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New
Finance Minister appointed.
On 24 July, President Chávez appointed Deputy Finance Minister Nelson
Merentes to assume the Finance Ministry portfolio in the place of José
Rojas. The incumbent Rojas was forced to resign over mounting differences
with the President over economic policy, in particular social security
reform and government debt management. The tone of current economic
policy is not expected to change substantially, since the incoming
Merentes is perceived as having strong ties to Planning and Development
Minister Jorge Giordani, who has been and remains Chávez’s chief economic
policymaker. Market reaction was subdued, since the new Finance Minister
is expected to tow the line on economic policy. Nevertheless, some
analysts point to the possibility that Merentes belongs to a small group
of economists within the Chávez government that lobby for change in the
current exchange rate policy, which has led to an overvaluation of the
Bolivar conservatively estimated at least 30-40%. Under Merentes, the
government may be persuaded to adopt more heterodox economic measures,
such as sacrificing inflation targets in favour of higher economic growth,
by easing the exchange rate depreciation and perhaps imposing import
tariffs. Furthermore, Merentes is apparently a strong advocate of tax
reform and decentralization, which he believes could serve to
substantially boost fiscal balances.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Venezuela. For more details please click here.
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