Inflation Will Continue Falling: An Interview with Outgoing Central Bank President Edmeé Benacourt

In this recent interview Edmeé Benacourt, the former president of Venezuela’s Central Bank (BCV), explains to newspaper Últimas Notícias the measures the government is taking against inflation. The recent BCV president also predicts that the “economic war” being waged against the government of Nicolas Maduro will be defeated, and that the Venezuelan economy will continue growing throughout 2013. 

UN: Before, the opposition said that the Maduro government was weak. Now that it appears to have consolidated itself, they say that the economy is weak.

Benacourt: Let’s review some important figures to do with inflation. We’ll analyze fiscal performance in 2012: January, 1.5% inflation; February, 1.1%; March, 1.9%. We were able to anticipate an annual inflation [for 2012] of close to 16 percentage points, less than estimated. However, in November and December of that year an economic attack was launched which caused an increase in inflation to 2.5% in November and 3.5% in December. With this, inflation for the year 2012 ended on 20%, which despite everything, was the estimate.

From there the economic war of 2013 began, which, taking advantage of the painful circumstances of the first quarter [when President Hugo Chavez passed away], managed to upset the economy. Inflation in January reached 3.3%, in February 2.6%, in March 2.8%, in April 4.3%, and in May 6.1%. However already in June inflation dropped to 4.7%, and we know that in the month of July it’s going to continue falling [inflation for July was 3.2%]. The same is happening with Gross Domestic Product (GDP), which has experienced growth for ten consecutive quarters. In the first quarter of this year GDP growth was 0.7%, and this is also going to continue increasing.

Despite an event as terrible as the death of the supreme commander [Hugo Chavez], our president Nicolas Maduro was elected, and we found ourselves facing a very strong economic war. However, with collaboration between the economic cabinet and the Central Bank, we began to hold meetings with the productive sector, because one of the actions directed at lowering inflation is to increase production. We immediately began working with different economic sectors to find out what their needs were. They focused on the shortage of foreign currency, shortages of primary materials, and problems with the new labor law; so we began to seek the solution for them.

What is that solution?

It is the one which we are achieving with our present course of action: satisfying the needs of production. If indeed it is true that the first need has been for foreign currency, which hasn’t been 100% satisfied, this has been met to a high degree and waiting times for the granting of currency have been cut [note: the Venezuelan government maintains currency controls to prevent capital flight, with the official exchange commission Cadivi administering the allocation of dollars to businesses and individuals]. We’re going to increase production, it doesn’t matter if it’s public or private, but we’re going to work on that, as we have been, and we’ve consulted the population too.

How were they consulted?

An instrument was designed to find out how the population saw the solution to their [economic] problems, and we now have the results, which tell us very important things. Of course, as we are the Central Bank, we asked people what inflation meant to them, and it would appear a lie, but in exact figures the population doesn’t know what the level of inflation is. For last year, when it was 20%, they gave other numbers.

People know there is inflation when there is an increase in prices.

Exactly. But they also know that although the price increases, they can acquire the product, which is very good. It shouldn’t be forgotten that our supreme commander made a social investment of $550 billion dollars. This isn’t money that went abroad, but remained here for our population. The people know that when prices increase it’s because there are problems in the economy, and they say that the solution to that problem is production. It’s important to see how our people have learned, the responses to the survey that we did were marvelous, so much so that one is surprised and says “wow, the people really know!”

Are the people participating?

Yes, our people know that the economic problem [of inflation] is solved with production, but also by fighting against the economic war of hoarding and speculation, and they say that in three months this will be overcome. With that response it seems to us that the famous honeymoon that is going to be given to our president Nicolas Maduro is coming. People have the expectation, the hope, that in three months these problems of the economy and production, speculation and hoarding, are going to end. Any governor, when they win an election, is given a kind of honeymoon, but one has not been given to our first chavista president, Nicolas Maduro, who began with an economic war.

How did you measure that?

The people say it. Over 70% of our population has that expectation [of the government overcoming high inflation and economic sabotage], and of course, with the joint work of the Central Bank and the National Executive, we have to achieve that goal. I think that we really are heading in a good direction.

Now, Doctor, why did the private media want you to go?

I think that it’s a product of wanting to maintain the economic war. First, in the media they say that I am an orthodox chavista, and I was born like that, and to change I should be born again. There are people who do not have an interest in the existence of controls for the rational use of foreign currency; it’s not in their interest, and because of that we have to insist upon preventative and solid controls. The media also seek to break our collaboration with the National Executive, as we maintain now, in abidance with our legal norms. Collaboration also exists with the minister of finance, Dr. Merentes.

Who is also a director of the Central Bank.

As are Dr. Jorge Giordani, Dr. Armando León, Dr. José Feliz Rivas, Dr. José Khan and Dr. Julio Viloria [who all hold other official or government positions]. Eudomar Tovar is also on the directive board as the first vice-president of the Central Bank, and he is the president of Cadivi. Thus there exists joint work and control of foreign currency, which we say isn’t perfect, but we have to make perfect, with monitoring and care. Due to this we know that our economy can be sustained, which the private media don’t like.

In the struggle against corruption that President Maduro has begun, how does the Central Bank support him?

We also support that struggle. We insist on preventative and solid controls because we aren’t going to allow that mechanisms to do with the allocation of foreign currency perturb us, and in such a way damage the growth of our economy. The media don’t like this, and seeing that the people are giving political stability to our president, [the opposition] now come with the economic war to prevent there being economic stability.

Translated by Ewan Robertson for Correo del Orinoco International