Business leaders warn Chavez’s economic policies strangling importers, private enterprise

Venezuela importers: Chavez strangling business

CARACAS, Venezuela — Business leaders accused President Hugo Chavez on Sunday of attempting to strangle Venezuelan businesses that rely on imports by making them pay more for foreign-made products.

They said Chavez is irresponsibly allowing the black-market rate for U.S. dollars to spiral upward, which increases costs for close to half of the country’s importers.

“The government doesn’t consider it a priority,” said Alfonzo Rivas, a businessman and president of the non-governmental group Cedice, which promotes individual and economic freedoms.

Chavez set a two-tiered exchange rate in January, pegging the bolivar at 2.60 to the dollar for priority goods such as food and 4.30 per dollar for imports of products the government deems nonessential.

But the government has not distributed enough dollars at the official rate to satisfy demand, forcing close to half of Venezuela’s importers to buy much more expensive greenbacks on the black market.

The black-market rate for the U.S. dollar reached 8.00 bolivars last week — almost double the official rate for nonessential imports and triple the rate for essential imports.

For many businesses, “all the products that cannot be imported at the official rate must be obtained on the parallel market, and that’s going to create more inflation,” Rivas said.

In a televised speech Saturday, Chavez blamed wealthy business owners for soaring prices, suggesting they are conspiring to undermine his government’s anti-inflationary measures such as price controls on hundreds of basic products ahead of congressional elections in September.

“There’s a conspiracy. The bourgeoisie are very much involved in managing the economy,” said Chavez, a close ally of Cuba’s Castro brothers. “I warn the bourgeoisie: We are not going to allow ourselves to be pushed around.”

Business leaders deny plotting against Chavez, countering that he seems determined to gradually replace private businesses and industries with state-run enterprises.

“The government sees the business community as an enemy,” said Rivas, whose own business imports raw materials to produce soups, microwave popcorn, cereal and other goods.

Victor Maldonado, who leads the Caracas Chamber of Commerce, Industry and Services, told Union Radio that Chavez’s socialist economic policies — not business owners — are responsible for Venezuela’s double-digit inflation. He urged the president to moderate his agenda and seek new advisers.

“Any governing official with good judgment should rethink his ideological principles, economic policies and group of collaborators,” Maldonado said.

Last week, the Central Bank and National Statistics Institute reported a 5.2 percent increase in consumer prices during April, driving the annual inflation rate to 30.4 percent.

Jose Guerra, a former Central Bank official who teaches economics at the Central University of Venezuela, said that “the inflation problem is getting out of the government’s hands.”

Chavez implemented the two-tiered exchange rate to discourage imports of nonessential goods while promoting domestic production of items such as food. Critics argue the initiative has failed.

Opposition leader Julio Borges said inflation is worsening because the government has not curbed the country’s dependence on imports. Consumer prices are increasing because Chavez has failed in his effort to boost domestic food production by seizing and redistributing farmland to peasants, Borges said.

“What have the expropriations provided? Has this helped increase domestic production? Has it improved supply? We all know the answer is a firm ‘No,’” Borges said.