Archive for December 10th, 2007

As Chavez travels abroad, a great decision by his administration to allow the price of milk to be determined by market forces

December 10, 2007

Only yesterday the Minister of Feeding Rafael Oropeza was blaming the milk shortages
on the private sector as the Government’s Mercal supermarkets were not
capable of satisfying the gigantic demand for milk as lines formed all
day and many had to be turned away without the now precious liquid. The
Minister criticized that milk producers were not investing to produce
more milk and even worse, were using a large fraction of the milk to
make cheese. Why? Easy, because milk prices are regulated, but not all
cheeses are, thus milk producers choose to make what gives them the
higher return.

A couple of years ago, the
reaction by the Chavez administration may have been to simply regulate
all cheese prices in that perverse thinking that has dominated Chavismo
for the last nine years.

But today, in a
decision that I praise and that completely and absolutely surprises me,
the Chavez administration recognize the importance of market forces and
rather than keep tinkering with the system, it announced the absolute and total deregulation of the UHT milk in Venezuela.

can’t even begin to describe how significant this decision is. For the
first time in years, The Chavez administration in the face of a problem
that I am absolutely sure had a strong impact on the referendum vote,
rather than inventing more controls or untried solutions went for what
economic logic suggests: let the price float and allow the people to
have as much milk as they want.

And you can be
sure than in a few weeks this will be the case, as producers and
importers will now be able to allow supply and demand to establish
prices and not be under the total regulation of the Government.

I not only congratulate the Government on the decision, but I also hope that it is the first of many like it.

is most intriguing after the attacks by Minister Oropeza on the private
sector during the last week, what changed in the government to decide
on such a different strategy all of a sudden? Was Chavez in the know?
Who recommended it? Is this part of a new strategy given the strong
impact on the votes in the referendum the shortages had? After all,
like an analyst suggested this weekend, the best strategy for Chavez
now would be for him to start governing, but if Chavez began to govern,
he will not be Chavez…

Chavez was certainly
taking some distance from the decision, as he is away at the swearing
in ceremony’s for Argentina’s new President, where is once again
devoting his time to international politics. He announced a summit for
Petrocaribe next week in Havana and just when he was being praised for purposely not touching upon the subject of the negotiations with the Colombian guerrillas, he comes out and says that his pact with guerilla leader Marulanad was almost ready, a little exaggeration given that Marulanda never even provided Chávez with evidence that any of the captives were still alive.

while Chavez continues to enjoy the limelight provided by the
international stage, albeit surprising, a decision is made by his
administration to solve a problem that affects real people and we
certainly hope that it will be the first of many.