Venezuela to oversee product prices, limit profits

CARACAS,  (Reuters) – Venezuela is creating a new  agency to limit profit margins for companies operating in areas  such as food and medicine, the vice president said on Monday,  in the latest effort to boost state control over the economy.

The agency aims to control inflation in the OPEC nation,  which has one of the highest rates in the world, by stopping  businesses charging “usurious” prices that state officials deem  are far above their costs of production.

“This law is meant to confront those speculators who have  for a long time been pillaging Venezuelans’ right to live in  dignity,” Vice President Elias Jaua said during televised  remarks, adding that the move was not an attack on the private  sector.

The law creating the new agency will be published  officially on Tuesday, he added.

Venezuelan inflation for the 12 months through June totaled  23.6 percent. High prices are among the top concerns for  Venezuelans and a major headache for socialist President Hugo  Chavez, who was already facing a tight reelection bid in 2012  before disclosing that he had cancer.

He is receiving treatment in Cuba.

Critics say the new move to control inflation could worsen  periodic shortages of staple goods that have been a thorn in  the side for the government.

“If this is fully applied, it will steadily lead to a  wartime economy,” said Jorge Botti, head of the country’s  principal business group Fedecamaras, in an interview with  local radio.

But government leaders may selectively enforce the new  regulations to target high profile businesses while leaving  smaller companies relatively untouched, as it has done with its  existing set of price controls.

The new agency will establish a national registry of  production costs for different products, and use this to  determine a “fair” profit margin for companies.

Jaua said the government would spend 90 days establishing  that registry through public consultations with industry.

The regulations will cover sectors including construction  materials, clothing, health services and education. Failure to  comply could result in fines or even expropriation.

Chavez created a system of price controls in 2003 for  staple products such as coffee, corn flour and meat that are  closely enforced at large supermarkets but routinely flouted by  small businesses.

Critics say increased enforcement of those price controls  resulted in a rash of product shortages in recent years.

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