Venezuela's government is setting limits on prices for cars as President Nicolas Maduro tries to close a popular loophole used by savers to guard against the fastest inflation in two decades.
Maduro said Monday that he would use new emergency decree powers granted by Congress to enable the government to set "fair" prices for all cars sold in Venezuela. At the same time, used vehicles won't be allowed to exceed the price of newer models, he said in televised remarks.
Automobiles purchased in Venezuela generally jump in value as soon as they leave the dealership's lot as decade-old currency controls reduce the availability of imported cars and parts, leading to months-long waiting lists. Carmakers including Ford and Toyota are on pace to churn out 70,000 vehicles this year in Venezuela, about a third of their capacity and less than the 104,000 they produced here in 2012.
Amid the shortage of new cars, demand for even decade-old clunkers has been soaring as Venezuelans buy durable goods as a store of value at a time their salaries and savings are being eroded by 54 percent inflation and a plunging currency.
Instead of reducing inflationary pressures, however, the price caps are likely to spawn a black market for the buying and selling of used cars much like the one that already exists for rental apartments, where regulations are also severe, said Asdrubal Oliveros, an economist at Caracas-based economic think tank Ecocanaltica.
*and why Socialism doesn't work