Was Maduro's cabinet change a missed opportunity for Venezuela?
鈥�听David Smilde is the moderator of WOLA's blog:听.听The views expressed are the author's own.
President Nicol谩s Maduro鈥檚 [cabinet] shakeup announced a week ago was, of course, anti-climatic. There were no major announcements of measures that might address the dramatic distortions in the Venezuelan economy. What changes were announced seemed to muddy the waters for reform.
In the hours after the announcements, analysts warned that听听was negative for the economy and for international perceptions.听,听鈥淣othing was announced to tackle the causes of the crisis. So for now the crisis can only worsen.鈥� Indeed international markets听听of the changes: In the following days, bonds fell and country risk increased, meaning Venezuela will have to pay more for credit on the international market.
One analyst likened Maduro鈥檚 moves听鈥� designed to balance internal forces but not much else.
Here we look at the four most important changes made and suggest they represent an internal reordering that could lead to economic and political reforms in the medium term. Nevertheless, they probably represent a lost window of opportunity.
Rafael听Ram铆rez听to Foreign Ministry
The most important move by far was the removal of Rafael Ram铆rez from his simultaneous positions as President of PDVSA, Minister of Energy and Mines, and Vice President of Economy and Finances. He was designated instead as Minister of Foreign Affairs and Vice President for Political Sovereignty.
From Maduro鈥檚 position, the logic of this switch seems to have been to diversify control over and responsibility for the economy. In his multiple positions Ram铆rez controlled the majority of the country鈥檚 GDP.
What is more, he has been a central figure in Chavismo just as long as Maduro and apparently saw himself as a potential successor to former President Hugo Ch谩vez before the latter designated Maduro. As such, it was never entirely clear that Ram铆rez shared the interests of the Maduro government. Indeed rumors of his removal have been circulating for at least a year. It is likely that Maduro regards Ram铆rez as something less than a loyal ally and thinks changes could be implemented in a better or different way without him.
Analysts differ regarding whether moving Ram铆rez to the foreign ministry was a strategic move or simply a consolation prize. Opposition legislator Henry Ramos Allup suggested that Ram铆rez might be听听than Elias Jaua was. In contrast scholar Kenneth Ram铆rez (no relation) said that Venezuela鈥檚听, that Ram铆rez would have little power in a Foreign Ministry packed with Maduro allies, and probably would be out of the government in six months.
Nevertheless, there is some logic to having the architect of Venezuela鈥檚 oil regime as Foreign Minister. Beyond the need for new loans, Venezuela鈥檚 oil industry faces some serious challenges that will require international cooperation to address. PDVSA is currently exploring听听crude to mix with its heavy crude,听. And if PDVSA sells US affiliate Citgo it will need to find refining capacity for its heavy crude.
As well, Venezuela has a听听through Petrocaribe and other agreements, which could seriously affect its regional support.
All of these factors suggest that moving Ram铆rez not only gave Maduro more control over the oil industry but put a relevant person at the head of Venezuela鈥檚 oil diplomacy.
New Economic Team
The most immediate interpretation of Ram铆rez鈥檚 removal is that economic pragmatism had been marginalized.听In June and July Ram铆rez had publicly suggested the need for reform measures such as unifying Venezuela鈥檚 multiple exchange rates and raising gasoline prices. However, on closer examination this interpretation is less than clear.
The measures that Ram铆rez put on the table听. Some insiders suggest there could be reform announcements soon. Others suggest Maduro is going to wait until his economic conference in November to announce relevant measures which would give him more political cover than if he had announced them last week.听
Furthermore, the changes in economic team actually seem to be in a technocratic direction. Indeed some of the left of the Chavista coalition portrayed Ram铆rez鈥檚 marginalization听. Rodolfo Marco Torres who retains his post as Minister of Finance and gains the position of Vice President for the economy is not considered a radical. And both Eulogio del Pino (President of PDVSA) and Asdrubal Ch谩vez (Minister of Energy and Mines) are engineers who have been involved in the oil industry since before the Ch谩vez period. Their designations were applauded in Venezuelan business circles.
The changes suggest PDVSA might听听than the multitude of other tasks it has taken on over the past decade, from distributing food to building houses.
Unification of Accounts
Maduro announced the creation of a听) that will bring together the different pools of money such as the Development Fund and the Venezuela-China Fund. Since the BCV publishes its figures, this could improve the transparency of Venezuela鈥檚 foreign reserves and could conceivably improve international confidence. It should also reduce the government鈥檚 discretionary use of these funds, which might have been part of Ram铆rez鈥檚 removal. There have long been complaints that he had too much control over these accounts.
Increased transparency could also bring some accountability by uncovering important corruption cases such as this one in听.
Maduro announced that this unitary fund would be started with $750 million dollars, an announcement that听听was all that was left of the听听the strategic reserves between 2005 and 2014.听there is likely around $10 billion, still a disappointing figure.
Elias Jaua to Ministry of Communes
Moving Elias Jaua听听was widely read as a demotion. But he is actually better placed there since he has a big following on the radical left and is a key player in the idea of reformulating the state and creating 鈥減opular power.鈥� Changing him indicates there听听over the coming year.
As听, it is not at all clear that the government has the resources to push forward with any significant push to reformulate the state. However, if the Maduro government prioritizes it and finances it well听听in the 2015 elections. Jaua is well positioned to mobilize the Chavista base and could use the institutions under his supervision for electoral proposes.
These four changes clearly do not amount to the 鈥渟hakeup鈥� observers expected, and do not represent any immediate change in course. For the time being, an absurdly overvalued currency, the听, and gasoline subsidies that听听per year remain intact, and Venezuela听
Maduro鈥檚 moves responded more to his government鈥檚 political objectives than to immediate economic necessities. The political costs of even modest economic reforms are high and Maduro is reluctant to assume them himself. Economic reforms announced in November would likely be represented as collective decisions. Measures taken before then will likely be announced by ministers rather than Maduro.
The question is whether a few months down the road Maduro will have the same opportunity he had this summer.
This has been Maduro鈥檚 most significant lull in the political struggle that began when he squeaked out a victory in the April 2013 Presidential elections. The protest movement that started in February had largely subsided by June. Maduro came out of the July PSUV congress with increased political capital听s. In July and August the opposition has been听听and largely sidelined from the political debate. And there are no elections planned for at least another year. 听
What is more, August and September are Venezuela鈥檚 vacation months and a convenient time to push through unpopular changes. With job approval ratings that still hover between 35 and 40%鈥攏ot at all bad for a sitting president鈥擬aduro still has some political capital with the population he could have used to push through more significant measures.
A couple of months from now the Christmas season will be right around the corner, and by early 2015 all attention will be directed to the 2015 elections. Both will make reform difficult.
