Maduro Doubles Down on Price Controls amid Record-High Inflation

By: Sabrina Martín - @SabrinaMartinR - Oct 23, 2015, 8:47 am
Faced with a growing economic crisis, President Nicolás Maduro says the government will enact stronger economic controls.
Faced with a mounting crisis, President Maduro says the government will enact stronger economic controls. (Apufat)

EspañolUndaunted by the severe shortage of basic goods, long lines outside grocery stores, and record-high inflation rates, the Venezuelan government is planning to step up its economic controls.

“We are going to tighten the screws on the Fair Prices Act and all other applicable regulations to buy goods and services,” President Nicolás Maduro announced on Tuesday, October 20, during his show, In Touch with Maduro, broadcasted on state television.

While Maduro’s announcement was scarce on details, the president said two new price categories would soon be implemented: a “maximum sale price,” and a “fair price” for essential goods. The former aims to cap profits on most products at 30 percent, while the latter seeks to fix the price of “essential goods, health care, and other basic services.”

Maduro further warned that firms that do not comply with the regulation will be met with “sanctions aimed at the company’s net income.” The president also announced tougher penalties for “speculation.” From now on, he said, “setting prices based on the black-market dollar rate will be considered an illegal exchange.”

To revamp the entire price-calculation system, Maduro will create a “Special Command of Fair Prices,” with Vice President Jorge Arreaza at the helm.

Additionally, the Venezuelan president said the government will give all state employees, and members of the National Bolivarian Armed Forces, a 30 percent pay raise. The government also plans to provide pensions at the new 9,648 Bs. monthly minimum wage for an additional 110,000 elderly residents.

According to Maduro, these measures aim to “protect the recent wage increase, tackle speculators, and boost exports.”

“Very Bad News”

For Venezuelan economist Luis Oliveros, the announcements are not a sign of positive change in the economy. On the contrary, Maduro’s statements are a “very bad sign,” he tells the PanAm Post.

“Maduro basically said that he will radicalize what he did wrong,” Oliveros explains. He believes further controls will only worsen the crisis, causing greater shortages and inflation.

The Venezuelan government should have admitted that their plans failed and dismantled current price-control regulations, he says, instead of worsening the problem and instilling fear and uncertainty in the business sector.

Oliveros compared Maduro’s latest move to that of Zimbabwean President Robert Mugabe, who triggered a historic hyperinflation episode after enacting a law to reduce prices.

Economist Alicia Sepúlveda at the liberal think-tank Cedice Libertad told the PanAm Post that the recent announcement will escalate the government’s clampdown on economic liberties. Venezuela already ranks last in the 2015 Economic Freedom of the World Report, and greater intervention in the economy will only mean “more threats to the productive sector,” she says.

Sepúlveda believes Maduro’s announcement reflects the government’s inability to build investor confidence and provide incentives for wealth creation.

“The government appears threatened head of the election, and they are doing what they can to scare citizens,” she argues.

Which Inflation Rate?

Also on Tuesday, Finance Minister Rodolfo Torres presented Congress with the 2016 budget proposal. The document estimates annual inflation will reach 60 percent next year, way below the 200 percent rate prediction for 2015 by the International Monetary Fund.

“The government is shamelessly lying,” Oliveros says. “Five days ago, Maduro said that inflation for 2015 was 80 percent, and on Tuesday he said it was 85 percent, implying that it grew one percentage point every day.… They lied, just like they don’t publish statistics on inflation, gross domestic product, balance of payments, or poverty.”

Even if the official numbers were true, Venezuela would be the only country in the world with an inflation rate above 30 percent, the economist notes.

Translated by Adam Dubove.

Sabrina Martín Sabrina Martín

Sabrina Martín is a Venezuelan journalist, commentator, and editor based in Valencia with experience in corporate communication. Follow @SabrinaMartinR.

The Divide That Causes Brazil’s Drug War to Ravage On

By: Alice Salles - Oct 22, 2015, 4:09 pm

Brazilian police kill one resident every 30 minutes, but local media outlets remain focused on political intrigue: the impeachment of President Dilma Rousseff. Pundits and reporters have forgotten to dig deeper into why the nation is in crisis; nor have they come to grips with a younger generation ready for change that goes beyond personnel. In particular, the youth have an end to the drug war in their sights, and they are in need of a political movement to take up the issue. Unfortunately, conservatives have yet to heed the call and must overcome ideological barriers that stem from the nation's torturous history. The History of Brazilian Drug Laws Brazil didn't always criminalize the drug trade. Prior to the 1964 military coup, drug abuse was a public health issue, and users received mandatory treatment. When the military regime took power, they replaced the Congress with the National Constituent Assembly, deposed opposition members, and drafted a new Constitutional Charter. The militaristic 1967 National Security Law marked the beginning of the war on drugs in Brazil. Faced with the increasing influence of socialist guerrilla groups in South and Central America, the majority of Brazilians cheered the military takeover. But as the youth took an interest in movements that opposed the undemocratic regime, conservatives of the era created the myth that linked anti-prohibition efforts to socialists. In 1985, when the military retreated and Congress returned some of the electoral power back to voters, many hoped for drug-law reform. But with the establishment of the new constitution in 1988, things got worse. Drug traffickers were no longer eligible for amnesty, and judges routinely denied them bail. In addition, the 1990 Law of Heinous Crimes stripped from drug traffickers the possibility of pardon or parole. The legislation also increased the length of pretrial detention, so the prosecution could double the procedural judgment delays. With the passing of the Drug Law in 2006, the focus of law enforcement became drug traffickers and producers, not so much users. The law also distinguished between drug traffickers who sell drugs to sustain their own addiction and "professional" drug traffickers, those who produce and sell to meet market demand. Casual drug traffickers usually benefit from lesser penalties. In 2007, Rio de Janeiro officials summoned the National Public Security Force to help fight drug trafficking in slums, creating a de facto police state in vast neighborhoods where the poor reside. With the increased repression, the consequences of state-sponsored violence became difficult to ignore. Conservative Leaders Are the New Castros? To Jair Bolsonaro, an outspoken conservative congressman from Rio de Janeiro, the "police in Brazil don't kill enough." In a video published by his son, Congressman Eduardo, the influential Bolsonaro senior argues that "violence is fought with violence." When questioned about Amnesty International's report on Brazil's police brutality, Bolsonaro claimed that "the Military Police in Brazil have to kill more." Almost half of these deaths [happen] in combat, or on missions. So Amnesty International is not reporting on what our country requires to address the public safety issue. In Brazil, the police are already working hard at it, with a death every half hour adding up to 3,022 in 2014 alone. About 77 percent of the victims were black men. With the 11th largest defense budget in the world, Brazil spends about US$31.9 billion annually on its military. And for what? To Bolsonaro, killing criminals without due process while on duty is part of effective police work. But he won't admit that there is a link between high killing rates and Brazil's drug laws. As small-time traffickers, users, and innocent bystanders die in police raids, drug lords become stronger. In addition, the increasing friction between law enforcement and the drug-trafficking community gives gangs the support of locals who are tired of living amid violence. Instead of inspiring respect from communities most impacted by the war on trafficking, police officers instill fear. To libertarian Kim Kataguiri, national coordinator for the Free Brazil Movement, allowing the police to "kill more" is counterproductive. The United States, Kataguiri told the PanAm Post, "is a great example of the [failure of the drug war]." US police are better trained and have superior equipment. Laws against drug-trafficking in the United States, when compared to Brazil's, are much harsher in most states. Still, since the United States declared a war on drugs in 1971, consumption has remained fairly constant. To the young liberal, the belief that the drug war could ever work is misguided: "It's delusional to believe our fight against drugs could become stricter than in the United States'" — after all, Brazil will never be as prepared. "Even if it were possible, a [tougher drug war in Brazil] would further centralize power and put more of it in the hands of traffickers." To Osmar Bernardes Jr., the co-founder of conservative news site Reaç, there really is a war going on in Brazil, forcing police officers to "become soldiers." The justice system in Brazil "won't offer any support to the exemplary citizen or police officer," Bernardes explained. To the young conservative, existing laws are not good enough. Enacting tougher laws should be part of the solution, he told the PanAm Post: We must appreciate police work and improve their training. We should simplify the justice system to make it more efficient and fair. We should also reform the criminal code to make sure the bad guy is punished more sternly, so criminals won't go back to a life of crime, and reinstate the right to bear arms for good citizens. We will only be able to discuss drug trafficking after we have addressed these factors. Kataguiri, however, contends that the drug war is less complicated than Bernardes would have you believe. Cartels and monopolies sustained by drug lords are only possible because the state prohibits honest citizens from trading drugs legally, putting the market in the hands of those who are willing to live as criminals. Adding more fuel to the fire by upping policing and toughening laws might work to curb murder, rape, and theft, but not when it comes to the drug war. Prohibition at Home with Communism To Kataguiri, the fact that the US and Cuban governments have cooperated in the drug war while both nations kept diplomatic ties severed is a "contradiction to the founding principles of the United States." "It's what the Declaration of Independence says," Kataguiri explained. "The US government was built to protect life, liberty, and the pursuit of happiness. Drug prohibition is a form of restriction on liberty and the pursuit of happiness." Despite the fact that many prominent news sources have already covered this cozy relationship between the US government and the Castros on the drug war, especially after the State Department released its 2014 International Narcotics Control Strategy Report, Bernardes wasn't sure how he felt about both nations' combined efforts. In Fidel Castro's Cuba, the government only admitted having records on local drug use in 2003. Until then, drug use was a "capitalist ill," an immoral habit tourists had brought to the island. The Castros are so serious about fighting the drug war that back in 2005, General Jesus Bacerra — head of Cuba's anti-drug agency — complained that the United States wasn't giving his agents enough leeway to take part in international efforts against drug trafficking. As a growing number of US states pass their own reforms, Washington is losing its grip on the war on drugs as a whole. But while Raúl Castro remains in charge in Cuba, the tough-on-crime stance will remain. To Kataguiri's Free Brazil Movement, the South American nation should adopt a federalist approach to the drug war. Each state has its own characteristics, its priorities. Power should be decentralized so that states are able to make decisions based on their needs. Brazil is a huge country, all states are different culturally, economically, politically, and socially. You can't have a debate about the drug war centralized in the capital, Brasilia. On the other hand, to Bernardes's friends at Reaçonaria, opposition to drug legalization is what's in. They actively support enacting even tougher punitive charges for traffickers, ignoring that when police are busy fighting the drug trade, real crimes such as murder and theft are left unsolved.

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