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News: Economy

Venezuela Announces Measures to Soften Impact of Devaluation

Punto Fijo, February 14th, 2013 (Venezuelanalysis.com) – Venezuelan government officials announced new measures in recent days to combat price hikes and speculation as a result of the recent devaluation of the exchange rate.

After the Venezuelan Bolívar was devalued by 31.7 percent last Friday, many in Venezuela expect there to be a general rise in prices and a reduction in purchasing power for much of the population, as imported goods will become more expensive.

However, government officials have vowed to combat rising prices through a number of new measures designed to prevent retailers from gouging consumers.

“We would like to announce that President Chavez’s economic team has decided to go ahead with a new formula that will link the final price of goods to the price at which they were imported,” said Vice President Nicolas Maduro on Wednesday.

The measure will require vendors to set the final prices of goods in accord with the exchange rate that was used when they were imported, allowing for a 40 percent profit margin. Goods imported at the previous rate of BsF. 4.30 per dollar will have to comply with a lower price than goods imported at the new rate of BsF. 6.30 per dollar, and both will have set margins to determine prices.

Maduro said the new measures are in response to past abuses in which importers request subsidized dollars from the government to import merchandise, but later sell the merchandise as if it had been imported at the more expensive parallel exchange market rate.

“Some of them only import half of what they requested, and then sell it for 10 or 15 times as much here in Venezuela. So we are going to demand that all retailers show at what price the merchandise was imported, and if they imported at a subsidized rate they will have to lower the price,” he said.

Government officials have reiterated in recent days that they will take action against any vendors who raise prices unnecessarily, including shutting down retailers engaged in speculation.

“Those who keep playing that game, and who are caught in the act, speculating against the people, we are going to enforce the law and immediately occupy those establishments,” said Maduro.

Venezuela’s government has created several agencies in recent years such as Indepabis (consumer protection agency) and Sundecop (National Cost and Price Administration), to monitor and enforce price controls.

Last week they announced the creation of another agency, the Superior Office for the Optimization of the Exchange System, that will supervise the operation of the exchange system and create greater control over the use of dollars for imports.

Maduro explained that one key responsibility for this new agency will be to monitor the use of dollars approved for importing, making sure the imports are necessary.

“This office has clear orders to regulate what importers bring into the country, because many importers just take the dollars and go sell them on the parallel market…This is something we were not regulating before, and now we are going to tighten those regulations,” he said.

Government officials also warned of speculators in other sectors of the economy who might take advantage of the moment to attempt to raise prices, even when the prices of their inputs do not rise.

Officials called on consumers to help inspectors by denouncing price hikes and speculation, and even set up a Twitter hashtag for this purpose.

Authorities said that there should not be an immediate price rise since the inventories of most retailers were imported under the previous exchange rate, and thus should not be sold for a higher amount.

“In order to adjust the prices the products have to have been brought in at the new rate of BsF. 6.30, but no products have been brought in at that rate yet,” said Commerce Minister Edmée Betancourt.

To combat these types of speculative price hikes, the government has vowed to conduct inspections in the coming months to assure that retailers’ inventories are being sold at the previous rates.

“We can’t allow them to modify the prices of their inventories. We won’t allow [vendors] to change their prices like that,” said Betancourt.

Authorities said that the new prices for a range of imported and national goods would be established by the government in the coming weeks.

Published on Feb 14th 2013 at 10.03pm