Venezuelan President Nicolas Maduro gestures during a meeting with South American trade group Mercosur members in Caracas, July 9, 2013. Venezuela’s June inflation slowed from the previous month’s 6.1 per cent to 4.7 per cent, the central bank said on Tuesday.Carlos Garcia Rawlins/Reuters
Venezuela's faltering economy needs more than personnel tweaks and a piecemeal anti-corruption drive.
President Nicolas Maduro recently appointed Eudomar Tovar as the new central bank chief – he's more market-friendly than his predecessor, Edmee Betancourt, and an ally of like-minded Finance Minister Nelson Merentes.
But unless Mr. Maduro gives Mr. Tovar the power to introduce bigger changes, there's more financial pain to come.
Official inflation figures show that prices have jumped more than 40 per cent in the past 12 months, for example – the highest since 2007.
The currency's black market now values the currency at just a fifth of the official exchange rate.
And even though oil production has been flat over the past few years, foreign currency reserves have fallen 22 per cent so far this year alone to $23-billion (U.S.).
Mr. Betancourt, Mr. Tovar's forerunner, tried to stem that at the end of July by ordering state companies to register their foreign exchange holdings with the central bank.
The resulting uproar from affected institutions led to his dismissal. That's a good sign if Mr. Tovar can come up with better ideas to reverse the reserves drain before they disappear altogether.
It may be that Mr. Maduro wants to use this opportunity to change economic policy.
However, his rhetoric generally signals the opposite. When announcing a new crackdown on graft last month, for example, he said, "I declare a war on the old, rotten anti-values of capitalism."
That type of language hardly suggests economic moderation has properly captured the President's fancy.
Even this campaign against corruption looks half-hearted. Some 50 managers at state-run institutions have been arrested in the past two weeks, but they seem to be mostly small fry.
Meanwhile, the biggest fish remain unmolested. And Venezuela's exchange-control restrictions and market distortions such as fuel subsidies that leave petrol costing 6 cents a gallon leave huge avenues for corruption and illicit commerce.
They also, of course, add to public spending and reduce economic output that has already been whacked by state-imposed market distortions. Combatting that needs a lot more than a few words and some new faces.