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  HOME | Venezuela (Click here for more Venezuela news)

Venezuela Inflation Remains High

By Jeremy Morgan
Latin American Herald Tribune staff

CARACAS -- Inflation continues to show few signs of slowing down, for all the government's claims to have gotten on top of raging price rises, to judge by latest figures from the Venezuelan Central Bank (BCV).

Consumer prices rose by a further 1.8% in April, up from 1.2% in March and 1.3% in February, but still below the 2.3% increase recorded in January this year. Last month's figure showed little improvement on the 1.7% rise seen in April last year, and took the accumulative increase since the beginning of this year to 6.7%.

Hardest hit, it would seem, were people who travel around, drink and smoke and end up in need of medical services. The cost of transportation rose last month by 4.6%, alcohol and tobacco prices increased by 3.1% and healthcare charges nudged up by 2.1%. People who talked a lot on the telephone paid 2.8% more than they had in March.

Suspicions that inflation is at least partly caused by price gouging gained weight from a complaint by Commerce Minister Eduardo Samán about the high cost of motor vehicles and consumer durables in Venezuela compared with neighboring countries. That said, economists argue that inflation has a tendency to feed off itself, putting consumers in a vicious circle in which the rising cost of one thing inevitably spins off into increases in prices for a lot of other things.

Samán claimed there was "an evident and enormous speculation" in prices of cars, and apparently believed he had the figures to back up his case. In this, he was echoing a recent remark from President Hugo Chávez, who publicly demanded to know just why cars cost so much more in Venezuela than in, say, Colombia.

The minister cited some best-selling car models. A Chevrolet Areo, for instance, cost the equivalent of $39,500 in Venezuela -- more than three times as much as in Argentina and Colombia, where the price for the same vehicle comes in at around $13,400 apiece. A Fiat Palio cost $37,000 in Venezuela, but $14,800 in Colombia and just $9,500 in Argentina; a Ford Fiesta $25,500 here but less than half that at $12,000 in the other two countries, he said.

The immediate question was what sort of exchange rate Samán was using to equate costs in Venezuela, given that under the Foreign Exchange Crimes Law it's illegal to price anything in hard currency, let alone sell or buy goods in dollars. Anybody even mentioning the parallel exchange rate can be subject to hefty fines -- up to 10 times the amount involved -- or even prison sentences. Naturally, that doesn't stop people talking.

Translating Venezuelan Bolivar prices into dollars at the official exchange rate of BsF2,150 to the dollar would tend to push the dollar equivalent of that same price to a higher level than if the exchange rate available outside the country was used, it was argued. Conversely, applying the parallel or unofficial rate would have the effect of lowering the dollar price. The bolivar closed at 6.70 to the dollar in the unofficial market on Tuesday.

The BCV's figures once again confirmed that Venezuela boasts (or suffers) the highest rate of inflation in Latin America, a continent once wracked by massive daily, monthly and annual rates that would raise eyebrows even here today.

Time was when Venezuela's regionally high inflation rate was at least partly attributed to the knock-on effect of high world oil prices, on the argument that with slews of cash sloshing around in the economy people were invariably going to be prepared to spend more -- and all the more so if obliged to do so by unscrupulous vendors.

However, with oil prices halved in comparison with less than a year ago, that argument would not seem to wash in terms of explaining why price rises are still so high now -- and possibly accelarating yet again. Orthodox economists point to high state spending, excess liquidity in money supply and what they see as undisciplined financial management by the authorities.

 

 

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