Bloomberg News

Food Shortages in Venezuela Bigger Worry Than Constitution

January 11, 2013

Food Shortages in Venezuela Bigger Worry Than Constitution

A worker weighs a bag of government subsidized food for a customer at a state-run market. The government said today that consumer prices in December jumped the most in 2 1/2 years, helping to create a shortage of basic goods. Photographer: Fernando Llano/AP Photo

At a bustling food market in downtown Caracas, armed officers belonging to President Hugo Chavez’s National Bolivarian Guard marched by boxes of lettuce and tomatoes, checking prices and storage rooms.

The inspection is part of a nationwide campaign to crack down on over-pricing and hoarding the government blames for shortages of basic goods, from toilet paper to sugar. The government said today that consumer prices in December jumped the most in 2 1/2 years, highlighting the growing economic problems that are amassing as Chavez’s battle with cancer unleashes a power struggle.

“This is the worst it’s ever been, I can’t find any eggs, rice or flour,” Noreli de Acosta, a 55-year-old housewife said walking out of the Quinta Crespo market in central Caracas, clutching a small bag with assorted vegetables and beans. “Of course the government is to blame.”

Fixing Venezuela’s economic woes, including an overvalued currency and a deficit larger than that of the U.S., will be instrumental to ensure support for Vice President Nicolas Maduro, the de facto leader as Chavez struggles to recover from surgery in a Cuban hospital. Chavez, 58, hasn’t been seen in a month and yesterday missed his inauguration for a new six-year term he won in October. Before leaving for Havana on Dec. 10, Chavez urged Venezuelans to elect Maduro should he not return.

Scarcity Index

An index measuring the scarcity of goods reached its highest level on record in December, the central bank said today in a report. Consumer prices rose by a more-than-expected 3.5 percent in December, driven by a 5.7 percent jump in food, taking inflation to 20.1 percent last year, the bank said.

“The economy will be Maduro’s biggest problem though now he’s trying to be more like Chavez than Chavez himself,” said Luis Vicente Leon, head of Caracas-based polling firm Datanalisis, referring to the government’s recent sweeps. “Destroying domestic production and expropriating companies makes you inefficient, dependent on imports and scares off investment -- there’s no way the economy won’t explode.”

Tens of thousands of Venezuelans took a symbolic oath of loyalty to Chavez and the “right to build socialism in our country” in Caracas yesterday in place of the ailing leader. They were joined by officials from 27 Caribbean and Latin American nations who arrived a day after the Supreme Court endorsed delaying the former paratrooper’s swearing-in ceremony.

While opposition leaders said they would plan a protest march on Jan. 23 over what they consider a violation of Venezuela’s constitution, many Chavez critics have resigned themselves to accept the status quo.

“For now, there’s not much we can do,” Pedro Elias Rodriguez, a 73-year-old retiree, said in the middle class Chacao district of Caracas. “They are mobilizing the people to cover up the shenanigans they use to remain in power.”

Capital Controls

Chavez suffered his only electoral defeat in 2007 when voters narrowly rejected a referendum to change 69 articles of the constitution amid shortages of beef, milk and sugar. He subsequently accelerated the nationalization of farms and food industries. Since taking office in 1999 he’s seized more than 1,000 companies or assets.

Capital controls have exacerbated shortages by limiting the amount of foreign currency Venezuelans can obtain to import goods. Venezuelans need government approval to buy dollars at the official rate of 4.3 bolivars, while some importers get dollars at a rate of 5.3 bolivars through the central bank.

On the black market, the bolivar has plunged about 30 percent since Chavez’s re-election in October to 17.55 per dollar, according to the rate-tracking blog Lechuga Verde, which means Green Lettuce in Spanish. The widening disparity with the official rates has made devaluation almost certain, though with an election to replace Chavez possible later this year, Maduro doesn’t want to risk a popular backlash, said Leon.

Televised Raids

Last year the government ordered companies such as Procter & Gamble Co. (PG:US) and Unilver Plc (ULVR) to lower the price of shampoo, soap and other personal care products to contain inflationary pressures. Authorities regulate prices for a wide range of products including chicken, cheese and coffee.

The government blames producers and merchants for hoarding products and this week carried out televised raids of warehouses. Among goods confiscated were 9,000 tons of sugar, part of which was imported by a supplier to the local unit of PepsiCo Inc. (PEP:US)

“The radical and irresponsible right wants to keep the people in a constant state of anxiety and therefore they’ve launched a new campaign of under-supplying,” Food Minister Carlos Osorio told state news agency AVN on Jan. 9.

Long Lines

Maduro has appeared almost daily cheering on the crackdown.

“The hoarders are trying to sabotage the economy and should be jailed,” he said Jan. 9, hours before four people associated with the alleged sugar hoarding were arrested and had their bank accounts frozen.

The day after a seizure of goods at Quinta Crespo, toilet paper reappeared on shelves in nearby stores, prompting long queues of costumers.

“There were several dozen guards and inspectors, they checked the warehouses,” said Joan Olivares, a 29 year-old security guard at the market. “Things have improved but there’s still a shortage of some goods.”

At a nearby poultry store, display cabinets were half empty and one shopper complained that prices were twice what the government mandated.

Morela Tirado, a 53-year-old housewife, said such shortages are only a small inconvenience and have not undermined her support for the Chavez government.

“So you switch meat for chicken, pasta for rice, what’s the big deal? Nobody is going hungry,” said Tirado. “It’s not that there’s no food, you just don’t always get what you want.”

Poverty Reduction

There’s plenty of cash still circulating in Venezuela, which is South America’s largest oil producer. Millions of poor Venezuelans have seen their incomes rise and access to health care and education improve under Chavez, helping drive economic growth that was 5.5 percent last year, according to preliminary central bank figures.

Maduro yesterday said he hopes to maintain the current pace of growth this year, even as economists forecast near- stagnation. Bank of America Corp. says the government must cut spending that ballooned ahead of Chavez’s re-election to reduce a budget deficit equal to 8.8 percent of gross domestic product, second only to Japan.

Across town in the Chacao neighborhood, there is little diners can’t get at La Estancia, one of the city’s best-known restaurants.

“Sea food platters, Argentine steaks, it’s all there,” said Miguel Rojas, the Maitre D’. Yet choice comes at a price, he said. An entree with an appetizer and desert runs around $90 at the official exchange rate, or one-fifth of the nation’s monthly minimum wage.

To contact the reporter on this story: Raymond Colitt in Caracas at rcolitt@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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