Venezuela President Ousts Long-Time Leftist Economy Planner
Jorge Giordani, the Architect of the Centralized Economy, Was a Confidant of Hugo Chávez By Kejal Vyas  
 The Wall Street Journal
June 18, 2014

CARACAS—Venezuelan President Nicolás Maduro late Tuesday ousted his planning minister, a longtime architect of the government's centralized economic model, and replaced him with another ruling Socialist party insider who faces an economy hobbled by the region's highest inflation rate and chronic goods shortages.

Jorge Giordani, a septuagenarian and prominent leftist economist, was a confidant of late President Hugo Chávez and served as planning minister through most of the Socialist party's 15 years at the helm. He was replaced by Ricardo Menendez, a former professor and industry minister who shares similar views, indicating that policy may not change much.

"While it is a positive to get some of the more strident Marxists out of the picture, I think it's the equivalent of rearranging chairs on the deck of the Titanic," said Russ Dallen, partner at brokerage Caracas Capital Markets.

Mr. Giordani is the brains behind oil-rich Venezuela's rigid system of price caps and currency controls that have tightly restricted access to dollars since the measures were implemented in 2003. Mr. Chavez adopted the controls to prevent capital flight, but critics say they have deterred foreign investment, starved the private sector of hard currency needed for imports and led to distortions in the economy, including a vibrant currency black market.

"[Mr. Giordani] is a man who has handled all of the challenges that the revolution has given him with absolute honesty," Mr. Maduro said during a televised address where he announced changes to his cabinet "as part of ongoing challenge to improve, amplify and refresh vital areas of the government."

"Certainly he is going to take on whatever new challenges that the revolution will assign him," the president said.

But despite Mr. Maduro's praise, the former planning minister's departure signaled a rift between radical ideologues and more pragmatic members in Mr. Maduro's party.

In a letter allegedly written by Mr. Giordani and published Wednesday in local media and pro-government outlets, the former minister sharply criticized President Maduro's management of the government, suggesting he was unable to control key institutions and correct Venezuela's moribund economy. "It is painful and alarming to see a presidency that does not show leadership and wants to affirm it by simply repeating the proposals of Comandante Chavez without coherence," said the letter, which also accused Mr. Maduro of straying from Socialist principles.

The authenticity of the letter, widely circulated in left-wing online forums that are popular with Socialist Party members, couldn't be confirmed. Mr. Giordani couldn't be reached for comment. His former vice minister, Ramon Yanez, declined to answer questions about the letter in two phone calls.

Also, spokesmen at the Planning Ministry didn't respond to calls seeking comment.

Mr. Giordani was a pillar of the team of leftist intellectuals formed by Mr. Chavez during the early days of his self-styled 21st century Socialist revolution. The two became close when Mr. Giordani tutored the former tank commander while he was serving time in a military prison for leading an unsuccessful coup in 1992.

Once known as "the Albanian" for the orthodox communist views he held in graduate school, Mr. Giordani in recent years came to be referred to as "the monk" for his austere lifestyle. In public comments, he blasted the so-called "Bolivarian bourgeoisie" for flaunting immense wealth generated through ties with the central government.

Mr. Giordani often touted the social achievements of his administration, including the creation of Fonden, an off-budget development fund controlled by the nation's executive office.

About $100 billion in oil revenues have been diverted to the fund over the last decade, slated for programs to benefit millions of Venezuela's slum-dwellers.

But the country's opaque finances have drawn the ire of critics who say the money has been squandered on unfinished projects or lost to corruption. Scores of public-works projects are paralyzed in a country where power outages and broken roads are common. The greater metropolitan area around the Caracas capital has been hit with water rationing for months because of a water-distribution network that lacks investment, critics say.

The difficulties are seen pushing Venezuela into a recession this year despite high international oil prices. Caracas-based business consultancy Ecoanalitica recently estimated that inflation may top 80% this year, by far the highest in the Americas.

Under Mr. Giordani's influence, Venezuela maintained a cumbersome tiered-foreign-exchange regime that sold subsidized dollars to top-priority economic sectors. But the system has been marred by corruption and business leaders complain that it stifles economic activity.

Most decisions on economic matters are now in the hands of Rafael Ramirez, who serves as economy vice president as well as head of state energy giant Petróleos de Venezuela SA, or PdVSA. Mr. Ramirez said recently that Venezuela is looking to unify its three different legal exchange rates.

Mr. Menendez, who now leads a newly structured Planning Ministry that will oversee national development, is a former minister who was once in charge of Venezuela's struggling industrial sector and most recently served as minister of university education.

He is seen as a leftist hard-liner, leading some analysts to doubt the chances of major policy changes. But other analysts say Mr. Giordani's departure is likely to suggest a subtle shift away from the policies and nationalizations heavily used by Mr. Chavez until he died of cancer in March 2013.

Rumors that Mr. Giordani was on his way out intensified last week after he was removed from the board of directors of PdVSA and the central bank. In a recent note to clients,  Bank of America  BAC +0.64%     labeled Mr. Giordani's exit from those two institutions as "a strong sign of the waning influence of the radical Marxist wing on economic policy issues."

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Giordani's removal from office unveils crisis in public administration
VÍCTOR SALMERÓN 
EL UNIVERSAL
June 19, 2014 

Jorge Giordani's removal from the Planning Ministry is no guarantee that the government will implement expenditure cuts, foreign currency reforms, and fiscal and monetary austerity, as President Nicolás Maduro has sent no signals in that direction

Jorge Giordani, the man late President Hugo Chávez entrusted with the highest positions in Venezuelan public administration, is now out of the government. His removal from office as planning minister unveils an administration unable to agree on an adjustment plan to restore the minimum balances lost after the excesses committed in 2012.

 In response to his removal, Giordani disclosed to the public a letter admitting that in order to promote Hugo Chávez's reelection on October 7, 2012 large resources were used.

 Rampant public expenditure, costly subsidies, mass imports due to the low official forex rate, a larger number of civil servants, and indebtedness by oil giant Pdvsa led to the breakout in 2013 of foreign currency shortage, inflation, and a climate of recession.

 Then, Giordani proposed curbing expenditure, and requested to be appointed as head of the Foreign Exchange Administration System (Cadivi) to manage the allocation of US dollars, yet President Nicolás Maduro did not meet any of his two requests.

 The struggle for the control of foreign currency and confrontation with both the president of Pdvsa, Rafael Ramírez, and the president of the central bank, Nelson Merentes, resulted in concrete actions such as devaluating the currency slowly to offset the drought of US dollars.

 The president of the National Economy Council, Efraín Velásquez, claimed "Giordani wanted to face the situation by cutting down on expenditure, which may have led to recession and lower inflation. Instead, Ramírez is more oriented to increasing expenditure with bolivars printed by the central bank. This sparks inflation, shortage, and recession as demand rises and supply declines in the absence of enough US dollars in the country."

 Giordani's removal from office does not imply a comprehensive adjustment with lower expenditure, a monetary reform and both monetary and fiscal austerity because Nicolás Maduro seems not to be convinced of this.

 Analysts believe Rafael Ramírez may soon be free to adopt the devaluation listed in his agenda. Meanwhile, true reforms still look distant.

  Translated by Jhean Cabrera

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