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