Venezuela government sets price caps on personal care products

By Simon Pitman

- Last updated on GMT

Related tags Personal care Inflation Colgate-palmolive

The Venezuelan government has set price caps on 18 consumer products, including personal and home care products, in an effort to curb inflation in the country.

The country’s president, Hugo Chavez has authorized the price freeze with immediate effect, in what is claimed to be an attempt to stop multinationals from making regular price adjustments to increase profits.

Chavez sees private sector price increases as being one of the primary courses of the country’s runaway inflation problem, which has been devastating the economy in recent years, leading to shortages in commodities and consumer goods.

Annual inflation running at 26 percent

Annual inflation in the country is currently running at 26 percent, one of the highest in the world, as the country has been hit hard by the global recession and the contraction of its private sector.

“The market has become a mechanism where monopolies dominate and manipulate the people,”​ said Chavez during a telephone conversation that was broadcast on state television.

“This idea of an invisible hand of the market that generates an equilibrium between supply and demand is a lie.”

Price freeze to affect mainstay personal care items

The price freeze will affect mainstay personal care items such as toothpaste, soap and shampoo, together with home care products, some processed foods, car parts and medicines.

In his address, Chavez read out a list of multi-nationals that he said he wanted to target, which included Proctor & Gamble, Johnson & Johnson, Colgate Palmolive and GlaxoSmithKline.

All of these companies have experienced operational problems on account of a major currency devaluation announced at the beginning of last year, as well as feeling the impact of the tough economic conditions.

Currency devaluation in 2010 impacted mutlinationals

In January 2010 Chavez announced the devaluation of the Venezualan currency on essential products in an effort to shore up demand for locally produced goods. This devaluation did not include cosmetic and personal care products, automatically making them more expensive.

The move served to prop up an already struggling Venezuelan economy. As a major exporter of oil worldwide, the country’s economy has been hard hit by falling demand for oil in the light of the global recession and this problem has persisted.

However, many of the leading international personal care companies announced significant losses on account of the measures, with Colgate-Palmolive estimating that the move cost it an extra $275m in 2010 alone.

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