<a href=www.vheadline.com>venezuela's Electronic News Posted: Wednesday, May 21, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: The price controls imposed on our economy comprise a mechanism by which the government regulates the prices at which a set of goods and services can be sold. In other words, the government sets mandatory prices for the sale of certain goods or services to the consumers.

One of the arguments for price controls is that the State will not allow corporations (large monopolies or oligopolies) to set the prices of goods and services at their discretion, and that on the contrary, it is the State which should administer and regulate those prices t prevent the corporations from speculating. However, apart from the "good intentions" policy makers may have, there is an enormous difference between the desired effects, in terms of benefits for the general population, and the effects actually provoked by controls. And it is also necessary to consider that there is a regulatory agency (Procompetencia) which ought to be the party responsible for keeping companies from engaging in monopolistic and oligopolistic practices; price controls can only achieve the same goal in a highly inefficient way.

Under the current circumstances in the Venezuelan economy, price regulation is not yielding the results anticipated by the authorities. Proof of that is the fact that the Central Bank's inflation statistics show a 1.7% increase in the Consumer Price Index (CPI) for April, chiefly reflecting increases for products subject to control.

Venezuelans still remember what happened in 1996 when inflation surged to 103.2% after the price control system was dismantled. Estimates for this year point to an inflation rate on the order of 50%, and it is important to recall that production costs have been rising for a number of reasons, and once the price controls are lifted, businessmen will seek to pass those cost increases along to the prices of their final goods. An indication that this is already happening is the disproportionate growth of the producer price index, which will sooner or later have to be reflected in consumer price increases as well.

LUISA AMELIA MARACARA EL UNIVERSAL

Venezuelan Planning Minister Jorge Giordani has never been more accurate than when branding the Gross Domestic Product as a submarine, since it behaves as such.

As a matter of fact, Venezuela's GDP sunk so many meters last year that the contraction reached 8.9 percent. In 2001, it had an insignificant growth, 2.8 percent; in 2000, the figure was 3.2 percent. Those two years did not compensate the 6.1 percent fall registered in 1999.

The submarine that Giordani referred to seems to be involved in a campaign that maintains it in the deepest waters, where pressure is so intense that is shattering it. This is reflected in the initial estimates by the Venezuelan Central Bank, which point to a 35 percent fall in the first quarter.

Actions adopted by the government so far this year do not seem to be intended to refrain the submarine from sinking. In fact, it has been showing many similarities to Titanic, which broke into two pieces, sank and never surfaced again. As the economy takes in water, the government's announcements to reactivate general production have not yielded any good results.

Each month, at least one minister announce a plan to reactivate his/her sector. But positive results do not come. In fact, President Hugo Chávez himself has admitted in the latest editions of his weekly radio and TV show ¡Aló, Presidente! the failure of many of their plans; he even complains about the State's functioning.

Meanwhile, the captain of the submarine, since his recent designation as Planning Minister, has chosen to remain in silence. He may be thinking on a new name to describe the behavior of the economy.

Caracas, May 20 (<a href=quote.bloomberg.com>Bloomberg) -- Venezuela's economy probably fell by about 35 percent in the first quarter, El Universal reported, citing preliminary figures compiled by the country's central bank.

The country's oil industry, which accounts for about 40 percent of gross domestic product, may have fallen by as much as 48 percent, while the country's non-oil GDP may have contracted by 25 percent.

The bank's board of directors will review the preliminary figures before they are released later this quarter.

Venezuela's first quarter GDP was affected by a national strike that started Dec. 2 and ended Feb. 1. The strike, whose goal was to force President Hugo Chavez from office, idled much of the country's oil industry and large parts of the non-oil economy.

(EU, 5/20 1-12)

To see El Universal's Web site, click on {EUDC } Last Updated: May 20, 2003 08:37 EDT

Reuters, 05.15.03, 9:37 AM ET CARACAS, Venezuela, May 15 (Reuters) - Venezuela's chief tax collector has resigned after President Hugo Chavez complained about tax evasion and corruption and ordered a shake-up in the state tax agency, officials said on Thursday. "Mr. Trino Alcides Diaz told me yesterday in a telephone conversation that he had presented his resignation," Jose Ricardo Sanguino, a pro-government National Assembly deputy who sits on the parliament's finance committee, told Reuters. Diaz, who led the National Customs and Tax Administration Service (SENIAT) for two and a half years, was replaced by Jose Vielma Mora, a retired military officer and Chavez ally who has been running Caracas' main international airport. Diaz's resignation followed a blistering attack against the tax agency by Chavez, a former paratrooper who earlier this year sacked 18,000 employees of the state oil company PDVSA who had participated in an opposition strike against him. In a television and radio broadcast Sunday, the populist president said levels of tax evasion remained intolerably high in the world's No. 5 oil exporter and he suggested many SENIAT officials were corrupt. "There are a lot of crooks in there," Chavez said. "If we have to shake up SENIAT like we did PDVSA, then we will; this is the country's money we are talking about," he added, saying he would personally supervise the probe. In April, the level of collected taxes slipped to 84 percent of the projected amount for the month, due to a sharp fall in customs revenues caused by existing tight foreign exchange controls. Customs revenues only amounted to around 47 percent of projected levels. Most of the country's private exporters and importers have halted operations because they say slow and inefficient allocation of dollars by the state currency control board is restricting their access to hard currency. Diaz was the fourth official to serve as head of SENIAT since Chavez took office in early 1999. Copyright 2003, Reuters News Service

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 13, 2003 By: Patrick J. O'Donoghue

Talcual afternoon tabloid has been quick to follow El Nacional in reducing its Internet media site to subscriptions. It may be worth noting that the tabloid, whose editor is former guerrilla and government minister, Teodoro Petkoff, was also quick off the mark to imitate El Nacional.com's web design a couple of months ago. 

• According to an advert announcing the measure, the site receives almost a million clicks a month (900,000 to be exact). 

The site offers three plans: three-monthly at $17.50 or 28,000 bolivares ... six-monthly $29.75 or 47,000 bolivares and annual for $44.50 or 71,200 bolivares. 

The means of payment is by credit card and while economic observers suggest that the tabloid will not break even opening subscriptions they say they admire the editor and shareholders for giving it a go, despite a downturn in adverts and revenues from Venezuelan companies.