Mérida, 8th March 2012 (Venezuelanalysis.com) – Venezuela’s monthly rate of inflation as measured by the National Consumer Price Index (INPC) was 1.1% in February this year, the lowest since the current system of measuring inflation with national coverage began at the start of 2008. The Venezuelan government argues that policies to meet social needs and boost domestic production are a key factor behind the new figures.
The statistics, reported by Venezuela’s Central Bank (BCV) on Wednesday this week, confirm that inflation has been decreasing for three months in a row, recorded at 1.8% in December 2011 and 1.5% in January 2012.
The annualised rate of inflation has also decreased, calculated at 25.3% from February 2011 – January 2012, compared with 28.7% the previous year.
Planning and Finance Minister Jorge Giordani stated yesterday that at the current trend the government is on target to meet its aim of an annual inflation in 2012 of 20 - 23%, as long as “we continue this daily effort, not only by the government, but also by consumers and the private sector, who must also produce within reasonable profit margins”.
Partly as a result of Venezuela’s dependence on oil exports and imported goods, inflation in Venezuela has traditionally been high, and was 27.6% in 2011.
The average annual inflation over the previous decade of President Hugo Chavez’s administration is 22.4%. Meanwhile during the neoliberal governments of Carlos Andres Perez (1989-1994) and Rafael Caldera (1994 – 1998) average inflation was 45% and 60% respectively, recalled Giordani.
The figures are compiled by the BCV and the National Institute of Statistics by measuring the prices of 400,000 products across thirteen sectors of the economy.
In six of the thirteen categories inflation was above the overall 1.1% figure, including food and non-alcoholic beverages (1.2%), restaurants and hotels (1.4%) and health services (1.8%). Meanwhile transport (0.7%), communications (0.2%), clothing (0.6%), and goods and services (0.9%) were among those below the average.
Causes of Slowed Inflation
Minister Jorge Giordani argued that slowed inflation was due to government social investment, especially in health and education, as well as policies encouraging increased national agricultural production.
“The social investment that the Bolivarian Government has made in these years is already reaching US $500 billion,” he said speaking on state television channel VTV on Wednesday evening.
The minister explained that government social spending has prioritised providing free health and education services to the population, which in turn allowed Venezuelans to spend more on foodstuffs.
He further indicated that the government’s Mission Agro -Venezuela, launched in January 2011 to provide low interest loans and training to farmers, has played a key role in reducing inflation, as “there is no doubt that one of the causes [of the decrease in inflation] is the necessary internal supply that must be produced in the country”.
Certain news agencies such as Reuters have attributed the decrease in inflation to the price controls recently set by the national government, whilst maintaining that the drop is "unsustainable".
In attempts to reduce inflation and ensure the population’s access to basic goods and services, the government’s Law on Fair Costs and Prices came into effect November 2011, freezing prices on certain basic food and personal hygiene items while a new, regulated price was calculated. The regulated price on 19 hygiene items will come into effect on 1 April this year.
The Venezuelan government has already launched several new social programs over the previous 12 months, including its mass public housing program in May 2011, welfare payments for families in extreme poverty and increased pension provision in December 2011, and the new employment and training program, whose registrations began in January this year.