CARACAS: Venezuela’s designation of central bank president Nelson Merentes as finance minister signals the Organisation of Petroleum Exporting Countries (Opec) nation may be headed toward a more pragmatic approach to rising inflation and slowing growth.
Merentes, an ally of the late socialist leader Hugo Chavez who served two previous stints as finance minister, is seen making rigid currency controls more flexible to ensure better distribution of dollars to the import-dependent economy.
His capacity for dialogue with investors, following the hermetic and doctrinaire tenure of his predecessor, could mean a more pragmatic approach to economic policy under President Nicolas Maduro, who won last week’s vote to replace Chavez.
Merentes, who is also a mathematician, faces a struggle to prevent the economy from slowing as the government trims spending, and to contain consumer prices pressured by blow-out 2012 outlays that helped ensure Chavez’s re-election.
“Merentes is hardly an orthodox economist, but he is seen as a pragmatic voice within ‘Chavismo’ who has been open to dialogue with the private sector and the international market,” said JP Morgan’s Ben Ramsey in a research note.
His most important tasks would be improving the currency system and bolstering local industry, which was cowed during the Chavez era of nationalisations and price controls.
Merentes had been central bank president since 2009, and he served as finance minister from 2001 to 2002, and 2004 to 2007.
Maduro said on Monday he would nominate former Commerce Minister Edmee Betancourt as the new central bank chief, a post that must be approved by Congress.
Most private economists expected growth to slow from 5.6 per cent last year to about two per cent due to a slowdown in state spending, which in 2012 was heavily driven by an ambitious home construction programme.
They also predicted inflation would reach close to 30 per cent this year on a burgeoning money supply after months of heavy spending and two devaluations since February that boosted the cost of imported goods.
The government’s forecasts for this year showed economic growth of six per cent and inflation of 16 per cent.
Merentes may revamp the recently created Sicad currency mechanism, which businesses initially called confusing and cumbersome, to ease dollar shortages that have left consumers scrambling to find goods ranging from wheat flour to auto parts.
That may require implicitly recognising that the bolivar, at an official rate of 6.3 per US dollar, is overvalued, given that greenbacks on the black market fetch nearly four times that amount.
“Merentes is a defender to the death of stabilising the parallel market,” said Asdrubal Oliveros of local firm Ecoanalitica via his Twitter account.
His appointment may mean a resumption of foreign bond issuance, which totalled only US$3 billion (1.96 billion pounds) last year following 2011 bond sales of US$17.5 billion by Venezuela and state oil company PDVSA — potentially boosting supply and pushing down prices.
Merentes is known for fluid communication with investors, business leaders and private bankers as well as a jovial sense of humour.
Like the late Chavez, his policy announcements are at times filled with colourful Venezuelan idioms. — Reuters