Shortages, Speculation Amid Rising Consumption in Venezuela

Estela Piñero, a head of household who lives near the government palace in the Venezuelan capital, does not go to the market to buy sugar. Instead, she buys it at three times the official price from informal vendors on a street corner.

CARACAS, Feb 9 (IPS) – Estela Piñero, a head of household who lives near the government palace in the Venezuelan capital, does not go to the market to buy sugar. Instead, she buys it at three times the official price from informal vendors on a street corner.

“I got my black beans the same way, and it looks like we’ll have to do it again to get beef. Maybe people are buying a lot, maybe the government isn’t keeping order, but the result is that goods are scarce and more expensive,” Piñero complained to IPS.

Some items disappear for days or weeks from entire middle- or lower-income neighbourhoods, forcing people to change their habits — from, for example, refined white sugar to bars of dark brown sugar — or simply to wait until the product is back on the shelves. Then people stock up nervously for fear of another shortage.

The shortages have occurred within a bubble of consumerism that is affecting the Venezuelan economy. Gross domestic product (GDP) grew 10.3 percent in 2006, according to official figures, while consumption increased by 16.3 percent.

Imports, which hovered between eight and 10 billion dollars a year over the last decade, reached a record 31.3 billion dollars in 2006, equivalent to 54 percent of the country’s oil income and 27 percent higher than the 2005 figure.

Sales of cars shot up to an unprecedented 343,351 new vehicles in 2006, according to the Automobile Industry Chamber of Commerce (CAVENEZ), breaking the former record of 228,378 cars sold in 2005, in this country of 27 million people with a national fleet of 3.5 million cars, buses and trucks on its roads.

By the end of January this year, 28,600 new vehicles had already been sold (the most inexpensive cost about 10,000 dollars), one-third more than in January 2006. “There is a four month waiting list, or else you have to pay the salesperson a commission under the table,” Margarita Gómez, who has made her first payment and is waiting for a European car, told IPS.

According to the Central Bank, inflation stood at 14.9 percent in 2006. Alarmingly, inflation for the month of January was two percent, and the food price index was up 4.2 percent, making it unlikely that this year’s 12 percent inflation target will be met.

Legislators met government authorities this week to discuss measures to curb price rises.

Prices in the food industry rose by 26 percent in 2006. The Venezuelan population spends an average of 41 percent of its income on food, but a much higher percentage of income is spent by those with the lowest incomes, economist Luis León, director of the Datanálisis survey company, told IPS.

Shortages, speculation and bottlenecks in the chain of production, imports and marketing have contributed to the inflationary cocktail, according to spokespersons for the private sector, just when President Hugo Chávez has given the order to accelerate the advance on all fronts towards a vaguely defined “21st century socialism”.

As for sugar, Venezuela produces more than two-thirds of the one million tons consumed yearly, from an annual output of 9.8 million tons of sugarcane, “but there’s been no production incentives policy for the past 25 years,” according to Rafael Chirinos, president of the Federation of Sugarcane Growers (FESOCA).

Gustavo Moreno, president of the large agricultural producers’ association FEDEAGRO, said that “price controls create problems for the profitability and importation of sugar. The government didn’t plan ahead of time to import the deficit of 250,000 tons, and the result was this shortage.”

Piñero paid 2.30 dollars a kilo for the sugar she bought from the street vendors. “They get it from Mercal (the government chain of markets of subsidised foodstuffs), don’t ask me how, at 1,300 bolívars (60 cents of a dollar, the official controlled price) and then sell it at a higher price,” she complained.

Products like beef, tuna and other fish, dairy products, chicken, several cereals, coffee and flour have also been subject to similar shortages in recent weeks, said Óscar Meza, of the economic analysis centre sponsored by the teachers’ union.

“The government should update its frozen prices, because on average there’s a 30 percent lag between the costs of production and marketing and the approved sales prices,” said Meza. “Or else they should show that 21st century socialism can solve the problem in a different way.”

The official price of beef is 4.25 dollars a kilo for the best cuts, but even in MERCAL outlets it has been sold at more than this, and in privately-owned supermarkets meat is 80 percent more expensive on average.

The government consumer protection office closed down a supermarket chain for 48 hours last week for selling beef at above the regulated price, which must be adhered to universally by retailers. The result was that other chains have stopped selling beef.

“If only the slaughterhouses and meat-packing plants would sell us beef at the official cost of 1.30 dollars the kilo, then we could sell it at the controlled prices,” said Carlos Carvalho, president of the National Association of Supermarkets. “We can’t afford the risk of being closed down because of a discrepancy in just one product.”

But Ignacio Díaz of the Slaughterhouses and Meat Processing Plants Association (ASOFRIGO) said “We can’t sell at the controlled price when we’re paying two dollars a kilo for cattle on the hoof, 52 percent more than last year.”

In turn, Genaro Méndez of the Cattle Ranchers’ Federation (FEDENAGA), claimed that “the government can’t impose price controls that are out-of-date and don’t take into account the increased costs of production,” quite apart from the fact that other Latin American countries, such as Argentina, Colombia, Costa Rica and Panama, have increased their beef prices.

Agriculture Minister Elías Jaua said “We are under pressure to increase food prices, and to float the dollar. But we shall stand firm. Profit margins for producers have shrunk, but they aren’t making a loss.”

In January the government granted agricultural producers a two-year income tax exemption (a traditional measure in Venezuela’s economy), and Jaua announced that private banks had been instructed to devote 21 percent of their credit funds to the agricultural sector. Until 2006 the proportion was 16 percent.

The other topic Jaua mentioned was exchange controls. Officially the dollar is worth 2,150 bolívars, although on the black market it changes hands for twice that amount. The government delivers dollars at the official rate to pay for imports of intermediate goods or final consumer products, when it is proven that there are insufficient dollars available in the country.

For weeks at a time, goods like spare parts for cars, medical articles, inputs for foods, toiletries and luxury goods have been absent from the lists of items eligible to receive dollars at the official exchange rate, which has put demand pressure on black market dollars, said opposition economist José Guerra.

One of Venezuela’s economic problems is its dependence on imported foods, because of the limited development of its farming sector.

Former minister of agriculture Hiram Gaviria, who supported Chávez during the first three years of his administration (1999-2001), said “This government is the one that has hit the self-reliance of Venezuelan agriculture the hardest.”

According to statistics cited by Gaviria, agrifood imports were worth 2.4 billion dollars in 2004, twice the average yearly figure for the previous decade. They rose to a value of over three billion dollars in 2005, and 3.5 billion dollars in 2006.

Food minister General Rafael Oropeza announced that food would be imported so that shortages and distribution problems through MERCAL, which supplies nine million low-income consumers, would be alleviated within three months.

Jaua, for his part, announced that the government would provide nearly 1.2 billion dollars this year to finance, together with the private banks, 270,000 agricultural producers, 25,000 livestock raisers and 174 fishing areas, in order to boost domestic food production to 22.7 million tons, 26 percent more than the 18 million tons of food produced in 2006. (END/2007)