Venezuela's New Price Controls Order Cuts Of Up To 25%
27 Februar 2012 - 10:28PM
Dow Jones News
The Venezuelan government will cut prices on a slate of basic
goods up to an average of 25% as part of a long-awaited first wave
of broadly expanded price controls that officials say will combat
the country's soaring inflation, Vice President Elias Jaua
announced Monday.
"We have not messed with profit margins," Jaua said during a
televised rally. "We have only taken out the costs that should not
be included in a cost structure."
Among the adjustments, the price of bleach and dishwashing
liquid will fall 6%, toilet paper and tooth paste, 11%, and shampoo
and detergent, 25%. In all, the government has established new
price ceilings for sale to the public of 19 products, mostly
household cleaning and personal hygiene items. Jaua said President
Hugo Chavez, who left for Cuba last week for surgery to remove a
possibly cancerous growth, approved the list from abroad. The new
prices will go into effect April 1, allowing a chance for appeals,
though Chavez has threatened to seize the assets of any company
that resists the changes.
"We have been ... generous [with companies]," Jaua said. There
is no word yet on the future release of further price caps, which
officials have promised will touch virtually every sector of the
economy.
Chavez signed the Law of Just Costs and Prices in July and
originally promised to unveil the first new set of price limits by
December. The announcement has been delayed for several months,
unsettling Venezuelan retailers and producers who have long
complained existing price controls have forced them to operate at a
loss and have contributed to economic imbalances. According to
local analysts, many businesses leaders have cut back on inventory
and resisted increasing production while waiting to assess the
measure's impact.
As part of the new law, officials created a national agency,
known as Sundecop, to dive into the books of an estimated 16,000
firms in Venezuela and examine cost structures to determine the
"just" level of profit the companies should be collecting on their
products.
Companies that faced audits in connection with the first
installment of revised prices include local units of multinationals
like Colgate-Palmolive Co. (CL), PepsiCo Inc. (PEP), H.J. Heinz Co.
(HNZ), Johnson & Johnson (JNJ), Unilever PLC (UN, UL) and
Nestle (NSRGY, NESN.VX), as well as local food distributor and
packager Alimentos Polar.
Chavez has said the additional, far-reaching restrictions were
needed to combat price-gouging and product-hoarding in the private
sector, which he blames for Venezuela's notoriously high inflation.
During the 12-month period ending in January, consumer prices in
Venezuela Consumer prices rose 26%, the highest rate in Latin
American but down from the 27.6% posted in December. The slower
pace of inflation was partially due to the price freeze imposed on
the 19 products since November pending the new price caps.
Critics of the new law, however, say it will ultimately backfire
and lead to greater shortages of goods while driving inflation.
-By Ezequiel Minaya, Dow Jones Newswires; 58-414-120-5738;
ezequiel.minaya@dowjones.com
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