- By Juan Cristóbal NagelJuan Cristóbal Nagel is a professor of economics at the Universidad de los Andes in Santiago, Chile, editor of Caracas Chronicles, and co-author of the book Blogging the Revolution.
The Hugo Chávez government has always seized opportunities to insert itself into the economy in ways that will bring political payoffs. The bureaucrats in Caracas have been known to subsidize gasoline, sell dollars to Venezuelans traveling abroad at below-market rates, or give away washing machines to poor voters. (See, for example, this video, in which Chávez himself is offering appliances to buyers at 40 percent off the market price:)
Late last year the national assembly passed a measure called the "Law of Fair Costs and Prices." The new statute forces private businesses to provide detailed cost information that will allow the government to set all the prices in the country.
This is, essentially, price regulation on steroids. It goes without saying that the few private businesses left in the country shuddered when the law came to pass. But the main target of this new bureaucracy so far has been a curious one.
In late February, SUNDECOP (the unfortunate acronym of the new Fair Prices Superintendency) announced that it was applying its broad powers to regulate the prices of, among other things, deodorant, hair conditioner, shampoo, soap, and toothpaste. A recent report by the Caracas daily El Universal found that the shelves remain stocked up with the products in spite of the regulation, but that the quality and variety of brands has decreased substantially. Premium toilet paper, for instance, is expected to slowly disappear from the shelves.
The move was met with a mixture of relief and derision. Why, some asked, would the government go to such great lengths to regulate the price of… beauty care products?
The reason is simple: Venezuelans are obsessed with beauty and personal care. Anything that feeds into that part of their culture is bound to reap political benefits.
How important are beauty and personal care to Venezuelans? This is a nation with the highest ratio of beauty queens per capita, but other statistics are even more telling.
A survey conducted a few years ago by Roper Starch, a consulting company, found that Venezuelans were the vainest of all the countries studied. A full 65 percent of women and 47 percent of men owned up to worrying about their looks "all of the time."
It shows. Venezuelans spend an average of $115 per year on cosmetics and toiletries on a per capita basis, according to Euromonitor, a consultancy. The Venezuelan figure is higher than those for Mexico ($74), Argentina ($78), Colombia ($56), and Chile ($90). Only Brazilians, at $149, spend more in the region.
Venezuelans are also regional leaders in plastic surgery. According to the International Society of Aesthetic Plastic Surgery, Venezuelans rank eighth in the world in terms of per capita aesthetic surgical procedures. They have about the same number of per capita aesthetic surgical procedures as Americans, even though Venezuela is, of course, much smaller and poorer than the U.S.
There is, of course, a dark side to this obsession. Last August, for example, Rosa Pérez, a 40-year old janitor and grandmother from a poor slum in Caracas, died from complications following a botched breast augmentation procedure done in a makeshift clinic. Two months later, Elizabeth Veloz, a slim 23-year old business major from Maracaibo, died from complications during a combined breast, buttock, and liposuction surgical procedure. Most of the victims of these apparent malpractice cases are poor working women.
This obsession with beauty is undoubtedly behind SUNDECOP’s moves. Price controls can yield political benefits in the short run, even if the distortions they create hurt production. Initial results apparently show inflation in the targeted products slowing down, while demand appears to be picking up.
Obviously, the effects of these distortions will be felt at some point, and scarcity is bound to rear its head. Venezuela’s soaring inflation and intermittent shortages of goods are a major political problem for the administration. For the moment, though, the prices and supplies of these particular products remain stable. If the government can pull off its latest attempt at regulation without emptying the shelves, it could a big boost for a president who has an election just around the corner. In this respect, a bit of economic populism that plays up to what voters like may be just what the doctor ordered — at least if you’re a Chavista.