Venezuela Rolls out Cabinet Change, Economic Measures to Combat Inflation

Mérida, April 27, 2020 (venezuelanalysis.com) – The Venezuelan government announced a changing of the guard in the country’s oil sector on Monday as well as several measures aimed at tackling rising inflation.

Tareck El Aissami, who currently serves as vice president for economy and minister of industry, will additionally assume the helm of the Oil Ministry, while Asdrubal Chavez will take over as president of state oil company PDVSA. Chavez previously served as oil minister and president of PDVSA’s US subsidiary, CITGO.

Both men had been nominated to a presidential commission tasked with overhauling the country’s oil industry and raising production levels in February.

Critics have long accused Venezuela’s flagship enterprise mismanagement and corruption, while output has fallen precipitously following the US imposition of financial sanctions in 2017. The Treasury Department imposed further punishing measures in 2019 with an oil embargo and a blanket ban on all transactions with Venezuelan state entities.

Production has taken a further hit in recent months with the levying of secondary sanctions against Russian energy giant Rosneft and collapsing global oil prices brought on by the coronavirus pandemic.

In tandem with the cabinet changes, Labour Minister Eduardo Pinate announced a 60 percent minimum wage increase to take effect May 1. Base wages and pensions were increased from 250,000 sovereign bolivars (BsS) to 400,000 BsS, while food bonuses were hiked from 200,000 BsS to 400,000 BsS, bringing the total income to 800,000 BsS (US $4.67 at the official exchange rate). Pensions were set at 400,000 BsS, while other bonuses will also be adjusted.

The measures come as the Maduro government attempts to rein in spiraling inflation as the country’s economy reels from the COVID-19 crisis. At the time of writing, Venezuela had registered 329 coronavirus cases, with 10 deceased and 142 recovered patients.

On Friday, government spokespersons also announced that regulated prices for 27 basic staples had been “agreed” with private sector actors.

In addition, Venezuela’s largest food conglomerate Alimentos Polar, as well as processed meat producer Plumrose and slaughterhouse Matadero Turmero are to be subjected to “supervised sales” after they were accused of “breaking [previously] agreed-upon prices.”

Authorities are also due to intervene in the private cooking oil manufacturer, Portuguesa Oil Consortium (COPOSA), for 180 days following similar allegations, and are reportedly carrying out price-checking operations across the country alongside local communities and the Armed Forces.

Consumers have denounced steep food price increases in recent days, which have come alongside a significant devaluation of the Venezuelan currency.

Since the coronavirus lockdown began on March 17, the Sovereign Bolivar has lost 130 percent of its value, measured at the official exchange rate. Meanwhile, the parallel rate has seen a 164 percent devaluation in the same time period. The currency has been particularly hard hit over the past week and a half, with the black market exchange rate soaring by 56 percent.

The food price hikes, alongside other grievances such as extensive fuel shortages and power cuts, resulted in disturbances and isolated looting in several small towns in the states of Monagas, Lara, Sucre, Yaracuy and Bolivar on Wednesday and Thursday. Dozens were arrested, and one man lost his life in Upata, Bolivar State.

The Maduro government lifted currency exchange controls in May 2019 as part of a battery of liberalising economic policies aimed at bringing inflation, which had soared to 1.7 million percent in 2018, under control.

Before the recent surge, month-to-month inflation had only surpassed the 50 percent hyperinflation threshold twice since February 2019. According to the Venezuelan Central Bank, last month’s 13.3 percent inflation was the lowest level since June 2017. Analysts, however, have previously warned that the policies applied to rein in inflation, including restrictions on the amount of currency in circulation, came at the expense of contracting aggregate demand.

Paul Dobson and Ricardo Vaz contributed reporting from Mérida.