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April 17, 2007
Price Controls Working Wonders in Venezuela
From the Economist:
Who controls the food supply and why a fertile and oil-rich country should have problems getting food to its 27m people are questions that pit the leftist government of Hugo Chávez against much of the private sector. Venezuela has one of the world's highest inflation rates (see chart). Food prices are rising even faster than the overall index. That is despite—or because of—the fact that food, medicines and basic services have been subject to price controls since 2003. Meat, milk, black beans and sugar are among many products that, from time to time, disappear from the shelves—even those of Mercal, the government-run supermarket chain. Often, though, these goods can be found at much higher prices in the hands of street traders.
The government has a simple answer to the conundrum. “It's part of the curse of capitalism,” according to Mr Chávez. In February he declared war on “hoarders and speculators”, issuing a decree mandating jail sentences of up to six years for anyone interfering with food supplies. The government promptly seized a slaughterhouse and a cold-store.
Many businessmen and shopkeepers have a different view. They complain that controlled prices are set so low that they are obliged to sell at a loss. If they don't, they risk fines, temporary closure, expropriation or even imprisonment. In late March, for instance, the government temporarily closed 17 butchers' shops it accused of breaking price regulations. Mr Chávez has said that if he has to take over the entire food industry he will, although many Venezuelans doubt the government would be capable of running it.
Posted by Peter Mork at April 17, 2007 12:36 PM
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