 Bolivarian Republic of Venezuela Isea caught on camera thinking about his Miami seafront home News this week is that Venezuela's Finance Minister, Rafael Isea (above) is to step down after becoming the gov't candidate for the Aragua region in the upcoming regional governors election. The first thing to note about this is how regional governor seems to be a higher prize for Isea than Finance Minister. Interesting, no? Imagine Gordon Brown in the 1990's stepping down as chancellor to take up the position of Mayor of London, for example.
So Chavez is going to announce "in the next few days" Isea's replacement at the finance ministry. Whoever gets the job, he (or she) can expect the same amount of interference from the big guys and his advisers. I've heard there's a shortlist of five names for the job, but as I don't really have a clue on 4 of them I'm not going to speculate right now. Whoever gets the nod is likely to be from the same sphere of influence as Moris Beracha and his pal Isea. The hand of shadowy richguy Moris Beracha has certainly been noticed in the last few months. Venezuela has changed tactics according to his whispered instructions to combat inflation and a runaway parallel exchange rate, with Beracha making chest-puffing "I told 'em to do that" noises here and there around the bizchat circuit. But how has the Venezuelan economy done during Isea's tenure? The answer is "not bad at all". He's been pretty successful in reeling in the parallel exchange rate.....  (click to enlarge)....and there has even been a modicum of stability in the parallel forex for the last two months. To some extent, inflation problems have been nettle-grasped, with a lot of the fixed prices for goods relaxed in order to allow market profits to run. The immediate effect of removing the price control on milk, eggs etc was to see a jump in monthly inflation (January, February, March numbers were high), but the medium term effects are now kicking in and we should see a slackening off in the rate of inflation.
Importantly, Isea has in conjunction with the "independent" Central Bank (smothers a giggle) managed to crimp the rapid rise in money supply very successfully, too.  The main weapon use has been issuing dollar debt to mop up excess liquidity. Of course, this has just been the jumped on as an "oh-my-god-they're-running-up-massive-debt" story by those who can see no right in the Chavez admin, but while oil remains strong there's nothing to worry about, really. It's real gov't intervention in markets, of course, but perfectly sustainable in the long term....as long as oil stays expensive.The result can be seen in the flatlining of the international reserves number (read the chart right to left). Note the way reserves have wavered around the U$30Bn mark for quite some time.  We can deduce from this (in very general terms, of course) that the big wave of income from oil has not been tucked away in the bank account, but has been put to work. Frankly, I see no cause for worry with reserves at U$30Bn; it's more than enough for a country the size of Venezuela, and diverting the petrodollars from the savings account and into the economy is akin to running stealth sovereign wealth fund.But back to the departing Isea; Venezuela bonds drooped on the news that he was leaving the post, which is a sure sign that the market likes the guy. With the parallel rate now under control and the banks playing ball with the gov't, things look more settled in the financial sphere. The acid test will be watching how inflation levels react going forward, and if Chavez can finally get a bit of non-oil local growth underway. That'd be nice............ http://incakolanews.blogspot.com/2008/06/venezuela-finances-change-at-top.html |
