President Hugo Chavez gave Vice President Nicolas Maduro the right to authorize debt sales and seize assets as Maduro described the Venezuelan leader’s health as “difficult and complex” following an operation for cancer.
The resolution, which was published in the Official Gazette on Dec. 21 and distributed online today by local news website Noticias24, also gives the vice president the power to approve changes to Venezuela’s annual budget and accept or reject proposals submitted by government ministers.
Chavez, who has not appeared in public since flying to Cuba 16 days ago for his fourth cancer operation, said on Dec. 8 that voters should elect Maduro to protect his legacy if he is unable to remain in office. The self-proclaimed socialist gave orders on economic policy by telephone from Havana that Venezuela’s Cabinet was set to discuss starting yesterday, Maduro said on Dec. 24.
“The decree published in the Gazette and the phone call with Maduro makes you think that the government is ready to take measures for an economic adjustment,” Barclays Plc analyst Alejandro Arreaza said today in a telephone interview from New York.
The Venezuelan government’s victory in gubernatorial elections on Dec. 16 has increased the chances that it will devalue the bolivar “sooner rather than later,” Arreaza and fellow Barclays analyst Alejandro Grisanti said today in an e-mailed note to clients.
Absorbing the Cost
“The government may be willing to absorb the political cost of a devaluation now and avoid having to do it at the beginning of a possible new administration,” Arreaza and Grisanti said.
Venezuelan dollar bonds have returned 45.51 percent 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 today.
The 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, Arreaza said.
“If the government devalues, it’s possible that we won’t see too many debt offerings from the government or state oil company Petroleos de Venezuela SA next year, just as in 2012,” he said. “But if they delay a devaluation, the volume of issuance will be greater than in 2012.”