President Nicolás Maduro ordered managers of electronics chain Daka to lower prices or face prosecution.
CARACAS, Venezuela — Venezuela's President Nicolás Maduro intensified his perceived fight Monday against "bourgeois parasites" he accuses of an economic war against the socialist country by threatening to force more stores to sell their merchandise at cut-rate prices.
National guardsmen, some of whom had assault rifles, were positioned around outlets of an electronics chain that Maduro has ordered to lower prices or face prosecution. Thousands of people lined up at the Daka stores hoping for a bargain after the government forced the companies to charge "fair" prices.
"I want a Sony plasma television for the house," said Amanda Lisboa, 34, a business administrator who waited seven hours outside a Caracas Daka store, similar to Best Buy. "It's going to be so cheap!"
Five managers of electronic retailers including Daka are being threatened with prosecution for unjustifiable price hikes, the Venezuela government said. More stores may be at risk, as well. Government inspectors were dispatched to check prices at an array of other businesses.
"This is for the good of the nation," Maduro said, referring to the military's occupation of Daka. "Leave nothing on the shelves, nothing in the warehouses … Let nothing remain in stock!"
Maduro said his seizures are the "tip of the iceberg" and that other stores would be next if they did not comply with his orders. Maduro is expected to win decree powers in Congress in the coming days that he says will be used to take over more businesses.
The assault against business comes amid a severe shortage of basic goods and extreme inflation, which is currently at an annual rate of 54.3%. Both are tied to policies of the government, which is boosting public spending and printing money in record amounts to pay for it.
Venezuela's central bank said the country's money supply grew 70% in the past year. As a result, the value of the Venezuela bolivar continues to drop at a time when the country must import increasing amounts of basics like food and even toilet paper due to failed state schemes for running the economy.
For Venezuelans, it costs more bolivars every week to buy from stores that must pay the foreign producers of goods they order in hard currency like U.S. dollars. But Maduro blames it on greedy business and his opponents here and abroad.
Hebert García Plaza, head of the High Commission for the People's Defense of the Economy, said a new washer/dryer cost 39,000 bolivars on Nov. 1, and went up to 59,000 bolivars a week later. According to the exchange rate set by the government, that is the equivalent of a washer-dryer going from $6,190 to $9,365.
But that math is distorted because the state's official exchange rate is set artificially far lower than what people get for their bolivars on the black market. In that case the washer/dryer cost $650 on Nov. 1.
Also, Venezuela's policy of restricting the reasons for which people can exchange bolivars legally has raised the exchange rate on the black market, making dollars more expensive for retailers and thus raising the cost of the goods they import.
Importers complain that there is such a shortage of dollars they are having to buy them on the black market to import inventory at a good price. If they were to charge clients based on obtaining the dollars at the official rate, they say they would make no profit.
Maduro's government has brushed aside such complaints and is trying to put an end to black market currency exchanges. The government banned websites that publish the black market dollar rate, a strategy that one prominent Venezuela blogger likened to banning the sale of thermometers to crack down on cold weather.
Nonetheless, many Venezuelans lined up for the reduced-price goods. Televisions were the most in-demand item in the line outside Daka. Also sought were refrigerators, washing machines, sewing machines and other imported appliances.
Water and snacks were being sold outside the stores by Venezuelans keen to profit from the commotion. Happy customers emerged carrying large-screen televisions and other items back to their cars.
"I would bet that the next thing to disappear from shelves are televisions," said Alberto Ramos, an analyst at Goldman Sachs in New York. "What the government is doing is aggravating the picture. There is no economic justification for this."
The government said that five people had been arrested in the country's central city of Valencia for looting. Even Venezuelans who knew the policy was unsustainable were in line for a good deal.
"I have no love for this government," said Gabriela Campo, 33, a businesswoman hoping to take home a cut-price television and fridge. "They're doing this for nothing but political reasons, in time for December's elections."
Maduro has been taking dramatic measures up to the approach of municipal elections on Dec. 8. His popularity has dropped significantly in recent months, according to some independent media polls.
Ramos and most analysts are expecting a devaluation soon after the election, likely leading to even higher inflation. This is not the first time Venezuelans have seen their government steal company assets in times of trouble.
Former president Hugo Chávez often theatrically expropriated or seized assets from more than 1,000 companies during his 14-year tenure. This, among other difficulties for foreign firms, led to a severe drop in foreign investment in the country that has hobbled its ability to produce oil despite having the world's largest estimated oil reserves.
"This is more like government-sanctioned looting," said Caracas-based engineer Carlos Rivero, 42. "What stops them going into pharmacies, supermarkets and shopping malls?"
Bill's comment: History repeats. This approach to economics and governance has failed repeatedly in third world countries.
Update: NY Post 27Nov13
Update: NY Post 27Nov13
Venezuela is in a death spiral that could produce a crisis for the United States. Economic collapse, incompetent leadership and Cuban meddling may provoke a showdown among well-armed chavista rivals, with civilians caught in the crossfire. US diplomats, who’ve spent years ignoring or minimizing threats emanating from Venezuela, must act urgently to prevent a Syria scenario on our doorstep.
The late dictator Hugo Chávez left behind a mess: His divisive, illegitimate regime polarized society and devastated the economy. Inflation is running at 50 percent, while the vital oil sector is faltering. The bloated, bankrupt state can’t sustain the social spending that kept the peace; the nation already faces food shortages, power outages and rampant crime.
Chávez’s hapless successor, Nicolás Maduro, won disputed elections in April in what even he called a “Pyrrhic victory.” His mismanagement since has only hastened the country’s decline — for example, dealing with toilet-paper shortages by confiscating paper companies.
Maduro has resorted to accusing the Obama White House of plotting the collapse of the Venezuelan economy. He’s also created a “vice ministry of supreme social happiness” in an Orwellian gesture to tamp down widespread social anxiety. He even moved up Christmas celebrations up in advance of the Dec. 8 local elections.
Last week, Maduro publicly ordered retailers to lower prices on consumer goods. Security forces arrested dozens of shopkeepers and stood by as mobs emptied store shelves. Good luck seeing those shelves restocked. As he further tightens economic controls, Venezuelans will have to settle for what the government provides. Their only other choices: Flee the country, turn to crime — or oppose the regime.
Maduro is most worried about the last. He recently ordered the detention of several civic leaders who’d been mobilizing protest rallies. Regime sources say that he may even nix the upcoming elections and jail well-known opposition politicians.
Most blame these draconian measures on Maduro’s Cuban handlers, the puppeteers behind his rise to power. The destitute Castro regime’s survival depends on Venezuelan oil, so it means to keep Maduro in power by repressing popular unrest and ferreting out dissent — including within the regime.
By pushing Maduro to purge powerful chavistas — many with ties to the military — who disapprove of Havana’s heavy hand, the Cubans have likely overreached. This crackdown has stoked tension within the military between those aligned with Maduro and nationalists who’ve never been comfortable in a Cuban harness.
The regime has very little room to maneuver. Virtually every Venezuelan is infuriated by the daily fight for survival. The anti-chavistas are fed up with the harassment by an illegitimate and incompetent one-party state. All sides in the military are busy weighing their options.
Any act of repression, street brawl, electoral fraud or corruption scandal could unleash all the fury built up over the regime’s 15 years. Tragically, the sight of military units squaring off in the streets of Caracas is not a distant memory.
The United States imports about half the Venezuelan petroleum that it did when Chávez was elected in 1998, but that’s still 9 percent of our foreign oil purchases. Plus, an implosion of Venezuela’s economy — or, God forbid, prolonged civil warfare — will roil the international oil markets and destabilize the region when the US economy is sputtering.
What’s worse, in the last decade, Venezuela has become a narco-state, with dozens of senior officials and state-run enterprises complicit in the lucrative cocaine trade. The regime also is an ally of Iran and Hezbollah, which may find their own ways to exploit chaos in Venezuela.
Geography makes the bloodbath in Syria all but invisible to Americans, but Venezuela is a three-hour flight from Miami and No. 3 in the world in social networking. The US public will see photos and videos of innocent demonstrators mowed down in the street. Moreover, in the Americas, the United States will be expected to lead.
The Obama administration must work with regional partners to respond to the brewing crisis. It should invoke the Inter-American Democratic Charter as a step toward restoring democratic governance, and to warn Maduro and military leaders that they’ll be held responsible for violence against citizens.
If the administration fails to confront these events decisively, Congress should demand action and make clear to the president that leading from behind is not an option.
Roger F. Noriega was US ambassador to the OAS and assistant secretary of state under President George W. Bush. He is an American Enterprise Institute visiting fellow and managing director of Vision Americas LLC, which represents US and foreign clients.
