New Venezuelan Finance Minister Presents Plan to Fight Inflation

Mérida, June 23, 2008 (venezuelanalysis.com)– On Sunday, Ali Rodríguez, the new Venezuelan Finance Minister, detailed ministry plans to take on the “immediate challenge” of inflation by investing Venezuela’s “overflowing” oil revenues in a broadened state apparatus to stimulate agricultural production and gradually leave behind “state capitalism.”

Rodríguez recommended that inflation “be combated in two directions, on the one hand, the stimulation of production principally in the food sector and, on the other hand, we must carry out a very prudent moderation of consumption.”

The minister explained that the food sector is where the “gap between national consumption and production in general” has been the largest, because “consumption has been very stimulated by a progressive distribution of oil revenue.”

Rejecting “neo-liberal” strategies which advocate “drastically reducing demand, implying a harsh impoverishment of the population,” the minister recommended that President Chávez “emphasize the supply factor” in order to curb inflation.

Specifically, Rodríguez urged Chávez to create an over-arching state organization to drastically increase agricultural growth. He acknowledged that “excellent work has already begun,” but exhorted that this be “multiplied” in order to be effective.

The apparatus should combine top nutritional experts who know what foods Venezuelans need most in order to maximize intellectual and economic activity, farmers who “know the productive land vocations and how to increase productivity,” and irrigation experts, the minister continued.

Rodríguez, who is also a former Secretary General of OPEC, said oil revenues, the primary source of funds for Venezuela’s government, will continue to grow, which “is going to imply years of grand efforts to develop national production.”

“They could go down, but I think that [oil] prices are going to continue to go up due to factors that have been behind the current increase in price,” he predicted.

Echoing OPEC, Rodríguez insisted that the supply of crude on the market is sufficient, and that a deficit in refining capacity along with investor speculation and a weak dollar are causing oil prices to soar beyond $130 per barrel.

In a televised discussion with former Venezuelan Vice President José Vicente Rangel on Sunday, the new minister envisioned a cultural shift in Venezuela as an integral part of the government’s plans to “accelerate the transition from a profit-driven economy to a productive, socialist economy.”

As “state capitalism” enters “a process of transition,” said Rodríguez, “we have to change the mentality of the Venezuelan from a profit-driven culture to a productive culture. This implies generating a new ethic.”

In order to change “the mentality of the citizen,” it is necessary to undertake “a profound transformation of the public sector,” the minister expounded, emphasizing the need to “make it more efficient.”

As part of this initiative, Rodríguez promised to reduce the amount of public funds held in the form of foreign debt bought up by the Venezuelan government, known as “structured notes,” because private banks were using the notes to convert their reserves into dollars rather than bolivars or other Latin American currencies.

Venezuela must “leave behind structured notes, and the bankers recapitalize, because that money is not of the bankers, it is public,” the minister declared.

Along with his plans to bolster the public sector, Rodríguez also said, “There is an open invitation to the private sector … and I reiterate the invitation that the President of the Republic made to the private business sector,” referring to the economic measures President Chávez announced on June 11th, which gives incentives to private enterprises to make a “strategic national productive alliance” with the government.

Venezuela has experienced 12.4% inflation in consumer prices in the first five months of this year. In April, President Chávez increased regulated corn prices to stimulate production and announced the acquisition of new agricultural machinery from Argentina and Iran, in an effort to “move away from the oil-based production model.”

Meanwhile, the government has expanded its food distribution system, which sells basic foods at either regulated or subsidized prices. While inaugurating a new local node of this system last Friday, Chávez repeated his policy that food security is the state’s obligation, since the private sector emphasizes profits that inevitably supersede human needs.