- Luis Salas replaced by Perez Abad in shakeup of economic team
- Venezuelan bonds fell to record low last week on default fears
Venezuela’s President Nicolas Maduro replaced the head of his economic team just five weeks after handing the job to a widely-criticized professor who blamed the world’s fastest inflation on the country’s “parasitic” business class.
Luis Salas, who held the post as economy vice president since Jan. 6, is leaving for family reasons, Maduro said on state television late Monday. He named Miguel Perez Abad, who was serving as commerce minister, to replace Salas, adding that he would make further economic announcements on Tuesday.
“Because of family matters that he has been attending to, Luis Salas will go on to work on other activities with the economic teams and directly with me,” Maduro said, without giving details of his new responsibilities.
The move comes amid concern the oil-dependent country is heading toward a default after oil fell to a near 12-year low and analysts questioned if Maduro has the political capital needed to make reforms such as raising gasoline prices and devaluing the currency. Last week, Venezuela’s benchmark dollar bond fell to the lowest since it was first sold in 1997 after a local newspaper reported that Salas had proposed stopping payments on foreign debt.
Perez Abad, a businessman, was previously a president of the Venezuelan business chamber Fedeindustria. He maintains close links to Eulogio Del Pino, the oil minister and president of state oil company Petroleos de Venezuela SA, according to Russ Dallen, a managing partner at Latinvest in Miami.
Private capital has “its space” in the construction of Venezuela’s “productive socialist” model, Perez Abad said last month, adding that the government should “break the piggy bank” to help maintain production levels.
Venezuela’s benchmark dollar bond due in 2027 rose for the first time in five trading days, with the yield falling 90 basis points to 29.97 percent at 9:09 a.m. in New York. The bonds price increased 1.11 cent to 33.56 cents on the dollar.
“Luis Salas was a very radical man,” Asdrubal Oliveros, director of the Caracas-based consulting firm Ecoanalitica, said in an interview. “They were never able to reach even minimal agreements in the economic cabinet because of his presence. While Perez Abad may understand a lot about the economy, the problem is Maduro and the question is if he is capable of taking the necessary measures.”
Salas, a 39-year-old university professor, argued in a economic pamphlet published last year that inflation doesn’t exist “in real life” and is instead a phenomenon caused by speculation, usury and hoarding.
“The economic vice presidency is a strategic space that requires a 24-hour presence,” Salas said on his Twitter account. “Personal reasons are impeding me from dedicating that. Miguel Perez Abad has the spirit and capacity for this work and has all my support.”
Venezuela’s Supreme Court last week overruled the opposition-controlled national assembly to grant Maduro the emergency powers he says he needs to fight triple-digit inflation and the deepest recession in over a decade. The International Monetary Fund estimates that inflation in Venezuela, which already stands as the world’s highest, will spiral to 720 percent this year. The economy is expected to contract for the third consecutive year.
“I was shocked to see Mr. Salas appointed to head the economic cabinet in the first place, especially since he had no economic or business training and had such ridiculous notions of the economic laws of supply and demand,” Dallen said. “But the rapid change after just five weeks is also shocking. It shows a government in chaos. At this point you have to wonder if they are just changing violinists in the band on the Titanic.”