Venezuela: Interview / Ricardo Sanguino, president of the Congress Finance Committee

[ChangoLoa]

"There are not brokerage firms in socialism... In the securities market, trading is almost nil; we are not interested in that market”

The National Assembly (AN) resolved to speed up the passage of laws related to the financial system in order to fit it in the socialist production model and toughen regulations.

Ricardo Sanguino, the president of the AN Finance Committee, said that financial regulations are the priority, because these legal instruments will bind financial agencies to intermediation and fulfillment of their functions.

Q: As appears from the texts, the intention is to have a socialist financial system.
We are in transition and banks should back, not only traditional sectors, but also production activities oriented to development of the communal economy and comply with the Economic and Social Development Plan 2007-2013. Likewise, insurance companies should play a similar role. Therefore, they should create products in line with the model.

Q: How brokerage firms fall within this system, let alone that they are being excluded from activities, such as the swap market?
There are not brokerage firms in socialism. They come from the evolution of the capitalist system. We are in transition; when we become a Venezuelan socialist society, perhaps these brokerage firms will be needed no more.

Q: Does it mean that in a socialist model, the securities market should not exist and the system just requires banks and insurance companies?
In the capitalist system we have, we can see family companies. Therefore, dealing in the securities market is almost nil; we are not interested in fostering such market. The financial system should contain banks and insurance companies only.

Q: Should the Central Bank act according to the system?
The Central Bank is being adjusted to the socialist model; hence the recent reform.

Control over the market
In this process of increasing regulations, the Parliament recently passed an amendment to the Law against Exchange Offenses, which enables the Central Bank of Venezuela (BCV) to centralize buy and sale of foreign currency-denominated securities. According to authorities, "speculation" in the swap market will be countered.

The president of the Finance Committee, in line with the remarks made by the Executive Office spokespersons, is certain that this market requires tougher control, because "by these means many exceeding funds went out."

Q: What will be the outcome of the centralized market, where there is lower flow of US dollars and the settlement of foreign currency at the official exchange rate has been delayed? The total demand has not been fully met.
There is nothing stiff in economy and finance. No economic activity can create applications for USD 94 billion, as Minister of Planning Jorge Giordani said. There is no way of thinking that the private sector has such a need. Anyone should fit in the real economy levels. Many used this (swap) market to take surplus funds away.

Q: The 2009 balance of payments shows that more than a third of imports were backed by swap dollars and essential activities had to use this way to buy input and keep on running.
We must review what was actually imported, whether those materials were really needed.

In this context, the congressman noted the role to be played by the Imports and Exports Corporation recently created by President Hugo Chávez "to replace the hegemony of the bourgeoisie in management of the people's funds."

"We will have an enterprise responsible for imports and exports; we cannot forget that there are overestimates of what it is claimed to be imported."

Q: hrough that corporation, will the State import input to sell it later to private firms?
That is being reviewed, it may be. There is the need to ascertain whether continuing producing some inputs or import them is any beneficial. For example, some steel products can be brought from China and, perhaps it would be better to import them. This is being assessed.