At the UK’s Telegraph:
Venezuela’s Hugo Chavez tightens state control of food amid rocketing inflation and food shortages
President Hugo Chavez is tightening state control over Venezuela’s food supply, setting quotas for food staples which are to be sold at government-imposed prices.The Venezuelan economy is in shambles,
Venezuela’s public finances are unravelling, with oil prices at $40 a barrel, while the national budget is calculated at $60 a barrel. Inflation is running at over 30 per cent
So, having screwed up big time, now Chavez is going to bring production quotas and price controls:
White rice, the staple for many Venezuelans, can now only be sold at a price of 2.15 bolivares (71p) per kilo. Private companies insist that production of that kilo costs 4.41 bolivares (£1.46) and that government regulations are impossible to fulfil and companies will quickly go broke. Companies that are dedicated to rice production must ensure that 80 per cent of their efforts are dedicated to white rice. The new regulations set production percentages, as companies were rebranding their products to avoid the government controls, like flavouring the rice, as the price restrictions apply only to white rice.
Not that price controls have been effective:
Government price controls on basic goods have been in place, in various forms, since 2003. But the restrictions have forced Venezuela to become increasingly reliant on imports of these products as local farmers will not supply the selected food staples at government prices.
Without a hint of irony, the Telegraph’s caption of Chavez’s photo reads “Hugo Chavez is seeking to ensure that his core support, the poor, can still fill their shopping baskets with food.”
Chavez sees that government intervention doesn’t work, so he implements more government intervention. While this does not make sense from the economics point of view, it further consolidates his power.
Does that sound familiar?
Commenter EMH points out that Chavez is also nationalizing food producers Cargill and Polar. Cargill, the American company,
Cargill, which is privately owned, has been doing business since 1986 in Venezuela, where its operations include oilseed processing, grain and oilseeds trading, animal feed, salt, and financial and risk management.
It has 2,000 employees in 22 locations in Venezuela, according to its Web site.
Make no mistake: it’s all about control.
Shoebox posts about future attractions.