Tags: chavez | venezuela | raise | prices

Chavez Threatens Venezuelan Firms That Boost Prices

Monday, 11 Jan 2010 10:28 AM

President Hugo Chavez threatened on Sunday to seize businesses that raise prices as a result of last week's devaluation of Venezuela's currency.

Economic analysts called the warning a futile attempt to control 25 percent inflation that is already the highest in Latin America and stands to be worsened by the weakening of the bolivar.

Chavez disputed that his decision to devalue the currency for the first time in nearly five years should spur a sharp rise in consumer prices.

"There is no reason for anybody to be raising prices," he said on his weekly radio and television program.

The socialist leader urged his supporters to "publicly denounce the speculator" and warned business owners that his government would "take over any business, of any size, that plays the bourgeoisie speculation game."

The devaluation aims to stretch oil earnings further by increasing their value in the local currency, and thus help the government counter a recession by boosting spending.

But critics said the measure will unavoidably push inflation even higher.

Oscar Meza, director of the local Cendas think tank, which tracks economic data, predicted the devaluation would propel annual inflation above 33 percent this year, with food prices rising as much as 36 percent.

"It's impossible for prices not to be adjusted," Meza said. "If they aren't adjusted, they'll disappear."

The currency's official exchange rate had been 2.15 bolivars to the dollar since a devaluation in March 2005.

Chavez set a new two-tiered exchange rate Friday, pegging the bolivar at 2.6 to the dollar for priority goods such as food and medicine and at 4.3 to the dollar for imports of nonessential products such as air conditioners and radios.

Chavez argues the change will discourage imports of nonessential goods and encourage domestic production of items such as food and clothing, which Venezuela mostly imports.

Chavez said he is determined to curb inflation — even if it means deploying the military to prevent price hikes.

The former paratroop commander, popularly known among supporters as "El Comandante," ordered Venezuela's top military official to meet with soldiers and officials of the consumer protection and tax agencies to draw up an "offensive plan" against price rises.

"I want the National Guard to hit the streets with the people to fight against speculation and take measures," Chavez said.

He did not elaborate, saying only that the government would consider the possibility of authorizing price increases for some products.

Such drastic measures could be counterproductive, Meza said.

"For all the threats and possible takeover of businesses, it's not going to solve the problem," Meza said.

"If they take control of businesses, the problem will only get worse."

Venezuela slid into a recession last year with gross domestic product dipping 2.9 percent after five years of growth as its all-important oil industry suffered a downturn due to lower production and crude prices.

Opposition leaders said wasteful spending by Chavez's administration forced the devaluation, which will put more cash at the disposal of the government while forcing consumers to reduce their day-to-day budgets.

"Venezuelans, especially the poorest of them, will pay for the devaluation of the bolivar from their pockets," said Luis Ignacio Planas of the Copei opposition party.

"The government is acting like a pickpocket, sticking its hands in the pockets of Venezuelans, taking their money to continue financing and paying for an irresponsible economic policy."


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President Hugo Chavez threatened on Sunday to seize businesses that raise prices as a result of last week's devaluation of Venezuela's currency. Economic analysts called the warning a futile attempt to control 25 percent inflation that is already the highest in Latin...
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2010-28-11
Monday, 11 Jan 2010 10:28 AM
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