne; Editing by Andrew Cawthorne and Ken Wills)

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