Monday 12th

Venezuela takes steps to curb inflation
Hugo Chávez' government Sunday moved to eliminate value-added tax on six food items, on terrestrial transportation for priority food products and on white corn used to manufacture food concentrates for animals.

The products that will no longer be levied with VAT include beef, pork, turkey, mayonnaise, oat, and creamy white cheeses, the Venezuelan Executive Vice-President Jorge Rodríguez told a news conference Sunday.

Further, the Venezuelan government announced agriculture subsidies amounting to USD 183.4 million for cotton, sugar cane, corn, sorghum, and rice growers. In exchange, growers will have to preserve prices unchanged.

Venezuela to preserve oil revenues in dollars to control liquidity
Minister of Finance Rodrigo Cabezas said that effective as of February 12th, the oil income tax, profits and royalties the state-run giant Pdvsa delivers to the Treasury will be kept in US dollars, and will only be changed into Venezuelan bolivars when the administration needs to fund public expenses.

"The method for the oil industry to pay taxes, royalties and profits to the government will be changed," Cabezas told a news conference on Sunday.
 
Last September, a special Treasury account was opened. Before Cabezas' announcement, the account was used to deposit any funds in excess of the monies estimated in the domestic budget. However, from now on, such an account will be used to deposit all the money (in US dollars) Pdvsa has to deliver the Venezuelan government for taxes, royalties and profits.

Up to February 2nd, liquidity amounted to USD 52.9 billion.

VAT on beef will be eliminated as of March 1st, tax authority says
José Gregorio Vielma Mora, head of the Integrated National Customs and Tax Administration Service (Seniat) said Hugo Chávez government move not to levy value-added tax on beef, among other food items, will be effective as of March 1st.

He ruled out banning imports of beef from Colombia. "In Colombia, the cattle-raisers association supports the government and does not spread discouragement."

He claimed that shortage and speculation are tricks to undermine President Hugo Chávez' government. "Any information disturbing the economy, finance, and trade has a goal to harm the economic policies of Hugo Chávez Frías."

Vielma Mora said no taxes would be levied on cell phone services, sodas and oat. "In Venezuela there is no war tax whatsoever."

Business sector thinks that price control is senseless
José Luis Betancourt, the chair of the Federation of Trade and Industry Chambers (Fedecámaras), deems it appropriate the government measures announced last Sunday and its willingness to address the farmers' concerns, but insisted on saying that price control is "unreasonable."

In his view, price control is what really harms consumers. It is "detached from reality, because the most expensive commodity is that which cannot be found in the market."

"These commodities (under price control) are precisely the ones with the highest inflation levels. Enforcing a price control policy that is not continuously revised will result into an inflationary economy. Selling at a fixed price is impossible, as there are variable costs. This makes no sense at all," he explained.

Traders hail government recent move
The Venezuelan Farmers' Federation (Fedeagro) welcomed Monday the government decision to remove the value added tax (VAT) from meat and implement subsidies to agricultural products, said Fedeagro head Gustavo Moreno.

However, the senior representative added, this action must go along with additional policies, including a review once in a while of price controls.

The National Association of Supermarkets and Services (Ansa) backed also the government offer to remove 8 percent of VAT from beef. "This will be translated into a direct benefit for consumers," said the agency in a communiqué.

Tuesday 13th

Government to regulate the whole meat production chain
A resolution dated August 2005, on top fixed prices for meat is to be amended, said Tuesday Minister of Light Industries and Trade María Cristina Iglesias.

"The Government has decided to regulate the whole chain, from producers to final users," the minister explained during a press conference, where she listed also the new prices for beef, poultry and eggs. The list will be released Wednesday in the Official Gazette.
 
Iglesias noted that as from Wednesday, the commodities should be sold "with no excuse whatsoever at these prices." This regulation, she stressed, will be enforced strenuously.

Wednesday 14th

Beef price up 38 percent
Minister María Cristina Iglesias said the price control on meat would continue in force, but prices were increased by 38 percent in average for the whole meat production chain, including cattle-raisings and warehouses.

Price increases will be implemented for whole chicken, chicken legs and breasts, as well as eggs and powder milk.

Poultry and eggs are to soar 45.3 percent in average compared to their previous price, while milk prices jumped 5.6 percent.

The market is expected to react, as beef prices, for instance, are 45 percent below current market prices.

President Chávez threatens to nationalize food distribution chain
During an event held Wednesday to grant pensions on new beneficiaries of the Venezuelan Welfare Institute (IVSS), President Hugo Chávez threatened to nationalize wholesalers and major food vendors.

"Down there in the barrio, you should denounce any grocery store which sells meat above the set price. Then, we will take control of it. We will give it to the community council in order to manage it, because I am certain that it will not steal its own community."

"The bigger you are, the more you have to take care of Chávez. If there is need to take over and nationalize you, just wait for some hours until the law is enacted and released in the Official Gazette. I will keep a watchful eye then. Give me the first excuse to nationalize the first warehouse, the first large outlet and make it available for the people," Chávez boasted.

Price control pushes imports up
Inflation in foodstuff has not been curbed by price control; since February 2003, according to official numbers, prices moved to 152 percent, as compared to 90 percent for general items.

Only last year, foodstuffs rose by 9 percent more than other commodities.

Abelardo Daza, an economist working with think-tank Lextrategy, explained that, statistically speaking, foodstuffs are less expensive when there is no price control.

"This is an effect of the control. Last year, for instance, estimated consumption in food expenses accounted for USD 20.9 billion. However, out of this amount, additional USD 1.8 billion was paid because foodstuff prices sped up as compared to the rest of the economy."

Friday 16th

Chávez announces VAT cut from 14 percent to 9 percent
A cut of five percentage points of value-added tax in two stages and the "monetary reform or conversion" to eliminate three zeros from the Venezuelan bolivar as of February 4th, 2008 late Thursday announced President Hugo Chávez during the first edition of his overhauled radio and TV show Aló Presidente! (Hello, President!)

"The value-added tax will decrease by three points as of March 1st, and two other points will be cut as of July 1st, 2007," Chávez explained.

This move comes following a number of economic measures -VAT exemption to new food items and increased individual travelers US dollar shares- the Venezuelan Government is taking to "stop an outbreak of speculation and inflation that is threatening us."