Political Violence Stokes Inflation in Venezuela, Says Central Bank

Inflation increased by 4.1% in March – up from 2.4% in February, according to the latest figures from the Central Bank of Venezuela (BCV). Comparatively, inflation rose by 2.8% in March 2013.

In a statement released yesterday, the bank attributed the spike to violence perpetrated by “a radical opposition”.

“The blocking of streets, threats against transport workers, missed workdays, attacks on industrial areas, public and private infrastructure damage [and] looting and the burning of shopping centres combined to create a concrete new wave of economic warfare,” the BCV stated.

“[This] affected the production of goods and their prices”, the bank stated.

Consumer food prices were the hardest hit, increasing by 6.1%. Yet inflation could continue to rise, the bank warned.

Increases in food prices have been accompanied by scarcity of previously stable consumer goods, such as coffee. Basics such as cornflour, cooking oil and toilet paper also remain scarce in some parts of the country.

Amid the shortages, opposition groups have targeted transport workers and government food programmes, while many businesses have been unable to open in the worst hit areas.

However, the bank withheld scarcity figures for the second month in a row. In January, the BCV’s scarcity index stood at 28%.

Last March the index registered 20% scarcity.

The BCV report also doesn’t include an updated annual inflation figure, which reached 57.3% in February.

Yet the bank did reveal new growth figures for 2013. The BCV reported 1.3% GDP growth for last year – lower than the 1.6% previously predicted by the government in late December. 2012’s growth rate was 5.6%.

The same day the BCV report was released, the International Monetary Fund (IMF) published its own regional report, predicting growth will be “subdued” across Latin America in 2014, and fall “sharply” in Argentina, Bolivia, Ecuador, Paraguay, and Venezuela.

“[F]undamental policy adjustments are needed in Venezuela to avert the risk of disorderly dynamics,” the IMF claimed.

The IMF’s report also predicted negative growth for Venezuela for the next two years; at -0.5% for 2014 and -1.0 for 2015.

However, the report also estimated a 2013 growth rate lower than the BCV’s figure, at 1.0%.

Earlier this week Maduro pledged to improve the economy by launching an “offensive” to bolster productivity, improve access to consumer goods and improve price controls to ensure “fair prices” for consumer goods.

“We will produce more and create better mechanisms to stop the induced…prevention of production in the country at all levels,” Maduro stated.

“The mechanisms of the economic war must be completely dismantled,” he continued.

The president also slammed businesses which he accused of undermining the economy by gouging consumers with speculative price hikes.

“The madness of speculator and parasitic capitalism is that it aims to increase wealth by stealing,” Maduro stated.

Not all doom and gloom

Despite increased inflation, the value of the bolivar is sitting between Bs60-70 to the dollar on the black market. On Thursday, the Bolivar traded at a rate of Bs49.67=US$1 through the government’s newest exchange system, Sicad II; up by 12 cents from Wednesday, and US$2.19 more than the initial Sicad II price.

When Sicad II was first launched in March, the rate was Bs51.86=US$1.

Sicad II was created by the government to improve access to foreign currency for Venezuelan individuals and businesses, and stabilise the value of the bolivar by displacing the black market. According to the government, the streamlining of the country’s foreign exchange regime with Sicad II will improve productivity in key areas.

One area prioritised by the government is agriculture, which is set to see a boost this year, according to the Ministry of Agriculture.

Yesterday, agriculture minister Yvan Gil stated that the sector is expected to grow by 13% in 2013, providing 28 million tonnes of food.

“Growth of between 13 and 14% is expected in the vegetable sector, while the [expansion of the] livestock and fisheries sector is estimated at 6%”, Gil stated.

According to the minister, ongoing government subsidies and other forms of support for domestic producers will play a role in improving productivity.

“We are supporting the productive sector, and promoting dialogue mechanisms to listen to proposals and requirements that make us more productive. We are committed to life, to peace and to the task of increasing production,” Gil stated.

Venezuela’s state owned oil company, PDVSA has also reported new developments, with the discovery of 185 million barrels of crude oil and just over one trillion cubic feet of natural gas.

PDVSA stated yesterday that the finds were made in three onshore locations.

Venezuela already has the world’s largest proven oil reserves, and PDVSA currently produces around 3 million barrels of oil each day. Today, hydrocarbons vice-minister Asdrubal Chavez announced that PDVSA will invest US$3 billion in increasing the company’s refining capacity in 2014.