Venezuela reshuffle dashes hopes of a change of direction

| Sept. 3, 2014 | Caracas, Venezuela

Published by Financial Times //pdf1//

Hopes that Venezuela would take a more pragmatic turn were dashed in a cabinet reshuffle on Tuesday night in which oil and economic tsar Rafael Ramírez lost his top jobs, one of which has been filled by a cousin of the late president, Hugo Chávez.

Mr Ramírez was removed as the country’s oil minister and as head of state oil company Petróleos de Venezuela (PDVSA), a role he had held for a decade. His position as vice-president for the economy has also been axed.

The country’s top economic role, the newly created vice-presidency of economy and finance, is to be held by Rodolfo Marco Torres, a former brigadier-general and participant in Chávez’s failed 1992 coup attempt against the then government.

“We must begin a new stage in the revolution,” said President Nicolás Maduro during a three-hour televised speech on Tuesday.

Mr Ramírez, who will become foreign minister, was seen as the figurehead of a pragmatic faction within the government, whereas Mr Maduro has remained staunchly loyal to his predecessor Chávez.

The country suffers from shortages of a range of staple goods, annual inflation of more than 60 per cent and a currency that in the past week has slid to a record low on the black market of more than 90 bolívars to the dollar, more than 14 times the highest of Venezuela’s numerous official exchange rates.

Economists largely put these problems down to price and currency controls.
In June, Mr Ramírez told investors in London that unifying the various official exchange rates was on the cards in government plans to improve growth. He said his aim was to “re-establish communication with financial markets”.

The same month, the ouster of Jorge Giordani, architect of the country’s economic controls, had been seen as a victory for pragmatists.
No announcements were made on Tuesday on a devaluation of the currency nor any changes to generous petrol subsidies that allow Venezuelans to fill up their tanks for just a few pence.

Chávez’s cousin Asdrúbal Chávez is to take over the oil ministry while geophysicist Eulogio Del Pino will lead PDVSA. Venezuela has the world’s largest oil reserves, according to Opec.

Alberto Ramos, a senior analyst at Goldman Sachs in New York, said the reshuffle would not be enough to bring about the broad economic change the country needed.

“What we see is policy paralysis,” he said. “We do not see the adoption of the measures necessary to address the growing sources of macroeconomic pressures.”

He added that Mr Ramírez carried some blame for the current state of affairs.

“Ramirez was perceived to be more pragmatic and less dogmatic than others in the government but he was not an outsider,” Mr Ramos said. “Quite the contrary, he has been for a very long time a top policy maker and as such also bears responsibility.”