Venezuela’s President Nicolas Maduro dismissed from his cabinet a longtime advocate of currency controls and a strong bolivar, a move Bank of America Corp. says is a prelude to further devaluation.
Ricardo Menendez will replace Jorge Giordani as Planning Minister, Maduro said on state television last night. Giordani, who taught economy to late president Hugo Chavez in jail in the early 1990s, helped design currency controls that were implemented in 2003.
Maduro is struggling to revive growth as the decade-long system of currency controls empties shelves of food and medicine and fuels inflation. Venezuela needs to close the gap between its three official foreign exchange rates, which range from 6.3 bolivars to 50 bolivars per dollar, to bolster growth, Economy Vice President Rafael Ramirez said last week. On the black market, the dollar is worth 73 bolivars.
“Giordani’s exit confirms the radical wing in the government has lost influence over economic policy,” Bank of America’s senior Andean analyst Francisco Rodriguez said by telephone from New York today. This increases the chances of a faster devaluation of the bolivar, he said.
Venezuela’s benchmark bonds due 2027 rose 0.2 cents at 12:26 p.m. in New York to 83.54 cents on the dollar. Yields on the note fell 4 basis points to 11.72 percent.
Since Maduro replaced Chavez in April 2013, the bolivar has lost about 70 percent of its value on the black market and the annual inflation rate has more than doubled. American Airlines Group Inc. yesterday joined at least 11 other carriers in cutting service to Venezuela because of difficulties in repatriating revenue from the country.
Venezuela’s annual inflation rate reached 61 percent in May after the government carried out the biggest devaluation since currency controls were implemented in 2003 with the introduction of an alternative currency supply system known as Sicad II that sells dollars for about 50 bolivars.
The handouts of dollars at the primary exchange rate, currently at 6.3 bolivars, fell by a third in the first four months of this year compared to the same period in 2012, according to consultancy Sintesis Financiera.
“It is painful and alarming to see a presidency that is not transmitting leadership,” Giordani wrote in a letter published this morning on pro-government policy discussion website aporrea.org. Maduro is “giving out massive resources to everyone who is asking for them without a fiscal program based on socialist planning.”
Venezuela has devalued the primary official exchange rate used for essential imports four times since 2003. Giordani oversaw a 32 percent devaluation in February last year and also closed down a central bank-administered secondary currency supply system known as Sitme that he characterized as a “perverse mechanism.”
Giordani said in the letter that under Maduro the central bank and state oil company Petroleos de Venezuela SA are “showing signs of independence” in managing their resources, derailing Chavez’s long-term development goals. Earlier this month, Giordani lost his seat on the board of the central bank.
Chavez spent two years in jail for leading a coup attempt against President Carlos Andres Perez in 1992. University professor Giordani frequently visited him.
Maduro appointed Hebert Garcia Plaza the new Food Minister and Luis Graterol to run the Sea and Air Transport Ministry last night.
“I want to thank Professor Jorge Giordani, companion of the struggle and friend of our comandante Chavez,” Maduro said. “He has been in the revolutionary government continuously these 15 years except on a couple occasions. With all our love and recognition, we offer him our hand.”