Venezuela Price Gouging

Could this happen in the U.S.?

 The Christmas shopping season has started with a jolt here, with the socialist Venezuelan government dispatching soldiers to “occupy” a major chain of electronic goods stores, ordering prices slashed there and in other shops that it has accused of price gouging.

Huge crowds formed outside stores in several cities over the weekend as inflation-weary Venezuelans showed up hoping for bargains. Others took the government’s order as a license to loot: Some posted cellphone videos online showing large-screen televisions and other items being carted off in Valencia, the country’s third-largest city. 

 The dramatic measures, ordered on Friday by President Nicolás Maduro, were reminiscent of the populist gestures of his immediate predecessor, Hugo Chávez, the country’s longtime leader who died in March. They come as the government grapples with serious economic problems, including inflation of 54 percent a year and shortages of many basic goods, including toilet paper, milk and flour. 

All of that is weighing on Mr. Maduro a month ahead of municipal elections that the opposition is seeking to cast as a referendum on his young government. Mr. Maduro argues that his government is facing an “economic war” waged by what he calls the right-wing opposition in Venezuela and its backers in Colombia and the United States. In announcing that military personnel would occupy the five-store electronics chain Daka, Mr. Maduro said that the government would supervise sales at significantly lower prices and that the store’s stock would be liquidated. 

Answer:  If Chris Christie gets his way, yes.  Gov. Christie might well declare a state of emergency if he thinks prices are "too high" during the Christmas shopping season.  Christie is clearly a Chavista at heart.

Letter from Hugo Chavez

I have been waiting for a long time, months and months, to publish this little letter that came into my possession.  I had to wait long enough, and indefinitely enough, so that it would be harder to determine just who was the recipient.

A person who is on the faculty at a universidad in Venezuela applied for funding to travel abroad to a conference.  The funding was granted, and the person asked his/her bosses to approve the trip.  This was the letter that came back (I typed it out from a paper original, so forgive the lack of proper accents, and the misspellings):


Republica Bolivariana De Venezuela            (DATE)
Estimada y estimado compatriota
Tenga un saludo cordial y Revolucionario!
    Cumplimos con informarle que su solicitud no puede ser ni sera procesada por diferencias de pensamientos.  Esto es debido a que su proposito de estudio no servira para el beneficio de la nacion.
    Personas de su familia presenta expediente contra la revolucion, por lo tanto, debemos cuidar a la nacion de sus intenciones.
    Le recomendamos que enmiende su vincula con el Estado soberano para poder confiar en las intenciones y proposito de su preparacion en el exterior del pais.
    Sin mas que agregar, se despide ante de Comision Administracion de Divisas (CADIVI)

(Two Truly Enormous Quarter Page Signatures, Obviously Proud and Important Dignitaries)

Now, in my not very good Spanish, here is the (a?) translation.  (After the jump)

BEFORE THE JUMP UPDATE:  Got an email saying that the letter is a hoax.  So, don't go saying "I read this on the internet, so it must be true!"  It may not be.  I'm going to leave it up, though for its truthiness value...

Hugo Cracks Down on Inflation

Hugo cracks down on inflation.....by beating up people who raise prices.

Very clever. He can bankrupt the middle class in six months.

WHY he would want to do that is hard to say. But it is an effective policy, if that is the goal.

The Venezuelan devaluation

The Bolivar has been pegged at 2.15 to the dollar for about 5 years. Over those 5 years, Venezuelan inflation has ranged from 15 - 30 percent per year while US inflation ranged from 0 to 5 percent per year. That is to say, unless the Bolivar was massively overvalued when pegged in early 2005, it has become way overvalued. Yesterday, President Chavez ordered the devaluation of the Bolivar to 4.3 per dollar (2.6 per dollar for some specific imported goods).

Chavez did a pretty good job of explaining the Venezuelan situation as one of a country suffering from the Dutch disease. It heavily exports a primary commodity, which supposedly causes currency appreciation and hurts manufacturing. He emphasized that the country needed to overcome this problem and produce stuff, not just pump stuff out of the ground. Here is a relevant fragment from his TV show:

The devaluation is good policy for sure. I am not crazy about the tiers and controls, and opposition leaders in the country say Chavez will use the increased local currency revenues from oil exports to boost domestic spending in advance of elections, but it is the correct move for the country at this time (and should have been done much sooner). Fixing the nominal exchange rate to a country whose inflation rate you are unwilling to match is a recipe for economic disaster that we have seen cooked up over and over again in Latin America.  Venezuela is getting out before the disaster hits, at least this time.