Panama Buys More Time for “Temporary” Price Controls


EspañolPrice controls in Panama are not going away any time soon. The national government announced on Wednesday that the emergency price holds on 22 food products will be extended until June 2015 — six more months than originally planned.

According to the Minister of Commerce and Industry Melitón Arrocha, the measure is meant to keep the country’s inflation rate low and improve the overall purchasing power of citizens.

Government extends #PriceControls for six months starting January.

“After analyzing the data, the national government has determined that price controls increase the purchasing power of the Panamanian people, allowing traders to rotate their inventory more often, earning higher incomes, and generating competition,” Arrocha said.

List of the 22 products with prices controls since July 2014. (Tu Bolsillo Primero)
List of the 22 products with prices controls since July 2014. (Tu Bolsillo Primero)

The measure, originally implemented through Executive Decree Number 165 in July, was scheduled to expire in January 2015. At the time, newly elected President Juan Carlos Varela said he planned to “rectify speculation” on food prices.

Meat, chicken, pork chops, tuna, rice, eggs, milk, white bread, and cheese are among the regulated products. However, Minister Arrocha has said the administration is open to adding more items to the price-control list, should “reasonable” prices not prevail.

Arrocha even believes that the apparent price stability of the 28 products not subject to regulations, yet still within the “basic family basket,” demonstrates the success of the price-control policy. As for how the reduction in fuel costs will affect food prices, the minister said he expects the effects to be reflected in the market very soon.

This program was one of the main campaign promises of president Juan Carlos Varela, with which he committed to reduce US$58 from the basic food basket, which soared 30 percent in the last five years. Although contrary to tatistics presented in other reports, the price regulations have managed to reduce the cost by US$52 so far, according to the Ministry of Commerce and Industries.

Testimonies collected by local broadcaster CB24 are less rosy: “prices have not fallen at all,” one respondent said, and regulated products have reduced quality. “The government deceived the people and the people let themselves be fooled.”

Juan Jované, an economist and former presidential candidate, has described the regulation as “insufficient, inconsistent, and incoherent” from the outset. He insists that it has not had any positive impacts for consumers, given that global prices have dropped, but in Panama, he claims, the opposite has occurred.

Úrsula Kiener, a member of the Agricultural Affairs Committee of the Panamanian Association of Business Executives (APEDE), argues that the measure does nothing to improve the agricultural sector. She writes that it is “a political ploy because it causes shortages, which makes a few companies (usually large) that are more efficient the only ones who can compete.”

Oil prices today (BRENT 59.86) make it clear that the free market in Panama is a fallacy, no price reductions.

Nevertheless, Arrocha denied the allegations that empty shelves began to appear as soon as the controls went into place. He argues that these arose because of “a change in consumption” — that people simply began to consume more of the products that were regulated.

Edited by Guillermo Jimenez and Fergus Hodgson.

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