Caracas, February 12th 2012 (Venezuelanalysis.com) – Venezuelan President Hugo Chavez has responded to what he described as “threats” from the country’s businesses community last week after various companies complained that the government’s new Law on Fair Costs and Prices was unviable and would lead to a scarcity of basic commodities.
In comments made last Thursday, Chavez defended the government’s latest economic move - which seeks to set a maximum sale price for various products in order to combat speculation - stating that his administration was “doing justice” for ordinary Venezuelans.
According to Chavez, businesses will still be able to run at a profit under the new law, although not by “robbing others”. The Venezuelan mandate also added that his government would consider nationalising companies that refuse to comply with the new legislation.
“The opposition are going around threatening that there will be destabilisation, but no, this is justice...if these people are going around saying that they won’t be able to keep producing, it doesn’t matter...no problems, come here to me with your business and I’ll hand it over to the workers,” he said.
In another clear message to Venezuela’s business community, the head of state said that the government would look towards other countries such as China for commercial investment should Venezuela be faced with the possibility of companies closing en masse.
“This message is for China...here certain people are threatening us: (saying) that if the president lowers the price of Mum Bolita (a deodorant) then the factory is going to close. We’ll bring in another then, we’ll bring it in from China.”
Chavez made the comments as his government moved to limit the prices on a further 19 household and personal hygiene items as part of the new legislation, having previously set price limits for over 1000 medicines in January.
Amongst the latest products to be regulated by the government are deodorant and bottled spring water, previously being sold at more than twice their manufacturing costs - a figure cited by Chavez as proof of the high levels of speculation in the country.
“The average price (for bleach) on the market is 13.57 bolivars per litre, whilst the study of the actual costs to produce a litre of bleach amount to no more than 6 bolivars, it’s the same for toilet roll, soap, deodorants, disinfectants, shampoo, wax, mineral water, razors and sanitary towels...this can’t happen, we’re not going to allow this,” he said.
Last July, the government announced its intention to start setting a maximum sale price for certain goods and services in an attempt to tackle issues such as hoarding and speculation in the country’s economy. As well as being strategies to secure greater profits, hoarding and speculation are often employed as a political tactic to destabilise the government by certain sectors of the business community, who are openly hostile to the Chavez’s administration and its regulatory economic policies.
Following a registration period with the Venezuelan government’s Automated Price System (Sisap) at the end of last year, businesses were obliged to submit their internal pricing structures to the newly created government agency for review. The submitted information was then used by the government institution SUNDECOP (National Costs and Prices Intendancy) to revise current prices of goods and services and to set a maximum price that consumers can pay for items on the national market.
According to Vice-president Elias Jaua, the government has not changed the manufacturing costs that were submitted by companies, although some business owners have argued that the government has not taken into account the cost of advertising when setting price limits.
Although some products will continue to be sold at similar prices, others are set to experience a sharp decrease in their retail price as a result of new regulations, with Venezuelan private newspaper, El Nacional, reporting that products such as Minalba mineral water and Mum deodorant (90 grams) will see a respective drop of 45.86% and 24.15% in their prices.
According to Jaua, businesses will have now have the opportunity to contest the government’s new price limits before they officially come into effect on 1 March. He also added that the government will consider changing some of the prices if presented with “convincing” evidence from the private sector.
Pepsi-Cola to be investigated
In an official state bulletin last Thursday, the Venezuelan government also revealed that Sundecop would open up an investigation into claims that US drinks corporation, Pepsi-Cola, had increased the sale price of its Minalba product in violation of a temporary government price freeze on mineral water.
According to the government, Sundecop had received complaints from businesses regarding the US drinks giant, which announced last week that it would make over 8,700 of its global workforce redundant in the coming year despite turning a profit of US$6.4 billion dollars in 2011.
“We are responding to the petition of a complaint which was submitted by a business owner, who indicated that there had been an increase in the price of mineral water. That is why we are undertaking an evaluation of the price of this product,” said Octavio Leon, Sundecop’s attorney, who also emphasised that article 27 of the new legislation solicits public participation in monitoring and dealing with speculation.
Pepsi-Cola must present its accounts from the November 2011 – January 2012 period to Sundecop within the next four days for review. On Thursday, Venezuelan President Hugo Chavez confirmed that mineral water would be one of the products to be sold at a limited price, with a 5 litre bottle of Minalba costing just 12.45 bolivars from 1 March, as opposed to its current retail price of 23 bolivars.
The government has stressed that it will pursue legal measures against businesses which choose to flout the new regulations, with the new law establishing sanctions such as prison sentences of up to 6 years for crimes relating to speculation and the fraudulent alteration of prices.