World

Venezuela's Maduro slashes prices of basic goods – ploy to gain votes, critics say

  • The government has requested the stores to post signs on their doors announcing their sales. "Prices reduced as ordered by the National Center of Fair Prices and the National Government," most signs read.

    The government has requested the stores to post signs on their doors announcing their sales. "Prices reduced as ordered by the National Center of Fair Prices and the National Government," most signs read.  (Franz von Bergen)

  • Franz von Bergen

     (Franz von Bergen)

Over the past few months, Venezuela’s government has lined up all its artillery aiming at the Dec. 6 legislative election – the ruling party, the socialist PSUV, needs all the votes it can get in order to retain a majority in the National Assembly, and critics say President Nicolás Maduro is resorting to all kinds of tricks to achieve this goal.

Some of the most drastic measures, they say, include interfering with the country’s economy and adopting populist measures hoping to improve the administration’s approval ratings – mired at 20 percent, according to the most recent poll by Venebarometro.

In the course of the last month or so, Maduro has announced a 30 percent increase in the minimum wage, approved thousands of new pension benefits for the elderly and passed an amended version of the so-called “Law of Fair Prices” to try and slow down the country's nearly 200 percent inflation rate.

The new law, enacted just a couple of weeks ago, sets a limit to importers’ profits margins, which the government said was the reason behind the uncontrollable climb in the price of basic products.

Along with the law, the National Center of Fair Prices, headed by the country’s vice president, Jorge Arreaza, came into being with the sole mission of setting maximum prices to every single product sold in Venezuela.

As a result, stores in malls across the country are suddenly offering sales that range between 10 and 50 percent.

A similar measure was implemented in November 2013, one month ahead of that year’s mayoral elections, when the government intervened to control the prices of all electronic goods.

In that case, PSUV’s approval rating climbed 9.3 percent in a matter of weeks and the party ended up capturing 72.2 percent of the municipal elections.

This time, however, analysts believe the effect won’t be as sweet for the government.

“They have made a timing mistake,” Asdrubal Oliveros, an analyst from the Caracas-based firm, Ecoanalitica, told Fox News Latino. “Economic decisions don’t have an immediate effect. Maybe they will reduce the opposition’s current lead, but [PSUV] won’t be able to take the lead.” 

Out in the streets, it appears that the current prices reductions are indeed having a smaller impact than in 2013. Back then electronic stores sold out of most of their merchandise in less than a week, whereas this time around stores still have most of their stock.

Store clerks consulted by Fox News Latino in two of eastern Caracas largest malls said sales have gone up just a little. “We still are far from the quantities we used to sell in 2014 and before,” said one employee who asked to remain anonymous.

Most say the reason for this is that prices are still high.

“My salary is not enough for this,” said Crispiniano Amaris, who was shopping for clothes.

“It’s really hard to make purchases now, even after all these sales and the salary increase,” added Ivonne Calcurian, one of the millions of minimum wage earners who saw their salary increase by around 130 percent in the last 12 months. Which is still 50 points below the rate of inflation.

People who support the government say the new regulations are all but necessary.

“There is an economic war against the government, and sellers are increasing their prices without real reason,” Oswaldo Benítez, a buyer from Caracas, told FNL. “We need tougher controls and sanctions.”

And the change to the Law of Fair Prices provides just that, punishing with jail time anybody who sets prices according to the black market exchange rate of 845 bolivars per dollar, and not one of the three official exchange rates (6.3, 12 and around 200 bolivars per dollar, depending on the situation).

However, the government is not issuing enough dollars at the official exchange rates, and some importers say they are forced to go to the black market.

Arrests have already been made for violating the price law – earlier this week Vice President Arreaza said 23 people were placed in custody for selling online basic food basket items at a higher price. According to the new law, they will be punished with 3 to 5 years in prison. If an organized group is behind the crime, all of its members will be charged as terrorists.

Oliveros and other analysts say the new controls don’t address the persisting issue of shortages and high inflation.

“The key to solve the problems is changing the current economic model and eliminating the controls on prices and the exchange rate,” Oliveros said, adding that the 2013 reductions are proof that this is a failed policy.

Most of the stores affected then weren’t able to replace the merchandise sold at reduced prices and many were eventually forced to shut down.

“We were one of the five official stores that Sony had in Venezuela, but the brand ended its operations after December 2013 and now we are working as a general brand store,” said Ericcson Hernández, manager at an electronic store in the Lider mall in Caracas. “We still have a lot of problems finding merchandise.”

Franz von Bergen is a freelancer reporter living in Caracas.

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