Black Friday sales come early to Venezuela

President Maduro's approach to countering a troubled economy has included mandating slashed prices and capping business profits. But will 'post-holiday blues' reveal an even tougher economic reality?

For many, Black Friday, with its swarms of bargain-hungry shoppers and special sales, marks the official kick-off to the Christmas-shopping season. By that measure, the holidays have come early in Venezuela this year.

In what has amounted to a nationwide fire sale, huge crowds have been descending on retailers across the country for weeks, after President Nicolás Maduro ordered discounts on everything from clothing and cellphones to car parts and home supplies. But fears are mounting that the mobbed sales now could lead to nationwide "post-holiday blues," as questions fly over the sustainability of such price-slashing and how to restock store shelves with rigid regulations in place.

"[The government intervention] is a huge blow to business and and what's left of entrepreneurial spirit in the country," says Victor Maldonado, director of the Caracas Chamber of Commerce.

President Maduro's administration has been grappling with empty store shelves and spiraling inflation since taking the helm in April. While many are skeptical that government-mandated markdowns can succeed in remedying Venezuela's troubled economy, at the very least, the discounts may help the beleaguered president save face ahead of the Christmas season, serving as a distraction from the country’s more pressing problems.  

"It's a strategy to change what's on people's minds," says Jose Vicente Carrasquero, a political scientist at Simón Bolívar University in Caracas. "The government is imposing a superficial issue on the public, one that does not get to core of the matter."

Marduro's crackdown on prices for luxury and durable goods is diverting attention from more serious issues, like the ongoing shortages of staple foods and household products, Mr. Carrasquero says. 

“These days, the lines to buy a television rival those to buy milk," he says.

Short-lived deals

Because of economic hard times, the idea of a gift-filled Christmas seemed all but out of reach to many Venezuelans just a few weeks ago.

The Venezuelan Central Bank announced earlier this month that prices have risen more than 54 percent since last October, the highest inflation rate in more than a decade. Shortages of many basic consumer goods such as milk, toilet paper, and corn flour have increased to their highest levels since 2010.

Accusing his political foes and the private sector of hoarding and price gouging, Maduro was granted the power to pass economic laws without Congress’s approval last week. While the president had already slashed prices at retail outlets and jailed 100 “bourgeois” businessmen, he has since capped profit margins and tightened regulations on imports in his push to put the economy back on track.

"It was all too expensive," says Ignacio Cepeda, a construction worker who was one of hundreds queued in front of an Ekipa outlet – the Venezuela equivalent of Home Depot. And while Mr. Cepeda applauds Maduro's actions – hoping to get his hands on some new home furnishings – he admits the deals might be short-lived.

"The only thing left will be empty boxes if Ekipa manages to open tomorrow, " Cepeda says.

Consumers across the political divide have been quick to capitalize on the low, low prices, but businesses worry about covering costs while the president attempts to put a lid on soaring prices.

"There are no rules to the game," says the regional manager of a department store chain in eastern Venezuela, who asked that his name be withheld for fear of government reprisals. "Today it's televisions and tools, tomorrow it could be potatoes."

"It's not sustainable," he says.

Post-holiday blues? 

"The president's strategy is nothing innovative," says Alberto Ramos, head of Latin American economic research at Goldman Sachs in New York. "We've seen the effects of these types of controls before. He's destroying confidence and aggravating problems within the country."

Prior to the president's “economic offensive,” the Caracas Chamber of Commerce estimated that half the country's manufacturers and 20 percent of its commercial sector had closed shop since President Hugo Chávez came to power in 1999.

In his 14-year rule, the late President Chávez nationalized more than 1,000 businesses and properties and established strict price and currency controls in his efforts to create "Socialism of the 21st century."

The World Bank recently ranked Venezuela as 181st out of 189 countries in its annual Doing Business Report, which considers indicators like the cost of regulations borne by businesses and the ease of gaining property rights. That puts it behind the likes of Syria, Haiti, and Zimbabwe.

While the nation at large is caught up in the spending spree, business leaders warn that these latest policies could have negative effects on the economy that extend far beyond the holiday season.

"The Christmas shopping season is going be short this year," says Caracas Chamber of Commerce director Mr. Maldonado. "I don’t know why any business owner would bother to restock their shelves."