January 22, 2017 / 9:40 PM / 3 years ago

Venezuela's Maduro taps ally Sanguino to head central bank

CARACAS (Reuters) - Venezuelan President Nicolas Maduro on Sunday tapped a political ally and economist, Ricardo Sanguino, to be the new chief of the country’s central bank, amid a deep economic contraction, runaway inflation and Soviet-style product shortages.

Venezuela's President Nicolas Maduro talks to the media during a news conference at Miraflores Palace in Caracas, Venezuela January 18, 2017. REUTERS/Marco Bello

Sanguino, a supporter of Maduro’s policies but not regarded as a particularly influential political player, is replacing central bank chief Nelson Merentes, who is retiring, the socialist leader said in a weekly televised broadcast.

Sources on Friday told Reuters that Maduro asked Merentes, a mathematician who has held the post since 2009 except for a brief 2013 stint as finance minister, to resign.

“I want us to begin a new phase in the development of the Central Bank of Venezuela,” Maduro said in his address.

Sanguino has never held a ministerial post nor has he been present for major economic policy announcements. As a legislator, he has primarily focused on ensuring approval for the Maduro administration’s routine financing requests and defending government decisions after they were announced.

In 2015, just before the opposition took control of Congress, Maduro’s ruling Socialist Party changed the law to remove the requirement that the central bank president be confirmed by the legislature.

Cabinet changes are relatively frequent under Maduro, and incoming officials have had little success in making significant economic changes.

Investors, however, had viewed Merentes’ return to the central bank in 2013 as a positive sign given his reputation as an economic pragmatist. That reputation largely wore off as he oversaw a massive expansion of the money supply that helped drive inflation to a reported 800 percent in 2016.

Maduro earlier this month named low-profile legislator Ramon Lobo to be Economy Vice President.

Venezuelans now routinely skip meals and spend hours in supermarket lines as the OPEC nation’s economic system steadily falls into disarray, spurred by the 2014 collapse in oil prices.

Maduro says his government is the victim of an “economic war” led by the opposition with the support of the business community.

Economists say Venezuela needs to dismantle its currency control system, which has left businesses without enough dollars to import products or raw materials. Four efforts to create a market-based currency system since 2013 have fallen flat.

Reporting by Deisy Buitrago; Additional reporting by Corina Pons; Writing by Brian Ellsworth; Editing by Paul Simao

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