With Chavez Absent, Venezuelan Government Fails to Solve Food Shortages

PHOTO: Shoppers waited in line to buy food at a private sector grocery store in the Quinta Crespo market in central Caracas, Venezuela, on Monday, Jan. 14, 2013.Meridith Kohut/Bloomberg via Getty Images
Shoppers waited in line to buy food at a private sector grocery store in the Quinta Crespo market in central Caracas, Venezuela, on Monday, Jan. 14, 2013. The government blames retailers for shortages of basic goods,saying they are hoarding items. But critics of the Chavez administration say that shortages have come about because of its populist economic policies.

Ysmary Berti, a history teacher, hasn't been able to buy coffee for more than a week.

"No one can find coffee, toilet paper, napkins or sugar," she gripes at a congested market in downtown Caracas.

"The whole country is up in the air," added Isabella Jimenez, a businesswoman who begrudges the absence of a more visible Chávez administration. "We lack essential items like sugar and flour and who's responsible for the economy?"

Tensions are running higher than usual in Venezuela, on account of the precarious health of president Hugo Chávez, now convalescing in Cuba after a fourth operation for an unspecified form of cancer.

Chávez has not appeared in public since December 10th, and in the meantime shortages of staple consumer items are aggravating the day-to-day life of Venezuelans, who must sometimes cue up outside supermarkets in lines of 100 people or more to acquire goods like sugar, rice, and bags of corn meal, used to make the quintessential arepa.

On January 22nd, 2013 shoppers at the Quinta Crespo market in Caracas struggled to find coffee and sugar (Photo: Andrew Rosati).

Some economists in Venezuela argue that the government could take several measures that would help to solve this food shortage problem. But they say that these policies are being delayed by government officials who do not want to make important decisions until Chávez returns.

"With all the current political and institutional problems, economics have been left in the background," said José Luis Saboin, a senior economist at the Caracas think-tank Econanalitica.

Saboin said that the Venezuelan government could help to ease food shortages by devaluating the national currency, the Bolivar. This would increase the amount of currency flowing in the economy and make it easier for retailers to get dollars with which to import food.

The government could also eliminate, or ease, price controls on basic goods, giving local industry a greater incentive to produce more food.

But such measures could prove to be unpopular with the regular citizen, as devaluation would diminish the value of people's personal savings, and lifting price controls would mean that prices for certain goods could temporarily increase.

Saboin said that the Venezuelan government, which is faced with the prospect of another election if Chávez is unable to recover from surgery, is hesitant to make such moves.

In the meantime, the Chávez administration is saying that the business community, with whom it is often at odds, is to blame for the food shortages. "It is a psychological war to demoralize and confuse our people," Vice President Nicolás Maduro said recently.

"Every week business owners are hoarding another item, trying to pit people against the government," claimed Ysmary Berti, the history teacher and Chávez supporter who was struggling to find coffee in Caracas. "But no one will force Chávez out!"

To combat food shortages, the Venezuelan government has launched a nationwide campaign against hoarding and price gouging. According to the administration, as many as 17,000 tons of food have been seized from company inventories across the country since the beginning of the crackdown and are now being redistributed through "supervised sales."

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.