Central Bank autonomy at risk.(Banco de Venezuela)(Brief Article)

Venezuela appears to be continuing down the interventionist path with the passage of a new law regulating the role of the central bank. The bill was finally passed on Tuesday, after months of delays in the national assembly. Although the government has celebrated the bill as a blueprint for modern monetary institutions, these claims have met with hostility, with opposition parties concerned that the new law could effectively turn the bank into a tool of the government. Tulio Vera, chief debt strategist for Merrill Lynch, in New York, is not surprised by the measures, seeing it as further evidence of President Hugo Chavez's interventionist policy stance. He believes the legislation undermines the impartiality of the central bank in several ways, by tying the central bank to the administration's agenda. The bill explicitly mentions the obligation of the bank to follow the 'principles guiding the social and economic policy of the government'. Decision-making has been further politicized by the structure of the board, with five out of seven members, including the governor, now to be appointed by the executive, increasing the prospects for a conflict of interest.

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