Punto Fijo, May 16th, 2013 (Venezuelanalysis.com) – As a response to increased shortages of basic goods in recent weeks, the Venezuelan government has announced it is in dialogue with members of the private sector and is taking measures to increase domestic production.
President of Venezuela’s Central Bank Nelson Merentes held a meeting on Wednesday with representatives of more than 400 companies in 24 different sectors of the economy in an attempt to work out some of the problems that have led to the recent shortages.
One of these problems has been the delay in approving foreign exchange for private companies that need to import goods.
Since 2003, Venezuela has maintained currency controls allowing the government to control what is imported by limiting foreign exchange to designated imports. Companies apply to the government to import goods, and the government transfers foreign currency to those companies that are approved.
In recent months there has been significant delays in this process, making it impossible for many companies to import needed merchandise and supplies, and thus affecting production.
Part of the problem is that the government must verify that the foreign exchange transferred to private sector firms is actually being used for its intended purpose, creating delays in the approval process. But the delays have also been due to a lack of enough foreign currency available to meet the demand for imports.
Merentes said on Wednesday that the demand for US dollars has been greater than what the government has available at the moment, creating “a deficit’.
“We are trying to find additional resources so that we can slowly reduce that deficit,” he said.
Venezuela’s foreign reserves are currently around US$ 25 million, but much of that is invested in gold or other investments and is not immediately available. Some estimates say that as little as US$ 3 million is immediately available for imports.
However, Merentes assured that the availability of foreign exchange has been resolved in the short term.
“We were informed of the problems in various sectors and we have reduced waiting times to almost zero. The situation is back to normal for more than 1,500 small and medium-sized firms,” he said.
Starting Monday, the government will be holding more meetings with the private sector to discuss making changes to a number of legal and economic measures.
Private sector representatives claim that the government-imposed price controls on many basic goods is what is creating the problem, causing the private sector to reduce production.
However, Venezuela consumers complain that prices are rising too fast, and that many vendors do not abide by the controls.
Government officials assure that production has increased overall in recent years, but that demand has increased faster.
“It’s not a deficiency in production, but rather excessive demand that is a product of a media campaign that causes nervous buying,” said Commerce Minister Alejandro Fleming.
Head of the Federation of Small and Medium Industries (Fedeindustria), Migues Pérez Abad also said that the growth in demand in recent years has been continuous due to falling poverty.
“Poverty has been reduced by 50 percent, meaning we have a greater amount of consumers,” he said.
The government has taken the immediate measures of importing large quantities of affected items, such as chicken, and toilet paper, and has approved a 20 percent increase in the price controls on items such as beef, chicken, and dairy products, in hopes of raising domestic production.
The problems related to currency controls are also being worked out, according to Merentes.
“We are making progress, but we have a lot of work to do,” he said.
Merentes explained that private sector companies would be receiving information about the future meetings to be held with the government so that they can attend those that concern them.
“Now we are in a phase of closer relations with the private sector, but we are not forgetting about the socialist economy,” he said.