Venezuela to regulate car prices in war against inflation

Reuters

By Eyanir Chinea

CARACAS, Dec 5 (Reuters) - President Nicolas Maduro'ssocialist government issued a decree on Thursday regulating theprices of used and new cars in the latest move to control thehighest inflation rate in the Americas.

Maduro, 51, who won a vote to succeed late president HugoChavez after his death from cancer earlier this year, has beenusing special decree powers to pass measures as part of what hecalls an "economic offensive" against capitalist speculators.

A decades-old problem predating Chavez's 14-year rule,inflation has hit an annual rate of 54 percent, causing hardshipfor Venezuelans, deterring people from saving in the localbolivar currency and increasing demand for scarce U.S. dollars.

"The prices (of cars) will be the result of a study of thecost structures and the establishment of a reasonable profit,"read the decree published in the official Gazette.

The government previously said that 15 percent to 30 percentwas a fair profit margin. It plans to cap the profits ofbusinesses, some of which it accuses of price gouging.

Although opponents recognize that some businesses areunscrupulous, they say many retailers have been forced to makebig price increases because they had to buy high-cost dollars onthe black market for imports. Greenbacks sell illegally for 10times more than the official rate of 6.3 bolivars.

Maduro's populist measures, including inspections ofhundreds of businesses and arrests of dozens of retailers onallegations of "usury," might help his candidates in a localelection on Sunday.

The new automobile regulations let the state fix car prices,and prevent used cars from being sold for more than new ones, acommon phenomenon in Venezuela's high-inflation environment,where vehicles gain value as soon as they leave the dealership.

Ford Motor Co, General Motors Co, MitsubishiMotors Corp and and Fiat SpA's Chrysler unit,all have assembly plants in Venezuela, and the government isseeking to strike deals with French carmakers Renault SA and Peugeot SA to build new factories.

But shortages of both cars and parts is common, withwould-be buyers often spending years on waiting lists. TheVenezuelan Automobile Chamber says car production fell 29percent between January and October compared with the sameperiod of 2012.

The decree also allows individual Venezuelans to use foreigncurrency to import vehicles via a state purchasing company. Carsbought that way cannot be re-sold for three years.

Opposition leaders say the numerous controls in Venezuela'sstatist economy are at the root of stagnating growth, shrinkinglocal productivity and shortages.

Economists widely expect a devaluation of the bolivar after the Dec. 8 vote.

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