Venezuela Leader Warns of Price Controls

Associated Press ^ | Jan 27, 2003 | JOSEPH B. FRAZIER

[new cruelty]

CARACAS, Venezuela - President Hugo Chavez plans to implement price controls on medicine and food, his latest effort to rescue Venezuela's economy wrecked by an opposition strike that Monday entered its ninth week.

Products already in short supply from the strike — such as milk, meat, flour, rice, pasta, bread, baby formula, tuna and sardines — will be under price controls, government minister Ramon Rosales told Monday's El Nacional newspaper.

"So that these (currency) controls do not hurt the poor, we will institute price controls," Chavez said Sunday in Porto Alegre, Brazil, at the World Social Forum.

His comments came as hundreds of thousands of Chavez opponents occupied a central Caracas highway for the entire weekend, protesting a Supreme Court decision suspending a Feb. 2 referendum on Chavez's rule.

After extending the protest well beyond the planned 24 hours, protesters finally rolled up their national flags — and, in many cases, their tents — and let traffic flow again.

Strikes started Dec. 2, staged by coalition of business, labor and political groups that wanted to pressure Chavez into accepting the referendum. The strike has greatly reduced oil production in the world's fifth-largest petroleum exporter.

Opposition leaders had hoped a referendum, though nonbinding, would embarrass Chavez into leaving office. Instead, they now plan to collect signatures Feb. 2 on a petition demanding Chavez's term be cut to pave the way for new elections.

A petition — with 15 percent of Venezuela's 12 million voters — is necessary to amend the constitution, cutting Chavez's six-year term, due to run until 2007, to four.

The president's price control announcement was meant to accompany his suspension of foreign currency dealings for five business days last Wednesday to halt the rush of nervous Venezuelans trading in their bolivars for dollars. The currency has lost 25 percent of its value this year alone.

While the currency controls will help protect the bolivar, they could hurt many businesses: Dollars are needed to buy food, about half of which is imported, medicines and other essentials, many of which are scarce.

The strike also has forced Venezuela to import gasoline, now so hard to find that lines at the few open stations sometimes stretch for a mile or longer.

On Sunday, Chavez also said he will soon propose a tax on all financial transactions in Venezuela, as "a kind of Tobin tax." Tobin taxes, named after Yale University economist and Nobel-laureate James Tobin, are designed to tame currency market volatility.

The president gave no further details but said Venezuela's dollar-based reserves dropped $3 billion in December and January as a the national strike dried up oil exports.

Chavez said Sunday that oil production has risen to 1.32 million barrels a day. But dissident oil executives put the figure at about 966,000 barrels on Monday. Pre-strike production was about 3.2 million barrels, and fell as low as 150,000 barrels early in the strike.

Oil provides 80 percent of the government's foreign exchange and makes up a third of gross domestic product.

Many small businesses that joined the strike at its outset have since returned to work, but thousands of others have refused to open up, despite the damage being wreaked on the economy.

The Santander Central Hispano investment bank has warned that Venezuela's economy could contract as much as 40 percent in the first quarter of 2003. It shrank by an estimated 8 percent in 2002 and unemployment is 17 percent.

[theDentist]

Hey Hillary! Another opportunity to turn a small investment into a hundred grand!

[WOSG]

uh, price controls create shortages. what nitwits. .... next up for Caracas: Food lines and food riots. Oh Joy.

[blackdog]

I don't get it. Every Marxist wannabe has rolled out the same methods for a hundred years now. Why the o'l price controls thing again. It has never worked. It makes me wonder if that is the purpose?

Price controlled goods will just no longer be available. Put price controls on food, housing, medicine, and you get starving, homeless, sick people.

[corkoman]

It worked for Nixon, didn't it?

[new cruelty]

Point taken. I recall during the days following 9/11, price controls were in place for things like gasoline, water, bread, etc. It could have been a knee-jerk reaction to merchants anticipating a rush on demand.

[KC_Conspirator]

uh, price controls create shortages. what nitwits. .... next up for Caracas: Food lines and food riots. Oh Joy.

But just think of the black market that will be created for Chavez's communist friends? They will make a killing at the expense of the rest of Venezuela.

[blackdog]

Was it oil Nixon screwed with? I was 13 during the Watergate hearings, so I suppose at 10 years old I was engaged in neighborhood conquest and sadly ignorant of national politics.

It was the Nixon resignation though that got me interested in politics and history.

On the price control arena, I hardly think Nixon was a Marxist. I got to meet Henry Kissinger in 1996, up close and personal. I had always disliked/distrusted him, but he certainly was a nice man when I spoke with him. Very kind.

[Free the USA]

http://www.freerepublic.com/perl/bump-list

[blackdog]

My theory is that the Marxist playbook calls for price controls for the people. However the real reason is so the military can police the enforcement and hence steal what they need from merchants/warehouses. Under the cover of "enforcing price controls", the military takes what it needs by finding certain merchants of goods in violation. The usual penalty is that the government backed military goons loot you on the spot. It is just state sanctioned theft. A sign of a poorly equipped military and infrastructure.

[blackdog]

Remember the rescue worker who was paying $3.00 per bottle for Evian water at Starbuck's because the manager of the store would not give it away! The rescue worker needed it to irrigate wounds so they could see how severe each victim was and triage them.

I am a real espresso addict, but I have not put my mouth to a cup of Starbuck's since.

[blackdog]

Despite him being likeable, I still don't trust Kissinger.

[new cruelty]

"Remember the rescue worker who was paying $3.00 per bottle for Evian water at Starbuck's because the manager of the store would not give it away! The rescue worker needed it to irrigate wounds so they could see how severe each victim was and triage them.

I am a real espresso addict, but I have not put my mouth to a cup of Starbuck's since."

Yeah, I recall hearing about that. There are some really wicked people in the world. But I never really went to Starbuck's to begin with. So, as an appropriate response, I just stopped drinking water. ;)

[blackdog]

I have a nasty habit of drinking espresso and not much else except wine at dinner. Last year it darn near killed me during hay making season. I actually had to go get an IV hooked up to rehydrate and get elctrolytes balanced. I thought I was having a heart attack.

At the risk of being status quo, you have my full endorsement to return water to your diet ;)

[Billthedrill]

Well, Nixon took the precaution of instituting wage controls simultaneously, but learned very quickly what von Mises pointed out decades ago - there's simply too much complexity in a modern economy to attempt this sort of a solution. Typically what happens in a price-controlled situation is that it produces immediate scarcity, both by disallowing price to match demand, and by actually creating more demand as people start stockpiling - hoarding - as they see goods disappear from the shelves. Watch, for example, what happens to bottled water and batteries when a hurricane is headed your direction.

So - anybody still have one of those snappy WIN buttons that Gerry Ford was flogging?

[blackdog]

Wanted by whom? Last I knew, the man has an office, A corporation, a known residence in New Jersey. If he is a "wanted person" I would say that it is Chief Moose who must be the one who can't find him!

I flew him from Charlotte to Teteroro and he never looked over his shoulder once.

Lumping Kissinger with Mao, Pol Pot, Franco, Stalin, and the like is a bit of a stretch. Kissinger was an advisor, not an elected official. Elected officials are free to take up his advise or dismiss it. Elected officials are the ones legally and morally accountable for such actions.

Are you saying we should arrest Kissinger because Nixon is dead?

[Orion78]

PING!