As Venezuela’s economy sinks deeper into depression with a fourth consecutive year of recession to go along with hyperinflation, some ruling socialist party members are raising their voices to call for reforms.
A closed-door debate is occurring inside the country’s all-powerful constituent assembly, the body stacked only with pro-government lawmakers created in August to sideline the opposition-controlled Congress, on what to do with the economy. While the final word is with President Nicolas Maduro and his inner circle and the majority believe the blame for the country’s ills lie with the private sector and the U.S. empire, it’s becoming harder to ignore calls from the streets to address the widespread misery regardless of the origin.
Perhaps one of the loudest voices calling for change is Jesus Faria, a former trade and investment minister who’s now a member of the constituent assembly. He has been urging the government to permit a free-floating exchange rate where the forces of the market set the best price for the bolivar. While he believes other stronger and subsidized exchange rates to shield the poor should be kept, it’s an odd public posture for a self-proclaimed Marxist economist who was a young university student in East Berlin when it was still under Soviet rule.
“We cannot delay changes to the foreign currency policy any longer,” Faria, 53, said in an interview in downtown Caracas. “A truly free exchange market has to be established, where supply and demand meet to fix the price.”
Venezuela currently has an official rate for priority imports of 10 bolivars per dollar which is largely reserved for government institutions or close allies plugged into the regime. Another central bank auction market which has been essentially paralyzed was selling dollars to some at 3,345 bolivars while the free floating street rate has shot up to more than 96,000 from just 4,500 a year ago.
Since taking over for his late mentor and predecessor Hugo Chavez in 2014, Maduro has resisted calls to devalue the official rates or significantly cut subsidies on everything from gasoline to utility rates and has become infamous for saying he’s going to make important economic announcements without actually following through. While he added denominations of new bills of as large as 100,000 bolivars it’s done nothing to address the problems.
The most significant economic adjustment he’s taken in order to save dwindling cash for debt payments was to curtail imports for everything from food to medicine and capital goods which has in part been reflected in his approval rating of around 25 percent. Still, he’s managed to divide the opposition even further and use his influence over all levels of government to increase his power.
After the constituent assembly was sworn-in, Maduro handed over ideas for eight economic laws for discussion and approval including a foreign investment promotion bill, a tax on the wealthy and one to open currency exchange houses nationwide. Two have been approved and the others are languishing in the economy commission.
If Faria had his way, a previous market operated by brokerages that was closed in 2010 could be re-floated with more checks and balances to act as an escape valve for the economy and allow for more private sector imports. It would also remove the website dolartoday.com as the main reference price of the bolivar. Maduro and his followers blame the website for part of the country’s ills.
Chavez, who first installed capital controls in Venezuela in 2003 after surviving a brief coup attempt and a two-month oil strike, was more adept at controlling the exchange rate and making timely adjustments to cut costs or weaken the currency. He allowed the brokerage-led market to flourish and used government bond sales as ways to alleviate hard currency demand before abruptly shuttering the FX scheme and jailing executives for supposed economic crimes amid accelerating inflation and a weaker bolivar.
While there are still few signs that such a market will be reopened, a new brokerage regulator was named on Nov. 9 and there are still about 50 firms with operating licenses in the country awaiting the opportunity to restart their businesses. The local financial industry continues to lobby for reforms in private conversations with government officials.
Any opening could benefit those suffering the most, argues a fellow constituent lawmaker and former pollster Oscar Schemel.
“There is a lot of pressure to come up with solutions to the economic crisis being felt on the streets from leaders of grassroots organizations, fishermen, workers, professionals and pensioners,” Schemel said in an interview.
That view contrasts with other members of the assembly including Eduardo Piqate, head of the economic commission.
“A discussion is ongoing in the commission on the liberalization of currency controls. I personally disagree with the idea,” he said in an interview.
The presidential press office didn’t respond to questions about discussions to relax controls.
“The government fears that liberalization will lead to the depletion of the foreign reserves, which is not true,” said Juan Domingo Cordero who runs Rendivalores, a Caracas-based brokerage. The government needs a transparent currency transaction system, he said.
Francisco Rodriguez, chief economist at Torino Capital who himself has made recommendations to the government on economic reforms in recent years, said that while discussions to loosen currency controls aren’t new, they’ve become louder.