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

The economy grew by more than 10 percent last year, helping Mr. Chávez glide to a re-election victory in December with 63 percent of the vote. Yet economists who have worked with Mr. Chávez’s government say that soaring public spending is overheating Venezuela’s economy, generating imbalances in the distribution of products from sugar to basic construction materials like wallboard.

Public spending grew last year by more than 50 percent and has more than doubled since the start of 2004, as Mr. Chávez has channeled oil revenues into social programs and projects like bridges, highways, trains, subways, museums and, in a departure for a country where baseball reigns supreme, soccer stadiums.

In an indicator of concern with Mr. Chávez’s economic policies, which included nationalizing companies in the telephone and electricity industries, foreign direct investment was negative in the first nine months of 2006. The last year Venezuela had a net investment outflow was in 1986.

Shortages of basic foods have been sporadic since the government strengthened price controls in 2003 after a debilitating strike by oil workers. But in recent weeks, the scarcity of items like meat and chicken has led to a panicked reaction by federal authorities as they try to understand how such shortages could develop in a seemingly flourishing economy.

Entering a supermarket here is a bizarre experience. Shelves are fully stocked with Scotch whiskey, Argentine wines and imported cheeses like brie and Camembert, but basic staples like black beans and desirable cuts of beef like sirloin are often absent. Customers, even those in the government’s own Mercal chain of subsidized grocery stores, are left with choices like pork neck bones, rabbit and unusual cuts of lamb.

With shoppers limited to just two large packages of sugar, a black market in sugar has developed among street vendors in parts of Caracas. “This country is going to turn into Cuba, or Chávez will have to give in,” said Cándida de Gómez, 54, a shopper at a private supermarket in Los Palos Grandes, a district in the capital.

José Vielma Mora, the chief of Seniat, the government’s tax agency, oversaw a raid this month on a warehouse here where officials seized about 165 tons of sugar. Mr. Vielma said the raid exposed hoarding by vendors who were unwilling to sell the sugar at official prices. He and other officials in Mr. Chávez’s government have repeatedly blamed the shortages on producers, intermediaries and grocers.

Those in the food industry argue that the price controls prevented them from making a profit after inflation rose and the value of Venezuela’s currency plunged in black market trading in recent weeks. The bolívar, the country’s currency, fell more than 30 percent to about 4,400 to the dollar in unofficial trading following Mr. Chávez’s nationalization of Venezuela’s main telephone company, CANTV, and its largest electric utility, Electricidad de Caracas.

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“There seems to be a basic misunderstanding in Chávez’s government of what is driving scarcity and inflation,” said Francisco Rodríguez, a former chief economist at Venezuela’s National Assembly who teaches at Wesleyan University.

“There are competent people in the government who know that Chávez needs to lower spending if he wants to defeat these problems,” Mr. Rodríguez said. “But there are few people in positions of power who are willing to risk telling him what he needs to hear.”

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