In a plan to guarantee a merry Christmas for its citizens, the Venezuelan government has launched special holiday price regulations on food, clothing, toys, hardware, electronics and shoes.
On October 31, 700 attorneys, 21,700 inspectors and 13,500 members of the socialist party’s Bolívar-Chávez Battle Units began to carry out the “2014 Merry Christmas Plan.” They are tasked with visiting retailers and supermarkets across the country to ensure compliance with prices mandated by Venezuela’s Superintendency of Fair Prices (SUNDDE).
These “fair prices,” however, don’t necessarily reflect the cost of running a business in the country. In Venezuela’s import-dependent economy, foreign currency controls make it difficult for businesses to obtain enough dollars to buy parts and products from abroad. In order to meet consumer demand, many turn to the black market to buy dollars, where they can expect to pay up to 15 times the government’s artificially low price.
Shoppers then absorb the difference when they buy the imported product — for example, a 32-inch television for sale for what amounts to US$4,682, instead of the government-set price of US$283. Because there are chronic shortages of some goods, including televisions, Venezuelans with the means and the motive will pay the premium.
At a local SUNDDE office in the western Venezuela city of Mérida, a representative named Odalis said that, regardless of what retailers feel they must do to meet demand, “Buying black-market money is illegal, so those black-market prices are illegal.”
In fact, some businesses that don’t need to buy dollars at the black market rate still price their products to reflect the black-market values, pocketing the difference. Speculation on shortages also spurs hoarding and drives prices up even further.
This time last year, Venezuelan military forces occupied a chain of electronics stores called Daka and arrested store managers on charges of price gouging. Prices were mandatorily lowered, despite the fact that they new prices spelled a loss for the company. According to a new law passed in January of this year, businesses aren’t allowed to earn more than a 30 percent profit margin on their products.
On a recent weekend, at a mall in Mérida, the manager of the store New York Shoes watched as several customers picked up and put down prospective purchases. Their eyes went straight for the price tag stuck to the sole of each shoe.
“I sell at a profit of just a little bit above 30 percent,” the manager said.
Though he’s breaking the law, the potential for SUNDDE coming for the store doesn’t worry him. “It’s impossible to check all of these shoe prices. Even different styles of the same shoe can have different import costs so they are priced differently.”
But on November 7, SUNDDE made its first move, against Caracas-based shoe and accessory store FBL Corporation (Corporación FBL). The government entity claimed the store was turning a profit margin of 652.54 percent and selling shoes for six times their “fair value.” In response, SUNDDE announced it would occupy all 36 FBL Corporation stores in Venezuela and supervise the sale of 252,000 pairs of shoes.
“This is what we need to do to protect salaries, to protect Christmas,” Odalis said.