Chávez wants price check on Coca-Cola

In an effort to battle high inflation and "capitalist speculation," the Venezuelan government on Tuesday instituted new price controls on many basic items, which has businesses and consumers wondering if more shortages will be caused.

The so-called Fair Price and Costs Law is aimed at putting a price cap on basic foodstuffs, personal hygiene and household cleaning products, as well as construction and medical supplies. "This system will prevent capitalists from tricking and robbing the people," said Vice President Elías Jaua in a nationwide address.

But business leaders warned that such "extensive and stringent" regulations will reduce investment and cause problems for consumers, including shortages of products in high demand.

Government officials say the new law will help reduce the country's high inflation rate, which, according to the nation's central bank, stood slightly more than 26 percent last month - the highest in Latin America - by forcing businesses to keep prices affordable.

The government of President Hugo Chávez has threatened to impose severe sanctions on those companies that do not comply with the price caps. Among the common consumer products covered by the new law are fruit juices, floor wax, soap bars, toilet paper, toothpaste and mouthwash.

The price controls, for now, will stay in effect until December 15.

"This is a law to protect the people from capitalism," Chávez said Tuesday to a crowd of officials and government supporters gathered in Caracas' poor 23 de Enero neighborhood. "We have a tough battle ahead."

He especially called on inspectors to "keep a watchful eye" on international conglomerates such as Colgate, Palmolive, Pepsi-Cola, Nestlé, Coca-Cola and Johnson & Johnson.

The sanctions the government can impose if manufacturers don't follow the rules range from fines to company closures.

In 2003, the government ordered price controls on basic foodstuffs, such as cooking oil and rice, which has led to shortages in some parts of the country.

Now, consumer groups predict more shortages on the horizon. "Our economy for the past eight years has been based on price controls and what we have seen is nothing more than shortages, inflation and deceleration of productivity," said the president of the National Association of Consumers, Roberto León Parrilli, in an interview with the BBC. "If you freeze the price of a product, naturally the manufacturer will go bankrupt."

According to Venezuela's Central Bank (BCV) figures, manufacturing productivity represented 17.36 percent of Venezuela's GDP in 1998, when Chávez came to office. In 2009, it dropped to 15.1 percent, reports the Caracas daily El Universal.