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May 16th, 2013 
Peter Nolan
Economists say Venezuela’s
shortages stem from price controls meant to make basic goods available to
the poorest parts of society and the government’s controls on foreign
currency.
“State-controlled prices – prices that are set below market-clearing
price – always result in shortages. The shortage problem will only get
worse, as it did over the years in the Soviet Union,” said Steve Hanke,
professor of economics at Johns Hopkins University.
President Nicolas Maduro, who was selected by the dying Hugo Chavez to carry
on his “Bolivarian revolution,” claims that anti-government
forces, including the private sector, are causing the shortages in an effort
to destabilise the country.
The government this week announced it would import 760,000 tons of food and 50
million rolls of toilet paper.
Commerce Minister Alejandro Fleming blamed the shortage of toilet tissue on “excessive
demand” built up as a result of “a media campaign that has been
generated to disrupt the country.”
“The revolution will bring the country the equivalent of 50 million rolls
of toilet paper,” he was quoted as saying on Tuesday by state news
agency AVN. “We are going to saturate the market so that our people
calm down.”
Finance Minister Nelson Merentes said the government was also addressing the
lack of foreign currency, which has resulted in the suspension of foreign
supplies of raw materials, equipment and spare parts to Venezuelan
companies, disrupting their production.
“We are making progress … we have to work very hard,” Merentes
told reporters on Wednesday.
Many factories operate at half capacity because the currency controls make it
hard for them to pay for imported parts and materials. Business leaders say
some companies verge on bankruptcy because they cannot extend lines of
credit with foreign suppliers.
Merentes said the government had met the US dollar requests of some 1,500
small- and medium-sized companies facing supply problems, and was reviewing
requests from a similar number of larger companies.
Chavez imposed currency controls a decade ago trying to stem capital flight as
his government expropriated large land parcels and dozens of businesses.
Anointed by Chavez as his successor before the president died from cancer,
Maduro won a close presidential election April 14 against opposition
candidate Henrique Capriles, who refused to accept the result, claiming
Maduro won through fraud and voter intimidation. He filed a complaint to the
Supreme Court, asking for the vote to be annulled, though that’s highly
unlikely to happen since the court is packed with government-friendly
judges.
Patience is wearing thin among consumers who face shortages and long lines at
supermarkets and pharmacies. Last month, Venezuela’s scarcity index reached
its highest level since 2009, while the 12-month inflation rate has risen to
nearly 30 per cent. Shoppers often spend several days looking for basic
items, and stock up when they find them.
Fleming, the commerce minister, said monthly consumption of toilet paper was
normally 125 million rolls, but that current demand “leads us to think
that 40 million more are required.”
“We will bring in 50 million to show those groups that they won’t make us
bow down,” he said.
Edited for Telegraph.co.uk by Barney
Henderson
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