Feb. 14 (Bloomberg) -- Venezuela will cap prices on essential medicines after President Hugo Chavez, who is undergoing “complex” cancer treatments in Cuba, ordered a 32 percent devaluation of the bolivar.
The government ordered the country’s price controls agency to submit a report “to establish maximum prices” within two weeks, Vice President Nicolas Maduro said on state television yesterday. The decision was made at a meeting of the economic team during the Carnival holiday this week, he said.
“We will establish the maximum prices for the people’s essential medicines and control them strictly so the medicine is available in all the establishments,” Maduro said.
Chavez, who hasn’t been seen or heard from publicly since arriving in Havana on Dec. 10 for cancer surgery, ordered his government to weaken the exchange rate by 32 percent to 6.3 bolivars per dollar starting yesterday. The devaluation, announced Feb. 8, spurred Venezuelans to shop for everything from televisions to airline tickets before prices climbed.
Venezuelan businesses will have to charge prices “exactly” in line with dollars received at the 6.3 bolivar rate according to a formula tying final prices with dollars sold to importers, Maduro said yesterday. Businesses are allowed “manageable” profit margins, he said.
Companies will not be allowed to raise prices on their current inventories and will only be allowed to implement adjustments on goods obtained at the new exchange rate, Commerce Minister Edmee Betancourt said today on state television.
A pharmaceutical company working in Venezuela is conducting “sabotage” and involved in “conspiracies,” Maduro said, adding that the company, which he didn’t name, will eventually be singled out publicly.
“Simply put, they should get in line with the law or the law will put them in line,” Maduro said.
A weaker currency may further fuel the fastest inflation rate in the region as about 70 percent of products consumed in Venezuela are imported or assembled from raw material shipped from abroad, according to the Consecomercio trade chamber in Caracas. Consumer prices rose 22 percent in January from a year earlier.
The devaluation, which seeks to narrow the budget deficit by providing the government with more bolivars for its oil export revenue, may undermine support for Chavez and his allies ahead of possible elections this year as the cost of living increases at a faster pace.
“These are necessary actions to stop short the speculative attack against the currency, against prices, against the induced shortages by these perverse sectors of the economic right wing,” Maduro said today on state television. “This attack is the beginning of an economic war.”
Former opposition presidential candidate Henrique Capriles Radonski said the devaluation would hurt the poor hardest and that the measure meant to make up for the government’s spending ahead of last year’s elections.
“You can’t justify this red mega-package during these years with history’s highest oil prices,” Capriles, who lost to Chavez by 11 percentage points in elections last October, said in an e-mailed statement.
Chavez, 58, is receiving “complex and difficult” medical treatments as he nears recovery from an undisclosed cancer, Maduro said yesterday after arriving from Cuba.
“They are complex treatments that should at some point close the cycle of treatment for his disease,” Maduro said.
The government hasn’t given an official health update on Chavez since Jan. 26 when Information Minister Ernesto Villegas said the former paratrooper had overcome a lung infection he contracted after the Dec. 11 operation.
South America’s biggest oil producer may have to call elections if Chavez dies or steps down. Before leaving for his fourth surgery in 18 months, he named Maduro as his successor in case he was unable to continue as president.
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