VZCZCXRO1984
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHV #1152 2282004
ZNR UUUUU ZZH
P 152004Z AUG 08
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PIORITY 1644
INFO RUEHWH/WESTERN HEMISPHERIC AFFARS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE
REATRS/DEPT OF TREASURY
RUMIAAA/HQ USSOUTHCOM MIAMI FL
UNCLAS CARACAS 001152
SIPDIS
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MMALLOY
COMMERCE FOR 4431/MAC/WH/MCAMERON
E.O. 12958: N/A
TAGS: EAGR PGOV VE ECON ETRD
SUBJECT: VENEZUELA INCREASES REGULATED FOOD PRICES TO
BOLSTER ELECTION PROSPECTS
REF: CARACAS 1081
1. (SBU) SUMMARY: On August 11, the Bolivarian Republic of
Venezuela (BRV) freed prices for a number of price-controlled
food products and raised maximum prices for several others.
Press reports indicate the BRV has increased regulated food
prices over thirty times since October 2007. Although the
most recent round of price increases of up to 110 percent
will contribute to inflation, keeping food on the shelves is
of greater concern to the BRV in the run-up to the November
elections. Many producers argue the increases are
insufficient and will not boost domestic food output enough
to satisfy growing consumer demand. END SUMMARY.
2. (SBU) In response to the increasing scarcity of several
controlled price food products (reftel), on August 11 the BRV
increased the regulated prices of eight basic food basket
items and freed prices for seven others. The price increases
range from a one percent increase for pork chops to a 110
percent increase for tomato sauce.
3. (SBU) Although years of pressure by industry groups
played a role in securing the price increases, industry
insiders believe the most important factor in the BRV's
decision was the need to keep food items popular with lower
income groups on the table. Several members of the VenAmcham
Processed Food Products Committee told the Agriculture
Attache on August 14 they are not surprised the BRV is taking
action to reduce shortages ahead of the November elections,
noting that the BRV considers food scarcity more damaging to
its prospects in the November elections than inflation.
4. (SBU) The President of the Federation of Associations and
Chambers of Commerce and Industry (Fedecamaras) told the
press the most recent price increases, justified as the BRV's
attempt to ensure supply, are yet another example of the
failure of regulated prices to contain inflation. According
to the UN's Food and Agriculture Organization (FAO), average
inflation in terms of food prices over the first five months
of the year among 16 Latin American countries was 7.2
percent, while in Venezuela the figure was 15.3 percent.
5. (SBU) Producer reaction to the price increases has varied
by how close industry representatives are to officialdom.
While "Bolivarian" producers have registered their approval
of the price increases, the larger associations critical of
the BRV argue the new prices do not cover the costs of
production and will not sufficiently encourage domestic
production. Although shortages of eggs and milk became much
less common when the BRV freed their prices, most producers
are not optimistic the BRV will be willing to apply this
lesson across the board.
DUDDY