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 |  Subject: Statist insanity continues: Chavez declares whale sperm, pickles, and codeine essential items  Thu Jan 14, 2010 5:41 pm | |
| Whale sperm, pickles and the pain reliever codeine will be considered essential goods in Venezuela and receive a preferential exchange rate under President Hugo Chavez’s new currency structure.
Bleach, cheese and whisky have been deemed nonessential. Importers of essential items will pay 2.6 bolivars per dollar, while goods not on that list will get a rate of 4.3 per dollar, according to the government’s Official Gazette.
Chavez on Jan. 8 devalued the bolivar by as much as 50 percent and created a multi-tiered exchange system to help stem an outflow of dollars. He scrapped the 2.15-per-dollar official rate and created the essential and nonessential rates. Venezuelans unable to get government authorization to purchase dollars at either of those rates turn to the parallel market, where the bolivar traded at 5.80 today.
“It’s going to become a highly politicized game, rife with corruption, impossible to manage,” said Moises Naim, the former Venezuelan minister of industry who is now editor-in-chief of Foreign Policy magazine. “This will be a goldmine for corruption and create incentives so that the main game in town is how to get hold of the preferential rate.”
Following the devaluation, Chavez said his government and the agency in charge of allocating dollars, known as Cadivi, need to closely supervise the multi-tier exchange rate to avoid graft. He said that importers who receive the 2.6 rate must not be able to sell the product at 4.3.
Essential Items
In 1989, Naim says he helped dismantle a multi-tier exchange rate as well as price and import-export controls.
For Pernod Ricard SA and Diageo Plc, companies that supply Scotch whisky to Venezuela, the new system may be a boon since they can access dollars at the 4.3 rate. Last year, they had to rely on the parallel rate.
While Chavez said that food, medicine and machinery will be imported at the preferential rate, ham, yogurt and fruits including strawberries, pears and apples will be considered nonessential. Tuna will be imported at 2.6 per dollar, while salmon becomes nonessential.
Venezuela, facing an electricity crisis from a drought that is threatening to halt a hydroelectric plant that supplies 73 percent of power to the country, now considers electric power imports to be nonessential.
Long List
The list contains thousands of items. Whale sperm, also known as spermaceti, is a waxy material that fills the whale’s head. It can be used for candles, soap, polish, cosmetic creams and hair products including shampoo, according Whale World, the Web site for the whaling station in Albany, Western Australia.
U.S. consumer goods companies who saw their share prices fall on Jan. 11 following the currency devaluation may see some relief if their products are deemed essential.
Colgate-Palmolive Co., the world’s largest toothpaste- maker, may be able to import goods at the preferential 2.6 rate as toothpaste is considered an essential item.
Other goods considered essential are elevators, dentures, vitamins, machinery, vegetables, seeds and magnifying glasses.
Non-essential goods include race horses, rabbit meat, coca leaves, truffles, ketchup, cigarettes and video games.
http://www.businessweek.com/news/2010-01-14/chavez-deems-whale-sperm-pickles-codeine-essential-items.html |
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