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A new target for Venezuela's demagogic president

From The Economist

THE otherwise sober facade of Venezuela's central bank, the BCV, is adorned with revolutionary graffiti. "A BCV for the people" and "Neoliberals out!" are two of the slogans to have appeared recently. The bank is the latest institution to be threatened with seizure by Hugo Chávez, the country's president. It is supposed to be autonomous, but the president is irked by its reluctance to do his bidding.

Mr Chávez has already persuaded the BCV to hand over the exchange-rate "earnings" accrued on the country's international reserves, as a result of the depreciation of the bolivar. Last month he also demanded $1 billion from those reserves, to subsidise agriculture. If the money isn't forthcoming by mid-January, "I'll deal with [the BCV] the same way I dealt with Petróleos de Venezuela [the state oil corporation]". In other words: take it over.

Such a pay-out is explicitly prohibited by the BCV's regulations, as well as by Venezuela's constitution. In a statement, the bank said it was "expressly forbidden by law to grant credits to the government". The inflationary effect of injecting $1 billion into the economy could be dire; ditto the impact on the tumbling bolivar of treating foreign reserves as if they were the government's piggy-bank. The finance ministry, in a bid to calm foreign investors, has tried to finesse the president's demands. In any case, the agricultural schemes that he says he wants to fund barely exist. Private banks, which are obliged to devote 12% of their lending to agriculture, say they have difficulty placing the money, for lack of viable projects.

But Mr Chávez himself attributes all criticism to the dreaded "neoliberals": "I'm not interested in economic theories," he says. Last week he claimed that the bank's reserves-currently standing at around $21 billion, thanks largely to stringent exchange controls-were $6 billion in "excess" of what the country required. It was "absurd" and "crazy" for them just to sit in a bank. The gold bars in the BCV vaults were "growing mouldy". He insists that he will change the law, or even the constitution, if he does not get his way.

Mr Chávez's friend, Fidel Castro, once appointed Che Guevara to head the Cuban central bank: an ominous precedent. "Each day we come closer to the Cuban model," Carlos Casanova, an opposition legislator, told parliament. One of Mr Chávez's former finance ministers, General Francisco Usón, put it more bluntly. "This is practically the same", he said, "as showing up with a pistol...and taking the money."

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