chron.com
Soaring inflation confronts Venezuela
By ALEX KENNEDY
Alfredo Cohen, who built and owns Venezuela's largest shopping center,
is trying to complete a $150 million Caracas office complex. Trouble
is, he keeps running out of bricks, pipe and shingles.
"In my 25 years in this business, I've never seen shortages like this,"
Cohen said in an interview in Caracas. "There's a scramble for
materials that's jacking up prices and adding at least 10 percent to my
costs."
The experience of Cohen's family company, Constructora Sambil, is being
repeated throughout South America's fastest-growing economy. Scarce
supplies of building materials, cars, food and other goods are imposing
costly delays and other efforts to cope, pushing Venezuelan inflation
to an annual rate of 17 percent in December, the central bank said this
week.
Some of the shortages are the result of the very price controls that
President Hugo Chavez has imposed to combat inflation, local business
people say. "All price controls, after a few years, become perverse for
production," said Gustavo Moreno, president of the Venezuelan
Agriculture Association. "If there isn't a periodic price increase to
take inflation into account, controls create more problems than they
solve."
Chavez, who was re-elected to a six-year term Dec. 3, has used controls
to combat inflation since 2003, when he froze the price of basic foods,
such as rice and meat, after a two-month national strike.
Since then, he's capped phone and electricity rates, and most recently,
set prices for 45 construction materials after the cost of some
products, such as drywall, doubled in 2006, Irwin Perret, president of
the Venezuelan Construction Association, said in an interview.
"Chavez favors price and capital controls to keep a lid on prices
rather than spend less or raise interest rates," said Alberto Ramos, a
senior Latin American economist with Goldman Sachs Group. "We expect
Chavez to persist with and possibly deepen these controls."
At 17 percent, Venezuela's inflation rate was the fastest in Latin
America last month. The rate was 15.8 percent in November; as recently
as May, it was 10.4 percent.
Brought to you by the HoustonChronicle.com |
