July 24, 2014
Venezuela shuffles economic team, limits corporate profits, keeps forex rate
Venezuela's President Nicolas Maduro shuffled his top economic officials today, limited corporate profits by law to under 30%, and said Venezuela's official exchange rate would remain at 6.3 to the dollar this year despite a soaring black market and constant rumors of devaluation.
"We're going to keep the dollar at 6.3 (bolivars) for the whole year and far beyond that," Maduro said in the annual presidential address to the OPEC nation's parliament.
Most economists say a devaluation is long overdue to rectify distortions in Venezuela's economy, including illegal trading of greenbacks at 10 times the official rate in local bolivars.
Maduro, who has stayed loyal to his predecessor Hugo Chavez's socialist economic policies, promised, however, that foreign exchange mechanisms would change, with state currency board Cadivi to be absorbed by another body.
He vowed an "iron fist" against those who siphon dollars at the official rate to make a profit on the black market.
Maduro surprised his audience by announcing that public banking minister Rodolfo Torres would replace Nelson Merentes as finance minister. Merentes is to return to his previous role as president of Venezuela's central bank.
The president said 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 gave few details of his planned changes to the currency control mechanisms, though he did announce that a new body, the National Center of Foreign Commerce, would assume the role of Cadivi, which is widely discredited due to corruption.
A foreign exchange auction system known as Sicad, which offers dollars at the higher rate of about 11 bolivars for non-essential items, would be strengthened and expanded, he said.
Dollars at the 6.3 level are given to importers for bringing in 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."
"Venezuela has sufficient dollar resources to maintain the strength of the 6.3 (level) but also to use complementary systems," he said.