Bloomberg BusinessWeek

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Chavez Price Caps Spark Panic Buying
Bloomberg BusinessWeek

Venezuelan President Hugo Chavez’s move to expand price controls this week sparked panic purchases by consumers, leading to shortages of everything from coffee to toilet paper.

“I’m buying everything that’s on the price control list that’s going to be regulated,” retired schoolteacher Elena Ramirez, 56, said in an interview at a Dulcinea supermarket in Caracas where she bought 12 packages of toilet paper, each with four rolls. “Everyone is in the same game. It’s madness.”

Under regulations that took effect on Nov. 22, the government can fix the price of 15,000 goods in an attempt to slow inflation that reached 26.9 percent in October, the highest in the Western Hemisphere. Chavez immediately ordered a freeze on the price of 18 personal care items ranging from toothpaste to deodorant until mid-January to prevent monopolies from “ransacking the people.”

While fixing prices, Chavez’s government is printing money and raising spending. The central bank has more than doubled the amount of money circulating in the Venezuelan economy since November 2007. Fiscal spending leaped 22 percent this year after accounting for inflation.