Saturday, February 17, 2007

Ch�vez Threatens to Jail Price Control Violators - New York Times

Ch�vez Threatens to Jail Price Control Violators - New York Times

CARACAS, Venezuela, Feb. 16 — Faced with an accelerating inflation rate and shortages of basic foods like beef, chicken and milk, President Hugo Chávez has threatened to jail grocery store owners and nationalize their businesses if they violate the country’s expanding price controls.

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. Inflation climbed to an annual rate of 18.4 percent a year in January, the highest in Latin America and far above the official target of 10 to 12 percent.

Mr. Chávez, whose leftist populism remains highly popular among Venezuela’s poor and working classes, seemed unfazed by criticism of his policies. Appearing live on national television, he called for the creation of “committees of social control,” essentially groups of his political supporters whose purpose would be to report on farmers, ranchers, supermarket owners and street vendors who circumvent the state’s effort to control food prices.

“It is surreal that we’ve arrived at a point where we are in danger of squandering a major oil boom,” said José Guerra, a former chief of economic research at Venezuela’s central bank, who left Mr. Chavez’s government in 2004. “If the government insists on sticking to policies that are clearly failing, we may be headed down the road of Zimbabwe.”

For now, Venezuela remains far from any nightmarish economic meltdown. The country, which has the largest conventional oil reserves outside the Middle East, is still enjoying a revenue windfall from historically high oil prices, resulting in a surge in consumer spending and lavish government financing for an array of social welfare and infrastructure programs. Dollar reserves at the central bank total more than $35 billion.

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