Venezuela: Gov't cracks down on speculation, seeks import/export control

May 15, 2010
The Venezuelan government nationalised the Exito Hypermarket chain for “speculation and abusive anti-worker practices” and c

In further moves to strengthen the state’s role in the economy, Venezuelan President Chavez announced on May 11 the creation of a publicly owned import-export company as part of a broader plan to combat “the hegemony of the bourgeoisie”, speculation and inflation.

Despite price controls and a fixed exchange rate, inflation reached 25.1% in 2009 — the highest in Latin America.

Central bank figures reported inflation climbed 5.2% in April (double that of March), bringing accumulated inflation for 2010 up to 11.3%.

Chavez said in Venezuela, inflation has a “large speculative component”. He said this was partly aimed at creating discontent ahead of the September National Assembly elections.

The government has increased the minimum wage by 10% in January and a further 15% on May 1, giving Venezuela the highest minimum wage in Latin America.

However, Chavez said capitalists immediately increased prices to ensure this redistribution of the national income “was captured by them”.

“The Venezuelan bourgeoisie still has a lot of power in the economy but I’d advise it against trying to corner us”, Chavez warned. He said measures such as fines or expropriations would be taken against those who engaged in speculation or hoarding.

Hoarding and speculation, part of attempts to break the government’s price controls on basic goods, are provoking shortages of some basic food items, including meat, sugar and milk.

A similar problem occurred in the lead up to the 2007 constitutional reform referendum, in which a vote on a proposed package of anti-capitalist, pro-poor constitutional reforms was narrowly defeated.

Venezuela is the largest oil producer in South America, and income from oil accounts for about half the country’s gross domestic product. This leads to what is known as the “Dutch Disease”, where high oil revenues act as a disincentive for domestic investment and production in other sectors.

This makes the country very reliant on imports and vulnerable to inflation.

Currency controls, to regulate foreign currency exchange and prevent capital flight, have created a thriving demand for dollars. Some estimate that about 30% of the country’s imports are dependent on the unofficial or parallel dollar market.

At the end of 2009, the bolivar (Venezuela’s currency) was trading in the parallel market at about one-third the official rate.

To address this imbalance, in January Chavez announced a controlled devaluation of the bolivar. A two-tiered exchange rate of 2.60 bolivars per dollar for transactions identified as priorities by the government (such as for food and medicine) and 4.30 bolivars per dollar for other imports.

However, while many importers receive dollars at the official two-tiered rates from Venezuela’s foreign exchange regulatory body, CADIVI, they continue to sell products at the unofficial rate, which is currently trading at around B8 per dollar.

In this way, they double or triple profit margins and contribute to price rises.

Chavez said: “It seems stupid giving dollars to the bourgeoisie and they import, charge, and overcharge, they buy [goods] abroad, bring them here and charge more than what they really cost.”

For this reason, the government has set up its own import/export company. Through the new company, the government will be able to import at the 2.6 bolivars per dollar rate.

Using the stronger rate, it will be able to significantly undercut private capital by selling products at regulated prices through a new chain of “socialist” stores.

Following the devaluation in January, Chavez nationalised the Exito Hypermarket chain for “speculation and abusive anti-worker practices” and converted it into the publicly owned Bicentenary Hypermarket chain.

The government also plans to purchase the Cada supermarket chain owned by the French-based Casino Group, which Chavez said will be fully state-owned by June.

The government is also trying to boost agricultural production and has set up a “socialist” food distribution company, Comerso.

Americo Mata, the coordinator of the Bicentenary Hypermarket chain, said: “With the transformation of these companies the national government aims to create a socialist food policy for the benefit of the Venezuelan people.”

On May 11, the National Assembly approved a new law to curb currency speculation after the Bolivar fell further in the parallel market.

Traders have been buying dollar bonds issued by the Central Bank of Venezuela (BCV) at the 4.3 bolivars per dollar rate and selling them at the parallel market rate, making huge profits.

The BCV will restrict bond trading by brokerage firms and exercise exclusive control over the purchase and sale of foreign currencies.

On May 10, three brokerage firms were taken over by the government. Others will be audited by the Venezuelan Securities Commission.

Also brewing is a conflict with Venezuela’s largest food and beverage company, Empresas Polar.

On April 28, Chavez decreed the takeover without compensation of a number of Polar storage sheds in the city of Barquisimeto, in Lara state, in order to build public housing on the land.

Polar has said it will mount a legal challenge to the expropriations. Polar is majority owned by Lorenzo Mendoza, one of only two Venezuelans to make it onto the Forbes 2010 list of the world’s billionaires.

The Polar conflict has caused splits within the “Chavista” alliance. Lara Governor Henri Falcon has sided with Polar in the dispute and has resigned from Chavez’s United Socialist Party of Venezuela (PSUV).

Falcon has joined the Patria Para Todos (Homeland for All — PPT), a small party that has been aligned with the Chavista movement, but which refused to join the PSUV when it was formed in 2007.

Polar, the PPT and Venezuela’s business federation Fedecameras have been campaigning in Lara against the expropriations.

This has lead PSUV leaders to declare there will be no alliance with what is now dubbed “Polar Por Todos” in the upcoming elections.

[Reprinted from]

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