Maduro with more power on economic affairs; devaluation of the Bolivar in the agenda
Venezuelan president Hugo Chavez delegated certain responsibilities in economic affairs to Vice-President Nicolas Maduro including the right to authorize debt sales and seize assets. The announcement comes at a moment when significant economic decisions must be taken following the profligate spending leading to last October’s election.
The resolution, which was published in the Official Gazette on Dec. 21 and distributed online on Wednesday, also gives the vice president the power to approve changes to Venezuela’s annual budget and accept or reject proposals submitted by government ministers.
The decree with the signature of Chavez is dated 9 December, two days before he underwent further surgery for cancer in Cuba, and a day after he called on voters to elect and support Maduro to protect his legacy if he is unable to remain in office.
President Chavez made a similar decision in July 2011 when he delegated responsibilities to then Vice-president Elias Jaua when he traveled to Cuba to receive chemotherapy.
The latest announcement comes amid much speculation about a possible devaluation of the Venezuelan currency, the Bolivar. Last devalued 2 years ago Venezuela’s currency has since become increasingly battered due to inflation. Many analysts agree that the government will need to make adjustments soon as a result of the growing fiscal deficit that is distorting other fundamentals of the economy, basically the exchange rate.
Venezuelan dollar bonds have returned 45.51% in 2012, the second-biggest return in emerging markets after the Ivory Coast, according to JPMorgan Chase & Co.’s EMBI Global index. Bonds have rallied on speculation that Chavez will be unable to complete his term in office after winning elections on Oct. 7.
Chavez and his vice president talked for about 20 minutes on Christmas Eve, Maduro told state television that day. The former paratrooper has taken a “few steps” as he undergoes physical therapy in Havana and is maintaining “progressive improvement,” Maduro said in a separate broadcast on Wednesday.
There is speculation that the Venezuelan government may opt to devalue only the exchange rate used on the Central Bank-administered SITME exchange and leave the Finance Ministry’s Cadivi exchange rate for priority imports untouched.
Likewise the Central bank reported on Thursday that the economy grew 5.5% this year, led by housing construction and government services.
Construction grew 16.8% and government services expanded 5.2%, central bank President Nelson Merentes said, citing preliminary figures. Official GDP data will be released in late February.
“We’re seeing the reactivation of the Venezuelan economy,” Finance Minister Jorge Giordani said in comments broadcast on state television.
President Chavez increased spending on low-income housing and wages in the run up to the Oct. 7 election, widening the fiscal deficit to about 8.8% of GDP this year, according to calculations by Bank of America Corp.
Non-oil sector GDP rose 5.7% this year, while the oil industry expanded 1.4%, the central bank said. Merentes declined to comment on future economic measures including any changes to the country’s currency controls.