Glimpses of New Monetary Policy in Venezuela as Maduro Seeks Support Abroad

Quito, January 5^th, 2015 (Venezuelanalysis.com)-President Maduro announced measures to address monetary policy in Venezuela, including appointing Economist Rocco Albisinni as the new President of the National Center of Foreign Exchange (CENOCOEX).

In the face of ongoing economic problems in Venezuela, Presidnet Maduro announced on Sunday the creation of the Strategic Reserve Fund (FER) as a measure to strengthen monetary and fiscal policy in the country. This fund is aimed at being a type of savings account to guarantee wage increases, pension funds, and the funding of social missions, the President explained, calling this measure part of “the Revolution of monetary and fiscal stability.”

President Maduro also announced that economist Rocco Albisinni would replace Alejandro Fleming as the new president of the National Center of the Foreign Exchange. Albisinni was formerly the Vice-President of the State and Socialist Economy, which functioned under the Ministry of the Economy.

Many analysts have pointed to Venezuela’s multi-tiered foreign currency exchange system, which includes three different rates for the US dollar, as a source of high inflation in the country. The illicit dollar market has pervaded the Venezuelan economy since around 2005. On the informal market, dollars can be bought for roughly 170 Bolívares, almost 30 times the official (SICAD I) exchange rate.

Few Venezuelans have access to preferential dollars, which are essentially subsidized by the Venezuelan government at about 6.3 bolivars to the dollar. Corporations that need foreign exchange to maintain their operations and Venezuelans that have credit cards or travel abroad can apply to get these cheap dollars but one of the largest groups that have access to this exchange rate is Venezuelan students in foreign universities.

With suspicions lurking about deviation from the “correct use”of these preferential dollars, the government is requesting that the 11,400 students who received the preferential dollars for studying abroad between January 2012- March 2014 bring paperwork to a government office to prove that they were truly enrolled in foreign universities in that time period.

The Venezuelan daily paper Ultimas Noticias reported that those who do not report to the CENOCOEX headquarters will face “sanctions” by the Ministry of Finance.

Economist Orlando Ochoa criticized Maduro’s recent measures via twitter, writing that “they are going to convert Venezuela into a great black market.” Additionally, he claimed that Maduro’s solutions only amount to “a bureaucratic alphabet soup,” referring to the many government agencies and programs that are referred to by their acronyms.

Meanwhile, with oil prices at a ten-year low, Ochoa is not alone in predicting further hardships for 2015 in Venezuela. President Maduro has planned trips to Russia, China and fellow Organization of Petroleum Exporting Countries in what the BBC is calling an “international tour to try to stem the impact of falling oil prices and a deepening recession.”

After a sharp increase in United States production flooded the market with cheap oil last Autumn, Venezuelan OPEC representative Rafael Ramirez paid similar diplomatic visits with little result. President Maduro has since accused the US government of trying “to destroy” OPEC.

Former President Hugo Chavez is often credited as the leader who revived OPEC’s power in the global market.