For many, the New Year represents an opportunity for change. For Nicolás Maduro, the somewhat embattled President of Venezuela, the beginning of 2014 has ushered in a cabinet reshuffle and a reorganization of the nation’s economic management.
On Wednesday January 15th, Maduro, in his first state of the union speech, addressed the national assembly and presented his annual government report. As part of this speech, Maduro laid out his major initiatives for the year. All in all, these initiatives signaled quite a degree of organizational change in both his government and strategy of economic governance.
To begin, he announced the reorganization of his cabinet. José Khan will become the Minister of Commerce, while the Public Banking Ministry and the Ministry of Finance will be merged. Rodolfo Marco Torres, the current Minister of Public Banking, will assume this new expanded portfolio and replace Nelson Merentes as Finance minister. Although Merentes will now be the head of the Central Bank, many see the appointment of Torres, an army general who was part of Hugo Chávez’s attempted coup of 1992, as a clear indication that Maduro is set upon deepening the socialist revolution begun by his predecessor, given Torres is deemed something of an ideologue in comparison to the more pragmatic Merentes.
As part of the realignment of his economic team, Maduro also announced a series of economic reforms aimed at addressing some of the more serious underlying flaws in the Venezuelan economy. These reforms include a strengthening of government control over the national currency, the bolívar. The Foreign Exchange Administration Commission (Cadivi) is to be disbanded and its responsibilities assumed by the National Foreign Trade Corporation (which will now be run by Alejandro Fleming), while the official exchange rate has been set at 6.3 bolívars to 1 US dollar, for the entirety of 2014. Although this was not the currency devaluation expected by economists, given the widening fiscal deficit, the Financial Times has suggested it represents “devaluation by stealth,” as the foreign exchange auction system (Sicad), where the Central Bank sells US dollars, is to be significantly expanded.
Finally, both to further bolster the government’s reforms, and to combat an inflation rate hovering around 54 per cent, Maduro announced the establishment of a 30 per cent ceiling on profits for all businesses, which will be part of the new Law on Costs and Fair Prices.
However, it isn’t all change in Maduro’s Venezuela. Rafael Ramírez will remain as vice-president of the government’s economic cabinet, energy minister and president of the state-run oil company, PDVSA.