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UNCLAS SECTION 01 OF 02 CARACAS 000033 
 
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E.O. 12958: N/A 
TAGS: ECON PGOV EFIN VE
SUBJECT: CHANGE IS IN THE AIR IN ECONOMIC MINISTRIES AS 
CABEZAS IS NAMED FINANCE MINISTER 
 
REF: CARACAS 3565 
 
¶1. (SBU) SUMMARY: Rodrigo Cabezas, Chairman of the National 
Assembly's Finance Committee, will be Venezuela's next 
Finance Minister, replacing current Finance Minister Nelson 
Merentes.  The change is part of a larger re-shuffling of 
positions by Chavez and will likely be followed by more 
announcements in advance of his inauguration on January 10. 
Cabezas, a member of Chavez's political party (MVR), has been 
a staunch supporter of the concept of "Socialism for the XXI 
Century," whatever that means.  END SUMMARY. 
 
¶2. (SBU) On January 4, Rodrigo Cabezas held a press 
conference to announce that he had been called by President 
Chavez the night before and asked to assume the position of 
Minister of Finance.  Cabezas has been an active member of 
the AN and very vocal as the President of the Finance 
Committee.  He was a leading advocate of transferring 
"excess" Central Bank (BCV) reserves to the National 
Development Fund (FONDEN) and for plans to remove 3 zeroes 
from the Venezuelan currency.  (Note:  Chavez recently 
announced that an additional USD 7 billion will be 
transferred from BCV reserves to FONDEN.  End Note.) 
 
¶3. (SBU) Cabezas has also been critical of the BCV's 
inability to contain inflation, which was 17 percent in 2006, 
though his proposal to lower the value-added tax was widely 
derided as ineffective and likely to actually contribute to 
inflation.  Cabezas has said that he intends to work more 
closely with the BCV than his predecessor, which may be read 
as future plans to eliminate the BCV's (already tenuous) 
constitutional autonomy and to further subordinate monetary 
policy to fiscal policy.  Cabezas has announced that deputy 
Rafael Isea, currently a member of the Finance Committee and 
a former military officer who participated in the 1992 coup, 
will become a Vice Minister of Finance.  Additional changes 
at the ministry and the institutions (such as state-owned 
banks) it controls are likely. 
 
¶4. (SBU) During EconCouns's last meeting with Cabezas in July 
2006 (reftel), he was straightforward in his defense of BRV 
economic policies, which even he couched as more political 
than economic.  He has been receptive to Embassy meeting 
requests in the past and rarely speaks out about 
U.S.-Venezuelan relations.  Cabezas did, however, quickly and 
loudly denounce the U.S. Ambassador in 2005 after a visit to 
Zulia during which the Ambassador signed a series of 
agreements with the state government. 
 
¶5.  (SBU) It has concurrently been reported that Jorge 
Giordani will continue in his role as Minister of Planning 
and Development and Rafael Ramirez will remain in charge of 
the Ministry of Energy and Petroleum and President of PDVSA. 
In addition, El Nacional reported that the Minister of Light 
Industry and Commerce (MILCO) will be replaced, possibly by 
former CADIVI President Mary Robles.  Meanwhile, Minister 
Merentes has announced that he will fill a position on the 
BCV's board of directors, reportedly replacing Giordani as 
the executive branch's representative on the board, and has 
said that he looks forward to returning to teaching math at 
the Venezuelan Central University.  If the rumors of his 
side-dealings in bond sales are to be believed, it should be 
a very comfortable retirement. 
 
¶6. (SBU) COMMENT: The move of Cabezas and Isea from the AN to 
the Finance Ministry is consistent with Chavez's increasing 
use of parliamentarians, such as former speaker Nicolas 
Maduro, to fill cabinet positions.  Despite claims that he 
was already planning to retire from the National Assembly, 
Cabezas has clearly been gunning for the job for some time. 
In recent months he has often preempted Merentes by 
announcing growth figures and gotten ahead of the government 
on issues such as inflation.  Cabezas faces a difficult 
juggling act as excess liquidity caused by government 
policies and heavy spending push inflation higher, while 
tools to fight inflation are limited by political 
considerations.  END COMMENT. 
 
¶7. (SBU) BIO NOTE: Cabezas is 50 years old and has been a 
member of the National Assembly (AN) since 2000.  Before 
that, he served as a deputy in the Venezuelan Congress since 
¶1990.  He represents his home state of Zulia and before being 
 
CARACAS 00000033  002 OF 002 
 
 
named Finance Minister, rumors had it that he was interested 
in the governorship of Zulia, currently held by former 
opposition Presidential candidate Manuel Rosales.  Cabezas 
graduated from the University of Zulia and was a professor 
there of Economics.  He has been active in obtaining 
financing for his university, including creating the 
Institute of Economic and Social Investigation and a 
postgraduate program in Humanities and Education.  Not only a 
public servant, Cabezas also owns a company in Zulia that is 
rumored to have uncanny success in winning PDVSA contracts, 
though no formal accusations of corruption have ever been 
made.  END NOTE. 
 
 
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