Maduro Hands Venezuela's Economy to Socialist Inflation Denier

  • President names 39-year-old professor as economy minister
  • Shake-up follows government's loss of congressional control

Venezuela’s President Nicolas Maduro named new economy and finance ministers, appointing a man who has blamed the world’s fastest inflation on the country’s “parasitic” business class in a move that will heighten tension with the new opposition-dominated congress.

Luis Salas, a 39-year-old university professor, became the head of a new productive economy ministry that will coordinate economic plans, Maduro said late Wednesday. In a economic pamphlet published last year, Salas argued that inflation does not exist “in real life” and was rather a phenomenon caused by speculation, usury and hoarding.

“The metaphor of the invisible hand invented by Adam Smith and abused by vulgar economists only serves to make invisible the hands of those who really control and regulate the production and commercialization of goods, and therefore prices,” Salas wrote. “The Venezuelan business class is ill-bred and parasitic and over time has become an economic tumor that lives off oil rent and the exploitation of workers’ salaries through speculation.”

The cabinet shuffle follows the government’s loss of its majority in Congress for the first time in 16 years in elections last month and as the economy sinks into the deepest recession in its history. The price of oil, which accounts for 95 percent of exports, fell in December to its lowest level since 2004, depriving the government of more funds and threatening to exacerbate shortages of everything from corn flour to medicine.

‘Hanging Himself’

“Maduro changed ministers to continue insisting on his radical ideas,” Jorge Piedrahita, the chief executive officer of broker-dealer Torino Capital in New York, said in an e-mailed note. “Maduro is hanging himself with his own rope. He may not stop until he sees a mob walking towards Miraflores.”

The yield on the benchmark dollar bond due in 2027 rose 55 basis points as of 9:22 a.m. on Thursday in New York, reaching a 4-month high of 26.8 percent.

“He’s a team player,” Maduro said, referring to Salas. “He has studied with profundity the phenomena of profiteering and the economic war. He has dissertations and deep studies.”

Rodolfo Medina was named minister of banking and finance, replacing Rodolfo Marco Torres who also held the economy vice presidency, which Salas takes over. Torres will head a new food ministry.

Diosdado Cabello, former president of the National Assembly and current pro-government lawmaker, was not given a post in Maduro’s cabinet. He is often viewed as one of the most powerful politicians in Venezuela and lost his post as National Assembly president when congress passed to the opposition.

Radical

“This cabinet is going to have serious coordination problems because Luis Salas is a much more radical person,” Asdrubal Oliveros, head of Caracas- based consulting company Ecoanalitica, said in a telephone interview.

The International Monetary Fund estimates gross domestic product contracted 10 percent in 2015, while economists polled by Bloomberg saw inflation at 124 percent.

Maduro, who said the cabinet changes came amid an “economic emergency” named Aristobulo Isturiz, governor of Anzoategui state, as his new vice president. He maintained Eulogio Del Pino as oil minister and president of state oil company Petroleos de Venezuela SA.

“This year looks complicated because Maduro didn’t go for a cabinet that is going to prioritize the adjustment that the country needs,” Ecoanalitica’s Oliveros said. “He named one of the most radical to head the economy team. The economic situation is going to become more complicated and will get worse.”

Congress Tensions

Earlier Wednesday, tensions were high at the National Assembly in Caracas, where congress swore in three opposition deputies who had been disqualified by the country’s Supreme Court.

The addition of the three deputies would restore the opposition’s so-called supermajority of 112 seats in the 167-seat National Assembly and give it widespread powers to oppose Maduro’s government. Opposition deputies have pledged to start the year probing allegations of government corruption and remove Maduro from power within six months.

“There is definitely a clash of powers, but that’s what happens when different parties hold the legislature and the presidency,” Greg Weeks, a professor of political science at the University of North Carolina at Charlotte, said in an e-mailed response to questions. “If the government were to ignore legislation entirely, it would need the support of the armed forces, and up to this point the military has shown no signs it would support such an unconstitutional action.”

Venezuelan social media was set ablaze with a video of National Assembly President Henry Ramos Allup having photographs of Maduro and former President Hugo Chavez removed from the halls of Congress.

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