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News: Economy

Venezuela Loosens Food Price Regulations To Improve Supply

Mérida, August 13, 2008 (venezuelanalysis.com)-- The Ministry of People’s Power for Agriculture and Lands and the Ministry of People’s Power for Light Industries and Trade of Venezuela eliminated price controls on some products and increased the regulated prices of others with the aim of promoting national production, reaching a full food supply, and guaranteeing fair prices.

Working groups were held with different productive sectors of the country to evaluate the different variables that affect the production chain and the cost of food and to arrive at a fair price that wouldn’t harm consumers but which would also be within the price range of production.

The new measurements came into affect on Tuesday.

Fifteen regulated products increased in price by 3-110%, with most at around 50% increases, such as first-class beef from US$5.50 to US$8.10/kg, mayonnaise from US$1.20 to US$1.80, and margarine from US$0.95 to US$1.20.

Seven other products, such as fresh tuna, salt, oats and smoked chops, will no longer be subject to price regulation. However they will have a suggested price which involved similar percentage increases.

The new price regulations are maximum sale price to the public, as well as maximum price paid to the producer, so that prices are regulated at various stages of production and sale, not just at the consumer end.

The new resolution also established the obligation to print the prices on the product, or make a complete list available.

The government has not changed the prices of many products for the last 2- 5 years, despite inflation affecting the supply end of their production.

Critics have blamed the price controls for food shortages. As food was unprofitable or sold at a loss, companies lacked the impetus to sell it.

However, a shortage indicator published by the central bank, which measures the percentage of stores where a consumer can't find a certain product, showed a 12.1 percent shortage of goods nationwide in July, down from a high of 24.7 percent in February.

Other critics of the recent price increases suggest higher food prices could contribute to the increasing inflation.

Conversely, most of the products whose prices have increased are made of food (or in the case of meat, use agricultural supplies) that is imported and are affected by the global food inflation crisis.

Richard Canan, vice minister of Agricultural Economy in the Ministry of Popular Power for Agriculture and Land said on Venezuelan state TV that the price adjustments are part of an aggressive plan to protect Venezuelan products and consumers. Part of this plan is also the recuperation of more than 2 million hectares of land from large estates.

He also argued that the subsidisation of fuel will help protect production and the price of products. “We have gasoline…subsidised at 60 bolivars, jet fuel for fumigation scarcely costs 10% of the fixed price in the international market…also fertilizer is obtained at half the price.”

This makes Venezuela less vulnerable to some of the main factors that have caused the global food crisis.

Canan also gave many examples of increased food production within Venezuela, such as rice, whose production has almost doubled since 1998, from 700,000 tons annually to 1,300,000 tons currently. Corn production has tripled from 700.000 tons to almost 3 million at the close of this year.

He reminded viewers that some of the problems with rice can be attributed to the smuggling of 100,000 tons out of the country to Colombia, where there are no set prices and sellers obtain double the price that they obtain in Venezuela. Cooking oil sells at triple the price in Colombia.

Now, the exportation of rice is prohibited, as is the use of white corn for feeding animals.

The spokesperson for the pasta sector, Simon Nobile said that the 23% price adjustment of pasta will make it easier to maintain the supply.

“We hope that we maintain the dialogue with the government and we achieve efficient supply. Until now, 35% of consumption was supplied through the Network of Food Markets (Mercal),” he said.

Wilmer Contreras, who has the Nutrition portfolio, argued that “it’s a situation with many variables. On the one hand we have the challenge of the using products for biofuel, we also have the speculation chains and the monopolies of agriculture internationally.”

From today, inspectors of Indepabis (Institute for People with Access to Goods and Services) will go out to markets to supervise the implementation of the new prices. The president of Indepabis, Eduardo Saman declared that the adjustments were made to certain food products “that were sold above price and were being sold almost in secret outside of the regulations.”

The price increases are one in a series of measures the government has implemented in an effort to ensure food sovereignty and security.

On Tuesday the ministry of Agriculture also said Venezuela will give $2 million grants to various Caribbean and Central American countries to buy fertilizer in time for the upcoming planting season. The idea, as Chavez said, is to “create a shield against hunger” in the face of rising food prices

The announcement came during a meeting of the countries in Havana where a treaty on reliable food supply is being drafted.

Published on Aug 13th 2008 at 6.44pm