Food prices rocket in Venezuela

IMF predicts that Venezuela’s inflation rate will reach 475 per cent by the year-end.

A man buys goods at a supermarket in Caracas on October 20, 2016. Hit by the fall of global oil prices, the economy in Venezuela has crashed and food shortages have prompted riots and looting in recent months. Photo: AFP

Food staples like rice and milk are returning to the empty shelves of Venezuelan supermarkets after a long absence —but who can afford those eye-popping prices?

Delia Mendoza’s eyes widen when she realises that the price for half a kilo of red beans is 4,211 bolivars, or $6.40 at the highest official exchange rate. This in a country where the monthly minimum wage is around $100.

“Incredible!” she gasps, and returns the beans -- a staple of Venezuelan cuisine —to the shelf.

In recent months, the leftist government of President Nicolas Maduro has begun to relax its price control system, allowing food sales at market prices in several Venezuelan states and, to a limited degree, in the capital Caracas.

That is a sea change for a country where strict price controls had been imposed since 2003.

“In a way, the government has turned a blind eye to this with all the regulations they have implemented,” said Asdrubal Oliveros, head of Ecoanalitica consultants.

“This has allowed many companies, many importers to start bringing in products, and those products are being sold at black market prices.”

Strict price controls Many economists blame the scarcity on the strict price controls, together with tight currency exchange limits and Venezuela’s over-dependence on its vast oil reserves, which has made it rely on imports for goods it once made at home.

Lacking easy access to greenbacks, businesses are starved for U.S. dollars needed to buy supplies and equipment available only abroad. Now that the price control system is crumbling, Venezuelan businessmen are starting to bring in imports again — but at a high price.

High inflation “There is plenty, but everything is super expensive and imported because nothing is made here,” said Mendoza, a 75 year-old retiree, speaking at a supermarket in a posh Caracas neighbourhood.

Venezuela is paying a heavy price for neglecting agribusiness and food production over the years to concentrate on petroleum, the source of 96 per cent of its foreign currency. With global oil prices in a slump, the country’s economy is in a tailspin and inflation is out of control.

The IMF predicts that Venezuela’s inflation rate, already the world’s highest, will reach 475 per cent by year's end — and with no changes, a whopping 1,660 per cent in 2017.