Merida, July 15th 2011 (Venezuelanalysis.com) – Yesterday Venezuelan President Hugo Chavez used his standing legislative authority to sign into law a new price control mechanism aimed at putting an end to speculation and hoarding.

The newly enacted Law for the Protection and Defense of Economic Rights for People to Access Goods and Services, or “Law for Just Prices and Costs”, allows the government to limit the prices charged for goods and services across broad sectors of the economy.

Elaborated by representatives of the ministries of food, commerce, basic industries and mining, planning and financing, and the Venezuelan Central Bank (BCV), the law creates a National Integrated System for the Administration of Prices (SINACOPRE) which will regulate, administer, supervise, inspect, and control prices charged to consumers. The agency, under the auspices of the Office of the Vice Presidency, will also be responsible for sanctioning those in violation of the law when necessary.

According to Vice-president Elias Jaua, within three months the new agency will begin to monitor costs of both production and importation so as to determine a fair price that can be charged to the public.

“The objective of the law is to stabilize prices,” said Jaua. “It is a law of labor against capital, a law of the rights of workers to obtain products at fair prices.”

Venezuelan officials often blame the country’s private sector for artificially inflating the price of goods and services in pursuit of economic and political objectives and hope this new law will help control the country’s inflation, currently at around 30%.

After signing the legislation into law, Chavez said it will benefit the majority of Venezuelans, aexcept those who “monopolize production, hoard and hide products, inflate prices, and take the big slice (of earnings) with them as a result of their pillage.”

The President made special mention of the exorbitant price charged to Venezuelan workers who purchase ready-to-eat foods outside of the home. Referring specifically to the price of arepas, Venezuela’s popular corn-based tortilla filled with any combination of ingredients (meats, beans, eggs, cheese, etc.), Chavez highlighted the difference in prices charged at private areperas and the chain of government-operated areperas socialistas.

Venezuela’s areperas socialistas, which maintain operations with no direct government subsidy, currently sell arepas at 7.50 BsF ($1.75 USD) per unit and earn a total 0.75 BsF ($0.17 USD) in profits per arepa sold. According to Chavez, the average arepa purchased from a private arepera can reach up to 35 to 40 BsF ($8.14-9.30 USD), when the total cost of production of this food item is between 7 and 8 BsF maximum ($1.63-1.86 USD).

According to Chavez, the areas of the Venezuelan economy most affected by the “tricksters” of capitalism are food, housing, clothing, and automobiles. Chavez said that the new “socialist” law is intended to bring an end to capitalism’s “trickery, immorality, and thievery.”

“This is another enabling law to advance the struggle against the injustices of capitalism and to protect the people, the entire nation, all sectors except the exploiters and speculators,” said Chavez.

Chavez enacted the law by way of legislative authority granted to him by the outgoing national assembly in December 2010.

Venezuela’s inflation rate in 2010 was 27.4%, while figures released at the end of the first quarter of 2011 put inflation so far this year at 22.9%. At the end of June figures from the Venezuelan Central Bank (BCV) placed inflation at 23.6%.

Greater Government Role in the Economy

Venezuelan Minister of Commerce Edmee Betancourt recently affirmed that the national government “now plays a role in 44% of the economy, and plans to strengthen the public distribution and marketing networks so as to reach 50% by the end of the year.”

Earlier this week the Venezuelan President nationalized Llano Arroz S.A., a private rice threshing and packaging firm that processes an estimated 20,000 tones of rice per year. The company is said to have sustained major debts with the government’s MERCAL network of subsidized supermarkets before being sanctioned over a year ago.

The expropriation of Llano Arroz, S.A. places the firm in the hands of the state-owned and operated Arroz del ALBA, S.A. and calls for the firm to be transformed into a “socialist unit of production” in which workers play a greater role in decision-making.

On Wednesday Chavez also enacted legislation that creates the Venezuelan Agricultural Bank (BAV), a publicly-financed bank worth some 340 million BSF ($79 million USD) intended to finance Venezuela’s strategic agricultural sector.

The BAV, under the auspices of the Venezuelan Ministry of Land and Agriculture, will begin by providing 20-year loans to rural producers, allow small-scale farmers to open checking accounts, and provide rural Venezuelans with credit cards to improve their quality of life.

Shares of the BAV worth one (1) Bolivar ($0.23 USD) are to be sold to the public and an assembly of shareholders will assume the role of defining the bank’s rules, regulations, and financing policies.

According to the Venezuelan News Agency (AVN), as part of the Venezuelan government’s AgroVenezuela Mission the state has recently issued some 242 million BsF ($56.28 million USD) in low interest-rate loans (4%) to 1,854 Venezuelan producers of rice. This financing is expected to facilitate rice production on over 50,000 hectares of arable lands.