Venezuelan President Hugo Chavez’s move to expand price controls this week sparked panic purchases by consumers, leading to shortages of everything from coffee to toilet paper.
People are buying more than they need to stock their homes and resell the products at a profit in the black market, Food Minister Carlos Osorio said yesterday on state television. The authorities are visiting stores to ensure the availability of regulated products, he said.
“I’m buying everything that’s on the price control list that’s going to be regulated,” retired schoolteacher Elena Ramirez, 56, said in an interview at a Dulcinea supermarket in Caracas where she bought 12 packages of toilet paper, each with four rolls. “Everyone is in the same game. It’s madness.”
Under regulations that took effect on Nov. 22, the government can fix the price of 15,000 goods in an attempt to slow inflation that reached 26.9 percent in October, the highest in the Western Hemisphere. Chavez immediately ordered a freeze on the price of 18 personal care items ranging from toothpaste to deodorant until mid-January to prevent monopolies from “ransacking the people.”
Speaking on state television today, Chavez said that he had detected “capitalists” hoarding thousands of kilograms of powdered milk, coffee and cooking oil and threatened to nationalize companies and factories caught stockpiling goods.
“I’m at the front of this operation, and we’re going to occupy factories and companies,” Chavez said. “We’re going to nationalize what needs to be nationalized. The bourgeoisie hoard milk, sugar and cooking oil and then blame me. But it’s their fault, the hoarders.”
The price freeze affects U.S. consumer companies including New York-based Colgate-Palmolive Co., Procter & Gamble Co. in Cincinnati, and New Brunswick, New Jersey-based Johnson & Johnson, said Ali Dibadj, a consumer analyst at Sanford C. Bernstein & Co., in a Nov. 23 report.
Colgate, Avon Products Inc. and Clorox Co. depend on Venezuela for 5.2 percent, 4.1 percent and 2.1 percent of total sales, respectively, according to Dibadj.
Jennifer Cherlune, a spokeswoman for Procter & Gamble, didn’t immediately respond to an e-mail and phone message seeking comment. Tom DiPiazza, a spokesman for Colgate-Palmolive, also didn’t return a phone message, and Bill Price, a spokesman for Johnson & Johnson, couldn’t be reached by telephone a day after the Thanksgiving holiday.
Cars at the Dulcinea market, located in the Los Chaguaramos neighborhood of Caracas near two universities, were parked two rows deep and spilled into the sidewalk in front of the store. Shelves normally stacked with toothpaste, soap and toilet paper were being depleted by customers too quickly to restock.
“We heard rumors that there’d be shortages of toilet paper and toothpaste and all basic hygiene products,” Jonathan Maestracci, a 24-year-old accounting student, said while shopping at Dulcinea. “Finding coffee now is practically impossible. It’s better to buy in big quantities thinking about what could happen. If nothing happens, you just keep it.”
Under guidelines published in the Official Gazette Nov. 18, companies must register with the national price regulator and disclose information about production, distribution and commercialization costs as well as details of local and international suppliers and sources for raw materials. The regulator will then fix prices.
“The law of supply and demand is a lie,” Karlin Granadillo, the head of a price control agency set up to enforce the new regulations, said yesterday on state television. “These are not arbitrary measures. They are necessary.”
Venezuela’s government will have a difficult task to monitor and regulate the price of the 15,000 products sold in the country, said Armando Leon, a director at the central bank.
“It’s a very complicated, complex law,” Leon said in a Nov. 22 interview on state television. “It needs to be evaluated very well or it could have a boomerang effect because an economy can’t be subject to a mechanism of price laws.”
While fixing prices, Chavez’s government is printing money and raising spending.
The central bank has more than doubled the amount of money circulating in the Venezuelan economy since November 2007, according to data compiled by Bloomberg. Fiscal spending leaped 22 percent this year after accounting for inflation, according to an e-mailed report by Bank of America Corp. economist Francisco Rodriguez.
Mounting shortages may hit the poor hardest, said Elsy Valladares, a 50-year-old publicist.
“There’s still going to be speculation and shortages, and who will suffer the most? He who has the least,” Valladares said while shopping at the Dulcinea supermarket. “If you have money, you can buy a little more. But what about those people who live on minimum wage or work by the day, do you think they can come and load up on stuff?”