Friday, October 11th 2013 - 13:28 UTC

Venezuela inflation soars to 49%; Maduro promises more dollars to help with imports

Venezuela's annual inflation rate rose to 49.4% in September, from 45.4% in August. Consumer prices increased 4.4% month-on-month, the central bank said, compared with 3.0% in August. It was the highest annual rate since the Venezuelan government changed the formula used to calculate the figure five years ago.

President Nicolas Maduro can’t contain promises or inflation

President Nicolas Maduro's administration has vowed to rein in inflation this year and on Thursday pledged on national television to auction 900 million dollars a week to companies to help with imports and combat shortages.

The central bank said September's price rises were driven by a 9.7% spike for housing services, a 6.6% jump for alcohol and tobacco, and a 6.3% increase for education.

Shortages of products ranging from corn flour to toilet paper worsened slightly in September versus the previous month, with the bank's “shortage index” rising to 21.2% from 20%.

Central bank officials have indicated that given the new circumstances they will revise the year-end target of between 15% and 20% set last year.

Heavy state spending in 2012, which helped Maduro's predecessor Hugo Chavez win re-election last year, followed by a devaluation of the Bolivar currency in February, have fuelled inflation in the country of 30 million people.

The government blames inflation on unscrupulous merchants arbitrarily raising prices of staple goods and basic services and has called on youth brigades to help keep track of prices in supermarkets and stores.

Maduro said the government will sell to companies 900 million dollars a week through an auction system that charges buyers more than the official rate. The system is expected to last until the end of the year. Since July the government sold 761 million through auctions.

However the big question is whether this will be enough since the country buys 70% of its goods overseas. Shortages fuel inflation (almost 50%) and caused the Bolivar to lose 60% of its value against the dollar in the black market this year.

The dollars will “complement any need the economy may have” through the end of the year, Maduro said. He added the government is revising the entire system of foreign exchange controls. Venezuela’s international reserves have dropped to 22.1 billion dollars, the lowest level in almost nine years, according to private estimates.

Maduro said the government provides 95% of the dollars importers need at the official rate of 6.3 Bolivar. The remaining 5% is supplied through auctions in the so-called Sicad system at an undisclosed rate, he said.

15 comments Feed

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1 jakesnake (#) Oct 11th, 2013 - 01:36 pm Report abuse
Viva la revolucion! Viva el papel higienico!
2 Pugol-H (#) Oct 11th, 2013 - 02:43 pm Report abuse
Take note Argentina, this is how bad it can get, and with worse still to come.
3 Kirk Nelson (#) Oct 11th, 2013 - 03:44 pm Report abuse
I could never, ever imagined that Carlos Salinas, Bill Gates and Mike Bloomberg are individuals with more money in their pockets than the 5th oil exporter country of Venezuela.
The speed of inflation in Venezuela is uncontrolled, because the temporary measures imposed by the government have no positive effect, to the contraty, local and internationl investment has decrease, while inflation quickly acelerates monthly.
Dolarization will be the only measure that will stop inflation, because the Central Bank of Venezuela will not be able to print any more currency bills as it is doing now, which in effect helps the encrease inflation rate.
If the country receives 85 Billions USD per year, why its inflation rate is 49%? If its monetary reserve is around 22 Billion USD and 70% of consumer goods are imported , that is including refinery goods, while loosing direct investment initiatives and incentives due to Bolivar's currency devaluation, and public and private credit operations are very limited, the question is; how long this ugly financial motion can continue?
Best and only option is Dolarization.

Kirk Nelson,
New York, USA
4 Optimus_Princeps (#) Oct 11th, 2013 - 04:25 pm Report abuse
@3 This is why all my friends from Venezuela left years ago.
5 Brasileiro (#) Oct 11th, 2013 - 08:10 pm Report abuse
@ 3

Things tend to improve in Venezuela. Venezuela is now part of Mercosul.
Therefore, dollarization is not a valid option.
6 ChrisR (#) Oct 11th, 2013 - 08:16 pm Report abuse
I think the Americans should withdraw the right of Venezuela to use the Dollar.

“They” hate them and want nothing to do with them so let us see how long the government and the stupid Maduro voters last after that.

Yes, there will be a train wreck, but it is coming anyway and it cannot be any worse. Once a creditable government (an oxymoron re Venezuela) is in place the Dollar can be reinstated.
7 Brasileiro (#) Oct 11th, 2013 - 08:32 pm Report abuse
América? South-América, North-América or Central-América?

Migrate from Bolivar to the dollar is migrating from nothing to zero.
8 jakesnake (#) Oct 11th, 2013 - 08:53 pm Report abuse
@5 - Tend to improve? Huh??

@7 - America. Enough said.
9 Anglotino (#) Oct 11th, 2013 - 09:18 pm Report abuse
Chavismo needs to collapse under a Chavista president.

Thankfully it is. Though it will take a generation to fix the economic scars, it is worrisome that it could take longer to change the mentality (a la Argentina).
10 The Chilean perspective (#) Oct 12th, 2013 - 05:51 am Report abuse
@3 Kirk Nelson.
The causes of inflation are the best understood monetary phenomena in the world of economics. I'll spell them out . If the money supply (the total amount of physical currency and other liquid assets in the economy) is substantially higher than the output (the products and services in the economy) then you will have inflation. The larger the gap the higher the inflation you will have. HOWEVER, this does not apply to the United States who has the monopoly to print the worlds official currency. They are the only ones that can print astronomical amounts of new money (currently >85 billion per month) and overcome the money supply vs output issue simply because China and others accept their freshly printed money and exchange it for output. So it's the same as if they were producing that output domestically as they are paying for it with domestically manufactured money. This scam can only last as long as the providers of output are prepared to take these freshly minted greenbacks.
11 yankeeboy (#) Oct 12th, 2013 - 11:18 am Report abuse
It makes me happy when Socialism collapses an economy and society.
I hope the same happens to all the Alba nations plus Argentina.
12 Conqueror (#) Oct 12th, 2013 - 11:35 am Report abuse
@5, 7 The essence of “civilisation” is production and progress. Latam is sadly lacking. Difficulty in manufacturing a sad fart. Although tinboy, Correa, Maduro, Morales and Mujica do their best. Pity their “best” is crap. Still, they are a reasonable joke. Always good to have a laugh. And they provide them. Virtually non-stop. Tinboy the tit. Correa the corpse. MADuro. Morales the moron and Mujica the brainless ex-terrorist.
13 Dany Berger (#) Oct 12th, 2013 - 01:28 pm Report abuse
It's makes me chuckle when I minority can close down a slowly dying country from a radical extreme right.........all over healthcare.

The USA's new creed changed from “Don't tread on me” to

”decrease social spending, increase military......WTF........let's make war!!!

It the last 60 years.....has there been a republican that ever diplomatically avoided war......of not started one?

USA.........the new THUGS in the world. You cannot fight off the world forever unless you change your ways. Learn from all the war mongering empires throughout history before it is too late.
14 yankeeboy (#) Oct 12th, 2013 - 02:43 pm Report abuse
Dany are you mad that another Socialist Utopia is falling apart and dragging millions into abject poverty and crime?
I think it is funny you've never learned that is how Marxists Dictators stay in power
My only conclusion is you are one of part of the unwashed masses that believe you can get something for nothing.
Sometimes you gotta learn the hard way
I think it is fantastic.

We have learned from the Great Empires and I'd be happy ruling the world for 500-700s years like they ones did. That's a pretty good ride and we are only just beginning better get used to it.
15 Anglotino (#) Oct 12th, 2013 - 09:31 pm Report abuse
It's makes me chuckle when I minority can close down a slowly dying country from a radical extreme left.........all over incompetence.

But it's alright, Maduro and his cohort won't be in power forever. Venezuela will rise again.

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