With Chavez Absent, Venezuelan Government Fails to Solve Food Shortages

Emptying company inventories may serve as a stopgap to satisfy shoppers' needs, but economists warn that without serious policy adjustments, shortages will only get worse. The problem they say is a dollar shortage.

A dearth of dollars in the country's government-controlled currency markets has been detrimental to bringing in imports as businesses struggled to meet heightened consumer demand after the government raised the ceiling of expectations via major spending outlays during last year's electoral season.

"Consumption has increased faster than production and the availability of foreign currency is insufficient to cover imports," says Ronald Balza, an economics professor at both the Central University of Venezuela and Andrés Bello Catholic University.

Fedecamaras, the country's main business group, says delays in receiving government-authorized foreign currency along with a drop of 40% in its supply has paralyzed businesses' ability to meet food demands.

Imports are central to feeding Venezuelans as domestic production has fallen because of the lack of incentives for private manufactures to produce goods that are price-controlled. This has been exacerbated by Chávez's nationalization of more than 1000 businesses and assets.

Shortages could present a huge political downside for the absent president. Unlike other economic problems, such as inflation or loss of purchasing power, scarcities are far more palpable for the average Venezuelan.

"You can always play with other economic variables…but not shortages," said Luis Vicente Leon, president of the polling firm Datanalisis. "Consumers know perfectly well what is going on when they go shopping and there is no food," he adds.

According to the Central Bank of Venezuela's monthly scarcity index, which is based on data from markets across the nation, shortages in December were at their highest level in four years.

In 2007, shortages reached record levels and are considered by analysts to be a major factor in President Chávez's Constitutional Reform Referendum defeat – his only electoral loss in his 14-year tenure.

"In the short term you can use a 'scapegoat' strategy, but it won't work permanently," Leon said of the government's decision to blame the private sector for food shortages. He explained that after a while, when products haven't reappeared, people will begin to blame someone new.

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