Venezuela seizes more stores ahead of local elections

Peter Wilson | Special for USA TODAY

La VICTORIA, Venezuela — Forcing stores to sell their merchandise for a price that the owners say will put them out of business may sound like a bad idea, but President Nicola Maduro is not angling to improve the economy, Venezuelans say.

"This is going to help him and his party in the short term,'' says Alfredo Ramos , a political science professor at the University of the Andes in Merida. "His actions are motivating his backers to go out and vote, and disheartening his opponents. However, his actions could very well hurt him in the medium term."

Thousands of people have lined up in front of electronics stores and hardware stores that have been ordered by Maduro to empty their inventories at cut-rate prices.

Maria Davila felt like a winner after emerging from the Traki department store with clothes for herself and her husband, as well as toys for their four children.

Davila spent 14 hours in line to make her purchases after the store reduced prices by up to 70% on merchandise to comply with Maduro's crusade against the country's "parasitical bourgeoisie."

"It was well worth the wait," Davila, 42, says of her ordeal. "I saved so much money. I feel like I won the lottery."

Taking a page out of the late Hugo Chavez's populist playbook, Maduro is attacking the country's producers and businesses to boost his United Socialist Party of Venezuela for local elections Dec. 8.

His orders may be followed by more. On Tuesday night, Venezuelan lawmakers gave Maduro the power to enact law without legislative approval. Maduro said he will use the authority to create a new state body to oversee Venezuela's currency controls that have led to widespread inflation and shortage of basic goods. He also said he will order that corporations slash their profit margins by up to 30%.

His party is hoping the moves will revive its chances in the upcoming elections for about 370 mayors and city council members. The opposition has cast the vote as a referendum on Maduro and his policies, which have thus far been unable to prevent record inflation and a shortage in goods like food, cooking oil and even toilet paper.

Before Maduro's seizure of the Daka electronics chain 10 days ago and selling its inventory at a deep discount, the opposition had been poised to do well, capitalizing on the country's soaring inflation and widespread food shortages.

A survey by polling firm Datanalisis for Sept. 23-Oct. 2 showed that 54% of those polled rated Maduro's job performance as negative, compared with 41% who rated his job performance as positive.

"The opposition is going to do very well in the largest cities and state capitals,'' says Tarek Yorde, a Caracas-based political consultant. "I think they are going to win up to 25 of the country's 33 largest cities."

The PSUV and its allies will do better in smaller municipalities, he said. The overall popular vote is too close to call, he said, making it difficult for either side to claim an all-out victory.

Maduro's response to this has been to veer further to the left, broadening his attack on stores that began with appliance merchandisers.

Over the weekend Maduro ordered similar measures against hardware stores, automotive part dealers and tire chains, charging that the owners were charging excessive prices and contributing to an economic war against his government.

"What the president is doing is making sure that we're going to have massive shortages once our inventories are exhausted,'' says Luis Quintero, who owns a hardware store in Caracas. "Come January we're going to have very little to sell because of what the president has done. He needed a scapegoat for his economic policies, and he hit on us."

Lines of 300 to 400 people gathered outside outlets of Epa – the Venezuelan equivalent of Home Depot – after Maduro ordered the company to reduce prices by 30% or face seizure.

National Guardsmen – sporting "Guardians of the People" armbands – stood watch as people hoped to buy paint for the traditional holiday makeovers of their homes.

Similar lines snaked out of some shoe, toy and clothing stores as merchants slashed prices to comply with Maduro's decree that profit margins shouldn't be above 30%. Maduro has claimed that some stores were marking up prices more than 1,000%.

"Don't leave anything on the shelves," Maduro said when he announced his campaign against price gouging. Some of his followers took his words to heart. The Venezuelan Observatory of Social Conflicts said that there were 39 incidents of looting or attempted looting in the first days of the president's campaign.

The head of the country's federation of chambers of commerce warned in a newspaper interview that the government was making a mistake by attacking speculation rather than addressing the failure of its economic policies.

"Speculation is the consequence of system, not the cause,'' said Jorge Ruig in an interview with El Universal. "In this case, it's like breaking the thermometer instead of curing the disease."

Soaring prices and shortages are the result of the government's foreign exchange policies, analysts have said. Venezuela strictly controls access to dollars, and currently has three exchange rates.

The official exchange rate of 6.3 bolivars to the dollar is administered by the Cadivi forex agency, which offers dollars for essential imports. Businessmen and others can also access dollars through a government auction system called Sicad, where the dollar is sold at about 12 bolivars to the dollar.

And then there is the black market rate, which is now above 60 bolivars to the dollar. Many merchants claim they have no choice but to buy dollars on the black market as the government has slashed the dollars its offering due to a fall in international reserves.

Companies say that prices reflect what dollar rate they used to fund their imports. Venezuela imports about 70% of the goods it consumes.

"The government created this mess with exchange controls," says Jorge Rodriguez, a manager at a small convenience store in the central city of La Victoria. "Now, they are trying to shift the blame before the elections, especially given food shortages."

Venezuela, which has the world's largest oil reserves, is in the midst of an economic crunch caused by the country's price and currency controls, which have created shortages of basic necessities such as milk, meat, cooking oil, sugar, corn meal and toilet paper. Inflation is at 54%, the highest in the hemisphere.

"They are destroying the Venezuelan economy,'' opposition leader Henrique Capriles Radonski said during a weekend campaign swing through the eastern state of Sucre. "People are waiting in line outside stores because they know that inventories are drying up."

Still, Maduro's actions have succeeded in diverting some attention from the country's food shortages, and soaring prices. It remains to be seen if members of his United Socialist Party of Venezuela will be able to capitalize on his war against speculation.

Quintero fears that the president and his party may emerge stronger in the short term thanks to the current campaign against businessmen.

"Venezuelans don't think too much about the future,'' he says. "We live in the present. We're destroying the economy with moves like this but very few think that way. In the future, people may have some regrets but right now they're acting like Christmas has come early."