2007-02-17

Venezuala Shows: Price Controls Cause Shortages

Hugo Chavez has threatened merchants and suppliers with jail for violating Venezuela's new price controls. Will this:
1) Cause people (known as "merchants" and "suppliers) to provide goods and services to Venezuelans, in accordance with what the Venezuelans want, and within the limits on prices set by the government?
OR...
2) Cause people (known as "merchants" and "suppliers) to find something else to do, such as immigrate to the US, where they can freely negotiate with customers, or merely to supply and merchandise products not subject to price controls?

Nadir may applaud that some citizens in this article see Chavez transforming Venezuela into Cuba or Zimbabwe; but those citizens aren't applauding.

From the article: ===================
"Food producers and economists say the measures announced late Thursday night, which include removing three zeroes from the denomination of Venezuela’s currency, are likely to backfire and generate even more acute shortages and higher prices for consumers." Chavez called for the creation of “committees of social control,” essentially groups of his political supporters whose purpose would be to report on [those] who circumvent the state’s effort to control food prices.

“We are in danger of squandering a major oil boom,” said a former chief of economic research at Venezuela’s central bank. “If the government insists on sticking to policies that are clearly failing, we may be headed down the road of Zimbabwe.”

...Shelves are fully stocked with Scotch whiskey, Argentine wines and imported cheeses like brie and Camembert [assumption: no price controls on those!], but basic staples like black beans and desirable cuts of beef like sirloin are often absent [empty shelves listing govt-approved prices!]. [Leading to] a panicked reaction by federal authorities as they try to understand how such shortages could develop in a seemingly flourishing economy [from oil revenues; good thing the UN doesn't put a "price control" on petro!]. With shoppers limited to just two large packages of sugar, a black market in sugar has developed [no price controls in black markets!]s. “This country is going to turn into Cuba, or Ch├ívez will have to give in,” said a shopper.

...a raid this month on a warehouse here where officials seized about 165 tons of sugar, [which] exposed hoarding by vendors who were unwilling to sell the sugar at official prices. [Who now will produce the next 165 tons of sugar?]

Fears that more private companies could be nationalized have put further pressure on the currency as rich Venezuelans try to take money out of the country [those evil rich people! Take their money from them!].

Venezuela, despite boasting some of South America’s most fertile farmland, still imports more than half its food, largely from Argentina, Brazil, Colombia and the United States [all with free markets!].

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