C&B Notes

Government Run Grocery

In our latest quarterly letter, we examined the first and higher-order effects that price controls are having in Venezuela.  The Maduro-led government has taken their policies to the (il)logical next step with the nationalization of a grocery retailer.

The Venezuelan government has taken over supermarket chain Dia a Dia and ordered the detention of its owners, as socialist president Nicolás Maduro intensifies a crackdown on private businesses.  It is the latest salvo in what Mr. Maduro calls an “economic war” in which he has accused groups of trying to destabilize the country by creating a shortage of basic goods.  On Tuesday armed national guardsmen were placed at some Dia a Dia (Day to Day) convenience stores in the capital, Caracas.  Charges are also being pressed against pharmacy chain Farmatodo, for not opening enough check-outs, in what the government claims is a “guerrilla tactic” to spur discontent.  “Those who use their stores to hurt the people will pay with prison time,” Mr. Maduro said.  Critics says the Maduro government is attempting to make the private sector the scapegoat for Venezuela’s deteriorating economy. Under policies introduced by the late president Hugo Chávez, much of the economy has been nationalized and manufacturing has declined, leaving the Opec nation heavily dependent on imported goods.

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Economists say price controls and strict currency exchange restrictions have generated a lack of dollars in the economy.  This has in turn has caused widespread scarcity of basic goods, including toilet paper and powdered milk, and dragged Mr. Maduro’s approval rating down to 22 per cent.  Instead of relaxing controls to boost supply, the president blames the crisis on rightwing forces backed by the US.  So far Mr. Maduro has been reluctant to implement austerity measures to help his cash-strapped government boost its finances.