CARACAS, Wednesday October 09, 2013 | Update

Nelson Merentes loses power over Venezuela's economic policy

Analysts find the government's policy undefined

Planning Minister Jorge Giordani (left) and Pdsva President Rafael Ramírez (right) (File photo)
Wednesday October 09, 2013  11:47 AM
Over the last six months, Nelson Merentes held talks with entrepreneurs, announced a more flexible foreign exchange market, met with investment banks, pledged centralization of Venezuela's foreign currency, and proposed adjusting controls on prices to reduce shortage. However, on Tuesday, he was removed from his position as Economy Vice-president of Venezuela and replaced with Minister of Petroleum and Mining Rafael Ramírez.

Although Merentes continues to hold his post as finance minister, he is no longer part of the Council of Revolutionary Ministers, a higher body within the Venezuelan cabinet. Jorge Giordani, however, continues in his role as Planning Vice-president. 

Rafael Ramírez, who is taking Merentes' place, has gained significantly more power. In addition to being minister of petroleum and mining and the president of oil giant Pdvsa, Ramírez will now coordinate the actions of the ministries related to the different production sectors.

It all seems that after Hugo Chávez's death, the Venezuelan Government lacks a solid leadership, which has translated into a number of cabinet reshuffles. Alejandro Grisanti, an analyst with investment firm Barclays, has interpreted Merentes' removal as a sign that the Venezuelan government lacks a well-defined economic policy. 

The measures proposed by Merentes and his appointment as Economy Vice-minister in April was a turn from Giordani's radicalism, centered on controls and no rapprochement to the private sector.

Is the designation of Rafael Ramírez a change back to radicalism? It may be, yet not completely. According to Luis Vicente León, the director of research firm Datanálisis, Pdvsa is the most hit by the government's decision to force the oil giant to sell most of its petrodollars to the Central Bank of Venezuela (BCV) at the official forex rate, which stands at the artificially low value of VEB 6.30 per US dollar. Therefore, the holding would benefit from the announced new forex market, where the company would be able to trade part of its petrodollars at a higher forex rate.

Barclays estimates that with Ramírez controlling this new forex market, US dollar-denominated bonds are likely to be issued again. Barclays also reckons that rapprochement to multinationals in order to attract foreign investments and boost Venezuela's oil output would continue.

Translated by Jhean Cabrera