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Welcome To Latam Insights Encore, a deep view of Latin America’s most relevant economic and cryptocurrency-based news last week. In this edition, we examine the course of action that Nayib Bukele has taken regarding price gouging and speculation practices in El Salvador, and how he has compared himself to Hugo Chavez and even talked about Karl Marx’s utopia satirically.
Hugo Chavez and Karl Marx: Bukele Mocks Opposition While Taking Measures to Fight Speculation
President Nayib Bukele made the headlines this week after he announced that his next battle would be against food speculators and wholesale distributors who gouge prices in El Salvador. The president first issued an ultimatum against these distributors, warning them to drop prices or to face punitive measures in the same way that gang leaders faced before. This raised the alarm of people who saw this as an attack on the free market, and a way for the government to take control of prices via direct intervention.
According to reports, this move could be configured as a way of blaming distributors for the ongoing scarcity and price increases that El Salvador faces as a consequence of not putting enough resources into increasing the national agricultural production and failing to offer sufficient increases to achieve this goal.
However, even when there are several voices explaining this phenomenon, Bukele has opted to push on with the intensification of the so-called Farmers’ Markets, a government-sponsored initiative that seeks to sidestep middlemen and offer several agricultural products and groceries to Salvadorans at lower prices. This action made Bukele compare himself with Hugo Chavez, albeit sarcastically, for applying the same solutions to these problems.
The problem with this approach is that, as experimented in Venezuela, when applied efficiently, it leads to the destruction of the productive apparatus that serves as a medium for these products to reach people, and centralizes the distribution of food in the hands of the government. When applied inefficiently, it creates a secondary market for these products and scarcity derived from the incapacity of stores to assign prices derived from a study of the cost structure of every company. So it’s a net negative for the country, whether citizens realize it at first or not.
The Salvadoran Farmer’s Market initiative is already feeling the pressure of the increased demand from an increasingly large part of the population, which due to Bukele’s promotion, are purchasing products at lower prices. Sadly, product demand has outpaced the government’s capacity in some cases.
Meanwhile, Bukele celebrates stating that El Salvador, as it is, might be the utopia envisioned by Karl Marx.
What do you think about Bukele’s measures to curb price speculation in El Salvador? Tell us in the comments section below.