[R-G] FT: More Venezuela Price Caps May Go

[Yoshie Furuhashi]

Venezuela, which, unlike Iran, has never had a Jacobin revolution
(thus leaving all strata of the ruling classes more or less intact)
and where the recent defeat of the Constitutional Reform makes the
prospect of the Bolivarian process (an evolutionary approach that is
perceived as a "kinder, gentler" alternative to a Jacobin revolution)
much less certain than before, has a weaker politico-economic
foundation for populism than Iran, though inflation leads neoliberals
to put the same pressures on price controls, government subsidies,
state-mandated wage increases, and other measures that "distort the
market" in Iran, too. -- Yoshie

<http://www.ft.com/cms/s/0/a754c228-a8ec-11dc-ad9e-0000779fd2ac.html>
More Venezuela price caps may go

By Benedict Mander in Caracas

Published: December 12 2007 20:49 | Last updated: December 12 2007 20:49

Venezuela's government may be forced to follow its decision to lift
price caps on milk this week with removal of controls on other food
products.

Intensifying disappointment with President Hugo Chávez's social
programmes in large part explains his defeat in the recent referendum
on constitutional change, according to Provea, Venezuela's leading
human rights watchdog.

Marino Alvarado, who heads Provea, says widespread inefficiency, as
well as problems such as politicisation and corruption, are
undermining the government's social programmes, known as "missions",
which have been crucial to Mr Chávez's continued high levels of
support.

"We are concerned that generalised disorder is pushing the missions
into a state of decay and it seems the government does not have the
capacity to resolve the problem," said Mr Alvarado, whose group's
annual report was published on Wednesday.

Mr Alvarado says state mismanagement has also caused mounting economic
distortions, further damaging effectiveness of social policy.

The programme to provide subsidised food to the poor has been the
worst affected. It is also the programme with the widest reach.

On Monday the government took its first step towards attacking
widespread shortages by lifting price controls on long-life milk, one
of several goods regularly unavailable in shops, leading to long
queues and discontent.

There is speculation controls may also be removed from other scarce
goods such as sugar, eggs, black beans, chicken and red meat.

Strong economic growth has boosted consumption, particularly among the
poor, but shortages are in large part caused by price caps, which Mr
Chávez introduced in 2003 to check a rapid rise in prices. Although
inflation has fallen, it is still the highest in the region at more
than 20 per cent annually.

But with the prices of almost half of the goods in the government's
price index subject to controls, it is feared the removal of price
caps may fuel inflation. This would be particularly unwelcome just as
the government prepares to introduce a new currency, the "strong
bolivar", on January 1.

Shortages are exacerbated by distortions caused by exchange controls.
A local newspaper, the 30-year-old Correo del Caroni, had to suspend
circulation on Wednesday due to problems in obtaining dollars from the
government to pay for imported paper.

Mr Alvarado says that government incompetence has lead to "a very
strong disenchantment with state institutions, particularly among the
poor".

Although so far this has not damaged Mr Chavez's personal popularity,
"if government inefficiency is not resolved soon, Chavez's leadership
itself will begin to fall apart," said Mr Alvarado. "The people feel
that years have gone by and the government is not resolving basic
social problems despite its immense economic resources."

--
Yoshie
<http://montages.blogspot.com/>