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Venezuela: Food is 37.1 percent costlier now

By Victor Salmeron, El Universal

In spite of a price control, in place for one year now, inflation hits consumers harder and harder. The consumer's price index jumped by 26.6 percent last year, the highest inflation level in Latin America. However, the deterioration of the purchasing power is much more obvious when the inflation index is broken down. A Central Bank report links increase to price and exchange controls.

In time elapsed since the government of President Hugo Chávez established price and foreign exchange controls, food, dress and transportation have become more and more expensive for the Venezuelans, according to figures released by the Central Bank of Venezuela.

The Central Bank's report shows that the consumer's price index jumped by 26.6 percent last year, the highest inflation level in Latin America. However, the deterioration of the purchasing power is much more obvious when the inflation index is broken down.

While salaries were stagnated between January 2003 and January 2004, food and alcoholic beverages have grown by 37.1 percent; dress and footwear, by 23.2 percent; household services, except phone, by 28.1 percent, and transportations, by 33.9 percent.

In January 2004 alone, the Central Bank indicates, the consumer's price index gained 2.5 percent, a figure that was influenced by the increase "in goods and services that are now under regulation and price control, which grew by 2.8 percent as a whole."

Failure

The explanation to these price increases in spite of the controls include, primarily the parallel dollar market. With a price that surrounds 3,000 bolivars to the dollars, this market marks the rhythm of the economy and outshines the official rate of VEB 1,600 to the dollar.

Official data indicate that in 2003, the Foreign Currency Administration Commission (Cadivi), the government agency in charge of providing the market with currencies at the VEB 1,600-per-dollar official parity, received import applications that involved as much as $9.605 billion, but effectively authorized no more than $3.194 billion.

As a result, more than half of all imports made last year financed through the parallel market. The final price of the products, naturally, showed this fact, deteriorating the population's purchase power. The 7.2 million Venezuelans who are unemployed or work in the informal economy are the hardest hit.

In 2001, the minimum wage was equivalent to $208 a month, but calculated on the basis of the unofficial rate of VEB 3,200 to the dollar, the Venezuelans who have a simple job now earn only a minimum $77, even with the salary rise decreed last year. Additionally, the foreign exchange control creates an accumulation of local currency in the market, forcing an increase in the prices. The government, in an attempt to narrow the gap between income and spending, included provisions for an inflation of 26 percent in the 2004 national budget. At its turn, this will also accelerate inflation.

Indicators reveal that inflation is contained at the moment. The wholesales price index soared by 42 percent from January 2003 to January 2004, but the descent in the demand is now keeping business owners from adjusting all prices.

Translated by Edgardo Malaver



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