Venezuelan President Nicolas Maduro's political disagreements with influential factions of the ruling PSUV party appear to have flared up into a wider internal conflict after the government last month confirmed controversial plans to raise local gasoline prices and sell state-owned PdV´s US downstream subsidiary Citgo.
Maduro had already been under fire from increasingly vocal party dissidents who blame the president for the Opec country´s worsening economic turmoil, tension that apparently triggered his entire 32-member cabinet to offer its resignation on 18 August. None of the ministers has since been ratified or replaced.
But the government's twin announcements last month that it would soon hike long-capped gasoline prices and sell Citgo to the highest bidder have escalated friction between Maduro and his internal critics.
Venezuela's GDP shrank by 5pc in first half 2014. The central bank forecasts full-year inflation of 75pc in 2014, without a gasoline price increase or new currency devaluation. A combination of higher pump prices and a fresh devaluation likely would push inflation well above 100pc this year, the bank says.
The black market currency exchange rate is now at an all-time high of 81 bolivares per US dollar, compared to the official tiered rates of Bs6.30/$, Bs11/$ and Bs50/$.
Vice president Jorge Arreaza said the cabinet's resignation early this week would "facilitate" the president's plans to restructure the government.
A presidential palace spokesman tells Argus that Maduro's cabinet changes will be "partial and gradual," suggesting that the majority of his ministers likely will be reappointed, including influential energy minister and vice president for economic affairs Rafael Ramirez.
But government-friendly polling firm Hinterlaces warned yesterday that Maduro "has run out of time" to contain the economy's crisis without major macroeconomic reforms that will have a significant financial impact on the population.
A second polling firm also often seen as favoring the government, Datanalisis, cautioned today that widespread shortages have become so critical as to threaten Venezuela's stability.
A pending cabinet reshuffle comes after military and radical nationalist factions in the PSUV asserted that the government's plans to raise fuel prices and sell Citgo contradict the social and economic interests of the official "Bolivarian revolution".
Maduro's internal critics maintain that heavily subsidized gasoline prices, currently averaging about $0.05/USG, are a social entitlement that should be maintained. The government should terminate PdV's preferential oil supply agreements with neighboring countries before raising local gasoline prices, the critics add, a sentiment uncommonly shared with opposition leaders.
PSUV opposition to selling Citgo also appears to reflect concerns that PdV would be stripped of its US downstream assets at a hugely discounted price to generate sorely needed cash for the government.
These concerns have been heightened by independent assessments issued by Venezuelan economists, including former central bank chief economist Jose Guerra, asserting that Citgo's current market value is about $5bn to $7bn, before subtracting the US refiner's debts, far short of the $10bn-$15bn range that Venezuelan officials are touting.
Maduro's cabinet has been dogged by internal ideological and policy divisions since he squeaked past his rival to win a special April 2013 election to replace late President Hugo Chavez. The longstanding rifts widened after Chavez died in March 2013.
The political uncertainty appears to be resurfacing in Caracas months after a government crackdown on student-led protests brought an uneasy calm that may now start to unravel, a possibility that is keeping large-scale oil investment at bay.
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