Venezuela currency controls make Scotch cheap as milk, syringes go short

CARACAS, (Reuters) – Venezuelan shoppers line up outside a Caracas liquor store to buy bottles of Buchanan’s 12-year Scotch whisky at half the usual cost, a deal made possible by a state subsidy that gave cheap dollars to import them.

The same subsidy, provided under the country’s three-tiered exchange control system, helps a Caracas merchant do thriving business in Canadian pines – a Christmas luxury in the sweltering tropical nation.

The socialist government of President Nicolas Maduro has even used the controls to subsidize Barbie dolls for Christmas shoppers by offering an exchange rate subsidy to toy importers.

But the holiday bargains have a downside: consumers continue struggling with shortages of staple products ranging from milk to medical supplies because the exchange control system does not provide enough greenbacks for businesses to import them.

“What we have here is complete disorder,” said Asdrubal Oliveros of Caracas-based consultancy Ecoanalitica. “They’ve provided subsidized currency for things like toys and clothes to create the sensation that they are relieving shortages.”

The 12-year-old currency controls are struggling to allocate a shrinking number of dollars as tumbling oil prices weaken state finances, a trend that may spur soaring inflation and further slow an economy widely believed to be in recession.

Product shortages, consistently a top complaint in the polls, may weaken the standing of the ruling Socialist Party in next year’s legislative elections as Maduro’s popularity has plummeted to 24 percent, according to pollster Datanalisis.

Medical equipment companies, for instance, received half as many dollars this year as in 2013 through the currency controls, which were created by late socialist leader Hugo Chavez in 2003.

Medical essentials such as replacement parts for radiotherapy equipment and syringes for breast biopsies that screen for cancer went scarce for much of the year as medical equipment firms struggled to get dollars to import them.

“Clinics were running out of inventories,” said Antonio Orlando, president of medical equipment firm Meditron and head of the industry association.

Once those firms did get dollars, they had to pay double to obtain the hard currency – leaving them with the same exchange rate as the one used to import the cut-rate Scotch.

Maduro has ruled out lifting the exchange controls, arguing that would benefit the rich. He says the current problems are in fact caused by an “economic war” led by opposition businesses with the support of Washington.

“There have been economic damages, a brutal war over the course of the year which has worsened and is now heating up on the international front,” he said recently.

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