CARACAS, Tuesday November 21, 2006 | Update
RAQUEL BARREIRO C.
EL UNIVERSAL
Stringent exchange and price controls have marked the Venezuelan
market over the last few years -a strategy the Venezuelan
Government has implemented in an effort to curb inflation.
However, a number of experts believe such regulations are
a ticking bomb waiting to go off.
In February 2003, Hugo Chávez' Government implemented
drastic moves. First, it set the exchange rate at VEB 1,600
per US dollar. The Venezuelan Central Bank (BCV) has subsequently
moved to devaluate the Venezuelan bolivar twice, at VEB 1,920
per US dollar and VEB 2,150 per US dollar.
The Government ensured that such a move would restore international
reserves and curb imports.
Three years have elapsed and the Government has actually
met its goal to strengthen international reserves -which skyrocketed
from USD 14 billion at the time the exchange control was set
to the present USD 36 billion.
However, other things have not ended up as planned. For example,
Venezuelan industrialists complain that importing some goods
is more profitable than producing them domestically. In fact,
the figures the Venezuelan Central Bank disclosed for the
third quarter show a 19.4 percent growth in trade "because
of an increase of 6.1 percent in the supply of domestic tradable
goods and 32.6 percent in the supply of imported tradable
goods."
BCV also reported that at the end of the third quarter imports
amounted to USD 22.65 billion, a 44.9 percent rise compared
to USD 15.62 billion the same period in the previous year.
Frozen prices
Parallel to exchange controls, the Venezuelan Government
moved to regulate the price of 145 staples, 242 personal care
and home cleaning products, as well as public utilities such
as power, land phone service and education.
Some prices have been increased during the period, but others
have not. Regarding food items, the price of hog leg (a food
item traditionally served in Venezuela during Christmas holidays),
for example, has not been increased officially. In the services
sector, no price adjustments have been made to phone services
or power over the last three years.
Despite all of these regulations, the Consumer Price Index
in January-November this year has jumped 13.4 percent, while
food items have soared 19 percent in the same period.
Price distortions have been noticed since price controls
were first implemented. Both the formal and informal markets
have sought the ways to avoid the regulation.
Consequently, consumers have been facing shortage of some
products such as milk, sugar, coffee, and beef, among others.
Further, industrialists ensure price controls have discouraged
investments.
rbarreiro@eluniversal.com
Translated by Maryflor Suárez R.
msuarez@eluniversal.com
04:20 PM. Western Hemisphere. Colombian President Álvaro Uribe said on Tuesday that governments should ensure citizens' rights to live on the border, in reference to a political and diplomatic crisis with Venezuela and its effects on border residents.