November 15, 2013 4:21 pm

Venezuela’s president jails 100 businessmen in ‘economic war’

Venezuelan President Nicolas Maduro greets supporters during a meeting outside Miraflores Palace in Caracas©Reuters

Venezuelan President Nicolas Maduro

Venezuela’s President Nicolás Maduro has intensified his crackdown on private businesses by jailing more than 100 “bourgeois” businessmen, the latest salvo in what he calls an “economic war” on alleged unfair pricing.

“I broke the spine of the economic war and the economic coup they were planning,” Mr Maduro said late on Thursday. “We have more than 100 of the bourgeoisie behind bars at the moment.”

In the past week, the president has sent soldiers to seize electronic stores he has accused of unjustified price rises, hoarding and speculation. Eyewitnesses say bargain hunters then flooded the shops and some looting was reported. Inspectors have been dispatched to about 1,400 other businesses. Mr Maduro picked out US tyre and rubber manufacturer Goodyear, demanding price reductions.

The government says unscrupulous businessmen belonging to the “parasitic bourgeoisie” have been raising prices of certain goods more than 1,000 per cent. Promising to step up an “economic offensive”, Mr Maduro announced that he was to set caps on businesses’ profit margins and extend controls to establish “fair” prices. “They are barbaric, these capitalist parasites,” he said.

For critics, the moves are an attempt to make the private sector the scapegoat to Venezuela’s deteriorating economy.

Mr Maduro inherited an economic time bomb from former leader Hugo Chávez. Policy paralysis has led to dwindling hard currency reserves and galloping inflation of 54 per cent. There are rampant shortages of food and goods, which economists attribute to currency market distortions.

The president blames the crisis on rightwing forces backed by the US, which he says are trying to destabilise the country.

“Maduro has tried to frame this as an economic war being carried out against his government,” David Smilde, a Caracas-based Venezuela expert at the Washington Office on Latin America think-tank wrote in a recent note. “Polling shows that Maduro’s various conspiracy theories only convince between 5 and 20 per cent of the population.”

Price controls and strict currency exchange restrictions have generated a scarcity of dollars to pay for imports in the oil-rich nation, with Venezuelans resorting to the black market for greenbacks, which can fetch nearly 10 times the official rate of 6.3 bolívars.

In what some analysts see as an effort to bolster dollar reserves, state-owned oil company PDVSA is to launch a $4.5bn bond offer. Barclays economists Alejandro Arreaza and Alejandro Grisanti wrote in a note that the “use of debt to maintain the FX [foreign exchange] supply would highlight the inconsistency of government policies”.

Mr Maduro’s rule will be put to the test on December 8 when the ruling Socialist party faces local elections.

“It seems the radicals have won the economic match and the government has finally opted for the radicalisation of a model that has excessive control over the economy,” says Henkel García, a director at the Caracas-based consultancy, Econométrica.

“Ahead of elections, it makes sense because the economic power is translated into political power.”

Mr Maduro has been making some populist moves. But since taking office in April, he has struggled to compete with Mr Chávez’s near mythical legacy. Now, as his mentor and predecessor did four times during his 14-year rule, he is seeking decree powers from the national assembly.

The president says he needs the enabling law to fight his economic war. Opposition leader Henrique Capriles branded the move an act of “immorality”.

Daniel Kerner, a Latin America analyst at Eurasia Group, a consulancy, said: “Given that the overall direction of economic policy is unlikely to change, economic and social conditions will likely continue to deteriorate. This does not mean, however, that the country is rapidly heading into a major political crisis that could threaten Nicolas Maduro’s political survival. Maduro has more staying power than many appreciate.”

Additional reporting by Reuters in Caracas

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