Saturday, February 17, 2007

Another socialism failure in Venezuela

Yeah, that Hugo sure is doing a helluva job. From the Old Gray Hag:
Faced with an accelerating inflation rate and shortages of basic foods like beef, chicken and milk, President Hugo Chávez has threatened to jail grocery store owners and nationalize their businesses if they violate the country’s expanding price controls.

Food producers and economists say the measures announced late Thursday night, which include removing three zeroes from the denomination of Venezuela’s currency, are likely to backfire and generate even more acute shortages and higher prices for consumers. Inflation climbed to an annual rate of 18.4 percent a year in January, the highest in Latin America and far above the official target of 10 to 12 percent.
“It is surreal that we’ve arrived at a point where we are in danger of squandering a major oil boom,” said José Guerra, a former chief of economic research at Venezuela’s central bank, who left Mr. Chavez’s government in 2004. “If the government insists on sticking to policies that are clearly failing, we may be headed down the road of Zimbabwe.”
The economy grew by more than 10 percent last year, helping Mr. Chávez glide to a re-election victory in December with 63 percent of the vote. Yet economists who have worked with Mr. Chávez’s government say that soaring public spending is overheating Venezuela’s economy, generating imbalances in the distribution of products from sugar to basic construction materials like wallboard.

Public spending grew last year by more than 50 percent and has more than doubled since the start of 2004, as Mr. Chávez has channeled oil revenues into social programs and projects like bridges, highways, trains, subways, museums and, in a departure for a country where baseball reigns supreme, soccer stadiums.

In an indicator of concern with Mr. Chávez’s economic policies, which included nationalizing companies in the telephone and electricity industries, foreign direct investment was negative in the first nine months of 2006. The last year Venezuela had a net investment outflow was in 1986.

Shortages of basic foods have been sporadic since the government strengthened price controls in 2003 after a debilitating strike by oil workers. But in recent weeks, the scarcity of items like meat and chicken has led to a panicked reaction by federal authorities as they try to understand how such shortages could develop in a seemingly flourishing economy.
Economic ignorance abounds here, by both socialists and the NYT (pardon the redundancy). It's simple, oh functional economic illiterates: if you keep food retailers (or any other business owners) out of a profit margin, do you think they're going to work for free? The more that government tries monkeying with prices and basic supply and demand, the more damage it does to the very people that government purports to want to help.

With shoppers limited to just two large packages of sugar, a black market in sugar has developed among street vendors in parts of Caracas. “This country is going to turn into Cuba, or Chávez will have to give in,” said Cándida de Gómez, 54, a shopper at a private supermarket in Los Palos Grandes, a district in the capital.

José Vielma Mora, the chief of Seniat, the government’s tax agency, oversaw a raid this month on a warehouse here where officials seized about 165 tons of sugar. Mr. Vielma said the raid exposed hoarding by vendors who were unwilling to sell the sugar at official prices (in other words, they wanted to make a profit...those bastards! - Ed.). He and other officials in Mr. Chávez’s government have repeatedly blamed the shortages on producers, intermediaries and grocers (aka the market! - Ed.).

Those in the food industry argue that the price controls prevented them from making a profit after inflation rose and the value of Venezuela’s currency plunged in black market trading in recent weeks. The bolívar, the country’s currency, fell more than 30 percent to about 4,400 to the dollar in unofficial trading following Mr. Chávez’s nationalization of Venezuela’s main telephone company, CANTV, and its largest electric utility, Electricidad de Caracas.

Fears that more private companies could be nationalized have put further pressure on the currency as rich Venezuelans try to take money out of the country. Concern over capital flight has made the government jittery, with vague threats issued to newspapers that publish unofficial currency rates (officially the bolívar is quoted at about 2,150 to the dollar).
“There seems to be a basic misunderstanding in Chávez’s government of what is driving scarcity and inflation,” said Francisco Rodríguez, a former chief economist at Venezuela’s National Assembly who teaches at Wesleyan University.

“There are competent people in the government who know that Chávez needs to lower spending if he wants to defeat these problems,” Mr. Rodríguez said. “But there are few people in positions of power who are willing to risk telling him what he needs to hear.”
Take note, Dubya! The left thinks that Chavez is wonderful, and since Hugo threatens newspapers that publish anything that could be seen as detrimental to Hugo's image, one can logically conclude that the left approves of such censorship. Therefore, if Bush were to do the same thing to the NYT or other leftwing fishwrap that Hugo is doing to his newspapers, the left would support the move, no?

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