For economy czar of crisis-hit Venezuela, inflation 'does not exist'
CARACAS: Venezuela’s new economy czar Luis Salas is tasked with controlling what is believed to be the world’s highest rate of inflation, but comes to the job with an unusual perspective: that inflation does not really exist.
President Nicolas Maduro on Wednesday tapped the 39-year-old sociologist as vice president for the economy amid soaring consumer prices and chronic product shortages, signaling a move toward orthodox socialism in the OPEC nation struggling under low oil prices.
Essays written by Salas describe scarcity and spiraling prices as the result of exploitation by businesses rather than government policy, offering an academic underpinning to the “economic war” explanation that Maduro uses to describe the current malaise of recession, runaway prices and widespread product shortages.
“Inflation does not exist in real life,” he wrote in a 2015 pamphlet called “22 Keys to Understanding the Economic War.” “When a person goes to a shop and finds that prices have gone up, they are not in the presence of ‘inflation.'”
Salas has argued against the idea that excessive printing of money causes inflation – an almost universally accepted tenet of macroeconomics. He insists prices rise primarily because corporations seek excessive profit margins.
The appointment of Salas appears to signal a break with the Socialist Party’s promises for market-friendly reforms last year, which ended in aborted efforts to liberalize cumbersome currency controls.
His designation augurs a further tightening of state controls in a country where supermarket lines routinely stretch for blocks and looming debt payments have left investors increasingly concerned about default.
Maduro last year said inflation would reach 85 percent in 2015 but the central bank has not published monthly figures since the start of last year. Unofficial private estimates now put the figure close to 200 percent.
Angry voters handed the Socialist Party a thundering defeat in last month’s legislative elections, giving the opposition coalition a two-thirds majority in Congress.
Salas will supervise newly-appointed Finance Minister Rodolfo Medina, a respected economics professor who has shown few signs of the overtly political approach favored by Salas.
While many describe Medina as a competent technocrat, he is not seen as having the leadership to push forward a politically complicated overhaul of economic policy.
Reuters was unable to obtain comment from either minister.
Salas’ numerous online essays are written in flowing academic prose featuring caustic turns-of-phrase such as “speculative-parasite-vulture capital” or “global war of the planetary plutocracy.”
Few offer specific policy proposals. One list of ideas for economic policies for 2016 published on Salas’ blog includes a recommendation that economic policy should be “coherent” and “should not be passive but rather active and on the offensive.”
The designation of the new economic authorities was met with derision by opposition critics who have for years excoriated price and currency controls for stifling productivity and fueling corruption.
“In times of inflation and scarcity, the new economic team has inflated ideology and scarce common sense,” wrote Ramon Aveledo, former head of the country’s main opposition coalition, via his Twitter account.
Economists say Venezuela needs to overhaul a currency control system that sells dollars at three different exchange rates. Greenbacks on a separate black market fetch 135 times the strongest official rate, offering juicy returns for those who have access to subsidized dollars.
Venezuelans enjoyed an oil-fueled economic boom under the 14-year rule of late president Hugo Chavez, whose generous social spending helped him to win repeated elections.
Maduro, Chavez’s anointed successor, in 2013 inherited an stuttering economy that was rocked by the collapse in the price of oil – which provides almost all its hard currency.
Former economy czar Rafael Ramirez, who held the same position as Salas in 2014, attempted to create a single exchange rate in an effort to carry out a broad macroeconomic overhaul with the support of foreign investors.
He was sacked several months later.
Salas’ writings indicate he plans to do the opposite of Ramirez. He has held up as an example of success the 2013 “Dakazo” in which troops took over a group of businesses including electronics retailer Daka and ordered them to slash prices.
“The first thing we can conclude is that prices can be controlled and speculation tied down if there is a combination of state guarantees and mobilization of the people,” Salas wrote.