Hugo Chavez’s assault on basic economic theory continues apace
Hugo Chavez’s government devalued their currency by half at their whim. Of course, the market doesn’t work that easy. If you devalue the price of something, that doesn’t magically mean you paid less for it. Unless, you live in Venuzuela where the socialist utopia has magical snapping fingers that automatically makes things cost half as much. When he devalued the currency he commanded that businesses (who will have paid twice as much for the goods on their shelves) could not raise their prices. Well, apparently a foreign owned chain tried to maintain basic economic theory by adjusting prices accordingly to match the REAL cost they paid and thus charge the REAL price they needed to recover the costs (or God forbid, make a profit). The punishment for this perfectly logical behavior? The government takes you over.
Venezuela President Hugo Chavez ordered the expropriation of Hipermercado Exito stores after alleging that the retailer broke the law by raising prices and hoarding goods.
The South American country will change its laws if needed to take over the retailer owned by Casino Guichard Perrachon SA of Saint-Etienne, France and Almacenes Exito SA of Medellin, Colombia, Chavez said today on state television.
“I order that we develop a dossier and prepare a new law to take over the Exito chain,” Chavez said. “Repricing and hoarding, what is this? You have to respect our house.”
Chavez’s government closed four Exito outlets for a day because the company allegedly increased prices following a Jan. 11 currency devaluation.
I like the part about needing to “change the law if they have to”. Pesky laws are such a nuisance. The upside of being a dictator is you usually can do just that: change the law as you see fit. Clearly, Chavez doesn’t understand that supply gets created when the suppliers have an incentive. Shortages in 5…4…3…2..