Venezuela, Protests, and Price Controls

Although protests in Ukraine continue to monopolize international media, similar instability has come to a head in Venezuela. The Latin American country has suffered for decades at the helm of ruinous policies that seek to regulate, restrict, and control its economy and those who must endure this suffering have had enough.

Following Hugo Chavez’s death last year, Nicholas Maduro resumed Venezuela’s presidency and subsequently defeated Henrique Capriles by narrow 1.5 per cent margin in the ensuing presidential election. Since then, however, there have been mass protests regarding a number of issues that plague the Latin American country, to which President Maduro has responded with lethal military action.

In Caracas, the protests have resulted from government expropriations and price controls on everything from electronics, toilet paper, and, most importantly, food–not to mention runaway inflation and government corruption, both of which exacerbate the conflict. The government tightened price controls recently through the so-called “Fair Price Law,” for instance, that criminalizes stocking large inventories, reselling food and other goods, and gives state officials power to arrest business owners based on subjective decisions regarding “overpricing.” These “offences” are punishable by up to 14 years in prison.

Along with price controls, state-controlled food agencies, such as Mercal, exist to sell food at subsidized prices. However, corrupt bureaucrats often intercept this food and sell it for themselves on the black market, which is thriving because of the government’s restrictive policies. As a result, food is less available at state-owned stores than at the few remaining privately owned food markets, according to some surveys. In addition, the Venezuelan government is notoriously incompetent when it comes to managing the country’s food supply. Last year, it imported massive amounts of food and was unable to coordinate distribution, admitting finally that the majority of it rotted in government supply yards.

Locally, many farmers have abandoned their fields, as profitability seems a hope too far: some food prices are being set at ten times less than the market rate. Meanwhile, Venezuelans, particularly in urban areas, are struggling to find food. Many have to make their way to Colombian border towns routinely to find their daily bread. The quest for milk, oil, and sugar can involve several days of travel and waiting. In these Colombian border towns, Venezuelans will often find what they are looking for, including food that has left their country via the black market. For many, though, the time and effort is simply not an option.

The next time you make an impromptu late-night grocery trip to buy a loaf of bread, consider what an immense luxury it is to have the bread sitting there waiting for you. This is what Venezuela is missing, as the national government distorts the market for food without any semblance of sanity. Tragically, it seems lessons from previous agricultural collectivization have not thrived. The only way to reliably ensure a stable food supply in Venezuela is to return to the basics of private property and the reliable enforcement of contracts. Market prices will ensure the production of the food that Venezuelans need to survive, not the government.

Michael Craig is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

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