Law Limiting Costs, Prices and Profits Comes into Force in Venezuela
By EWAN ROBERTSON
Mérida, 24th January 2013 (Venezuelanalysis.com) – A law limiting costs, prices and profit margins across the Venezuelan economy came into effect yesterday.
The law is designed to prevent over-pricing, speculation and other abuses against consumer rights which have been occurring in the South American country.
It was drawn up by President Nicolas Maduro after problems with Venezuela’s currency control system and what officials argue is an “economic war” being waged by anti-government business sectors have created economic imbalances for consumers such as high inflation and shortages in some basic products.
This….will not end well.
Many years ago I got to become friends with a young man from Caracas at one of my father’s BBQs. This was about a year before Chavez became President. He came from a well to do family who was in tool and die making. Anyways, he worked in retail before coming here and I learned a thing or two about how it is down there. Essentially, you had over the decades something akin to how our health insurance companies operated here, were a select few manage to consolidate and get the state to give its blessing. The state allowed and aided a select few to dominate at the expense of a real free market in retail.
Well..fast forward to today and you have the end result of state meddling/crony capitalism with a cabal of business interests. One hand helping the other. But instead of breaking up these retail combines and allowing the formation of a real free market for retail, we get something worse. Very rare does command economies and their price control schemes work out well. The fundamental forces of Supply & Demand ultimately will win out in one form or another. Incentives will be shifted, shortages will begin, oh the list goes on and on. We have seen this time and time again, be it here in the US or Cuba or the USSR or wherever, it almost always fails.
This, unfortunately for the average Venezuelan, in the end…will not end well.