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Long-shot Maduro rival vows economic reform

04 Apr 2018 21:39 (+01:00 GMT)
Long-shot Maduro rival vows economic reform

Caracas, 4 April (Argus) — A former state governor challenging Venezuelan president Nicolas Maduro in 20 May elections unveiled economic reform proposals that feature reopening the oil industry and returning expropriated assets to their original owners.

Henri Falcon, Lara state governor in 2008-17 who broke ranks with a fractured opposition coalition to challenge Maduro for the presidency next month, wants to change Venezuela´s constitution to dollarize the economy and snuff out hyperinflation.

Falcon´s candidacy is considered a long shot, less because of his orthodox economic platform than because of the dubious nature of the election itself, which has drawn international condemnation for failing to meet basic democratic conditions.

The proposed economic reforms crafted for Falcon by his chief economic adviser, Francisco Rodriguez, are grounded in the pursuit of at least $12bn in international loans to finance the recovery of state-owned PdV's crippled upstream and downstream operations. The proposed credit would come from multilateral organizations and commercial entities including oil companies.

Falcon's plan for reviving Venezuela's crude production, which sank to a new low of around 1.51mn b/d in March, includes strengthening existing relationships with Russian and Chinese oil companies.

Foreign-owned oil assets expropriated in 2006-09 by late president Hugo Chavez would be re-privatized, preferably by offering the assets back to their original owners, Falcon said. Under existing Venezuelan constitutional and legal norms, PdV could reduce its equity in over 40 existing upstream joint ventures from a current 60pc to 50.01pc as a way of securing fresh funding, technology and labor support from its foreign partners.

The free oil supplies Cuba has enjoyed since 2000 would be terminated immediately, Rodriguez said on 31 March. The PetroCaribe preferential oil supply initiative launched in 2005 would likely be terminated as PdV strives to maximize oil export revenues.

Falcon pledged to institute transparent external audits of PdV and its over 100 subsidiaries coupled with extensive management and personnel changes aimed at depoliticizing the company.

The "Great Transformation" economic plan crafted by Rodriguez would end exchange controls and dollarize wages at a starting level of about $65/month, and would include a one-time stipend of up to $25 for all Venezuelan nationals.

Falcon said he would seek immediate financial support from the International Monetary Fund and other multilateral entities to stabilize the economy, restore financial solvency, recapitalize the banking system after dollarization is implemented, and facilitate negotiations to restructure up to $70bn in combined sovereign and PdV bond debt.

Former Venezuelan planning minister Ricardo Hausmann, currently at Harvard University, estimated in 2017 that Venezuela could require up to $50bn of international aid to kick off a recovery. Local economist Robert Bottome says Venezuela will need over $100bn of financial assistance over 10 years to put the economy back on its feet.

In a presentation last week, Rodriguez indicated that Venezuela's foreign debt would be restructured and payments would resume only after the economy is stabilized – a process that could take several years.

Falcon's chances of unseating Maduro appear slim, at best. Maduro and the ruling socialist party (PSUV) control the electoral authority (CNE) and the supreme court. The defense ministry and armed forces high command are also aligned with Maduro.

Recent polls show that over 85pc of voters blame Maduro for Venezuela's severe crisis and are anxious for change. But Falcon has high disapproval ratings based on voter perceptions of his past ties to Chavez and his refusal to join the rest of the political opposition in boycotting elections that appear to be clearly rigged to favor Maduro.

Falcon's candidacy is also opposed publicly by a majority of the fractured MUD opposition coalition's member parties. His critics say he is an unqualified opportunist.

"I think Falcon means well, but he absolutely has no idea of the magnitude of Venezuela's crisis or how to deal with it, assuming he wins and is allowed to take power, which seems unlikely," Bottome told Argus.

Falcon has pledged to immediately free all political prisoners if he is elected. But Falcon's claim that he seeks to lead a "national salvation government" in which "no one is persecuted or punished for past transgressions" also suggests he would negotiate immunity deals with former Maduro government and senior PSUV officials in exchange for their support of his government.