Recognizing the need to tackle inflation, Isea sees six percent growth

Caracas Daily Journal (Jeremy Morgan): Finance Minister Rafael Isea forecast that economic growth could come out at more than six percent this year, and he dismissed suggestions that the downturn in world oil prices would have an affect on Venezuela.

Isea's projection marks a downturn after the hectic growth in the economy during the last two years. Economists say this would not necessarily be a bad thing. They've frequently warned that rapid growth could spur inflationary pressures, which could in turn swamp chances of sustainable growth – the government's stated aim for the economy.

The Venezuelan Central Bank (BCV) calculates that the overall rise in consumer prices reached 22.5 percent last year after 17.1 percent in 2006.

Prices increased in January alone by 3.4 percent, taking the annualized rate to 24.1 percent.

While Isea is sticking to the 11 percent inflation target set for 2008 by his predecessor, Rodrigo Cabezas, the minister recognized the threat posed by rising inflation. He said it was "necessary" to attack all the factors causing prices to rise. The government would pay full attention to inflation, he added, and especially to prices of "products of greatest need for the Venezuelan population."

The government has pointed the finger at suppliers for allegedly hoarding supplies of food, medicines and other household essentials to create shortages and bring pressure on the government to ease or end official controls on prices and foreign exchange.

"We're reinforcing the supply of food and medicines," Isea said. Persistent shortages are deemed to be one reason why the government recently increased official prices for some products, notably cheese. At the same time, however, some other foods were put under the controls regime.

The authorities have raided commercial premises where food was thought to have been hoarded, and shut down companies for allegedly having done so. President Hugo Chávez has vowed relentless action against hoarders.

Spokesmen for food producers and processors insist they're not to blame and that the fault lies with the price controls which have been in force for the last five years. They claim price controls are "strangling" the supply chain by not allowing companies to cover their costs. In addition, currency controls are said to be preventing them from obtaining sufficient foreign exchange to pay for imports, which meet an estimated 60 percent of the country's food needs.

The farmers' federation, Fedeagro, urged the government to raise producer prices for rice, one of several key food items whose supply has become erratic to non-existent in recent months. Unless prices were "urgently revised" rice production would be "seriously compromised" in coming months, Fedeagro President Gustavo Moreno warned.