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“Fair” Prices Arrive in Venezuela’s Stores: Socialist Paradise Ensues

By: María Gabriela Díaz - Nov 28, 2013, 11:51 am

EspañolOn November 8, President Maduro ordered military forces to occupy Daka, a famous chain of electronics stores, and forced them to sell at “fair prices.” Their store managers were arrested under charges of price gouging — usura, as it is known hereand hundreds of Venezuelans ran to the stores and joined long lines, hoping to buy some products “on sale.” In several parts of Venezuela, people got out of control and took these announcements as license to loot the stores.

Venezuelan shoppers wait outside Daka
Venezuelans queue for limited and disappearing supplies at controlled prices.

Since assuming office, Maduro has been facing what he calls an “economic war,” and he has responded in a reactionary manner — until now. He has decided to take a more aggressive stand, just in time for Christmas and the upcoming local elections.

Venezuela has been suffering an immense economic crisis, marked by restrictive economic policies such as foreign currency controls that suffocate the private sector. Despite this context, President Maduro still believes there’s no justification for stores raising their prices. He decided to send military forces to determine whether or not the stores were “speculating.”

Due to these repressive measures and intimidation, a lot of stores lowered their prices, even though if it meant getting no profit at all. For three weeks now, people have been buying whatever they can from these stores, be it for their own personal use or for resale later at a profit.

The problem began when businesses like Daka received dollars at the official rate, 6.3 Bsf. per dollar, and sold their products at prices that reflect the open or black market exchange rate — about ten times the official rate. According to Maduro, these products were overpriced, so he decided to intervene and stop these “thieves.” Beyond the media show, the case of Daka is part of a wider arena of problems.

The truth is that the country has become more and more dependent on imports, and businesses struggle to overcome mounting foreign currency controls to import the necessary goods and satisfy the demand. Even though some succeed, others don’t, so they end up resorting to the black market to obtain dollars for imports. Whether or not companies get their dollars at the official rate, however, they sell their products at prices that are inevitably determined by the black market rate.

Taking into consideration the increasing gap between both rates, a lot of individuals and businesses have taken advantage of the arbitrage opportunities. Those that have access to the artificial, official rate have made quite a business out of importing at a very low price and selling it a higher rate.

Some would say this is morally wrong; others would say this is economically correct, and businesses will always strive for more profit. However, in a scenario where free competition is nonexistent and government regulations increase, the few selected ones who get through have the power to determine the price they consider “fair.”

From the consumer’s perspective, the problem comes when there are no choices, so one has to accept the artificial price offered, especially if the goods are scarce. What the government can’t see, or doesn’t want to see, is that the more they control and the less liberty there is for competition, the more power these few businesses have over the economy.

This unbalanced dynamic is not a novelty in the country. The government is aware of this; it’s just that elections are coming. Maduro’s level of approval has been declining, despite the use of Chavez’s miraculous appearances. It should not take us by surprise then that just three weeks before the elections, Maduro leads an act of economic vengeance based on “Robin Hood” policies, where he defends poor victims from “capitalism” and its high prices.

For many years now, the government has been using scapegoats like Daka to blame someone else for its economic crisis, but this is old news. What has generated attention is the fact that Venezuelans have become used to this deprived economy, regardless of their social condition or political affiliation. They have accepted the scarcity in grocery stores, the long lines and big fights outside any establishment when basic food products arrive, the limits on the amount of products they can purchase, and so on.

How did Venezuelans get to this point?

meme-bastiat-1There may be many answers to this question, but they all would end with the same conclusion: Venezuelans have become submissive, because they are accustomed to depending on the government. There is a paternalistic relationship where good behavior — electoral votes — is awarded, while bad behavior — the opposition clamoring for their rights — is punished.

It’s ironic to think that Maduro, who carries an extreme Marxist-communist ideological view, has decided to battle the limited capitalism left in Venezuela’s economy by its main core: consumerism. Now, Venezuelans have electronics at home; Christmas is coming, and they feel pretty happy about it, maybe enough to forget the rest of their economic woes and cast their ballot in December.

What they may not realize is the consequences after this economic war: shortages, closed businesses, and unemployment. Now that our own Robin Hood has been granted the Enabling Law, let’s just hope he has a Plan B for what comes next.

María Gabriela Díaz María Gabriela Díaz

María Gabriela Díaz reported from Caracas, Venezuela, and led the PanAm Post internship program. She has a Bachelor of Arts in political science with a focus in international affairs.