As Venezuelan inflation hits new highs, a crackdown on consumer prices

David Brancaccio Nov 14, 2013
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As Venezuelan inflation hits new highs, a crackdown on consumer prices

David Brancaccio Nov 14, 2013
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Venezuela has a terrible inflation problem. Consumer prices jumped 54 percent last month alone, inflation rose above 50 percent for the first time since Hugo Chavez took power in 1999. President Nicolás Maduro blames a conspiracy of what he calls “hoarding and speculation” by rivals who want to bring down his Chavez-legacy government, and he’s taken some dramatic steps to turn the problem around.

“Instead of using monetary policies to combat inflation, he says he’s going to prohibit it,” says Marketplace contributor and Univision anchor Enrique Acevedo. “He’s calling in the military and police forces to basically occupy stores in industries like textiles or toys — slashing the prices 70, 80 percent off so people can get anything from plasma TVs to washing machines.”

Maduro took the unprecedented step of ordering Venezuela’s military to take over appliance stores and force down prices. As a result, Venezuelans looking to take advantage of bargains formed blocks-long lines in front of the stores. It wasn’t long before looting and pandemonium broke out.

“In an economy that’s struggling to get anything from flour to milk, people thought it was Christmas in November, basically, Acevedo says.

A central part of the underlying problem in Venezuela are strict the controls on foreign currency exchange. The bolívar is officially 6.3 to the dollar, but because dollars are only available through official government channels, a black market has flourished. Prices in stores are often geared to the black market price.

“The country, which devalued the bolívar by 32 percent in February has been unable to arrest that decline, even on the black market,” Acevedo says.

The timing of Maduro’s populist appeal could have something to do with upcoming mayoral elections across Venezuela scheduled for next month.

“I think they use the economy, they use conflict to gain political advantage at the polls, and the opposition in Venezuela has denounced this,” Acevedo says. “If I had to say, I’d say it’s a hundred percent political.”

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