Hyper-inflation in Venezuela reached 26.9% for the year to October against a rate of 29.1% in 2010. Price controls took effect on November 22 as the government tries to slow the country's fastest multi-year inflation spike on record -- and there are rumors of nationalization for local units of multinational consumer good producers.
U.S. companies exposed to Venezuela have already seen their shares under pressure. Colgate-Palmolive ( CL , quote ), with approximately 5.2% of its sales revenue from Venezuela, saw its shares edge up only 1.7% over the last two weeks -- when other blue chips were rallying.
Headline risk still remains, however, in a nationalization of inventories held in the country.
In an address through state television last Friday, Chavez threatened to nationalize companies and warehouses caught stockpiling products with, "We are going to nationalize what needs to be nationalized. The bourgeoisie hoard milk, sugar and cooking oil and then blame me. But it's their fault, the hoarders."
Companies must now report to the national price regulator information about production, distribution and commercialization costs. The government reports to have about 100 "unofficial" inspectors working to report to the government on hoarding or price manipulation.
Any nationalization or measures will certainly be politically biased and most likely will be aimed at foreign firms. The government has increased fiscal spending 22% in the last year, after subtracting for inflation, to improve popularity up to next October's presidential election.
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