MercoPress. South Atlantic News Agency

Venezuelan devaluation drives prices upwards

Regulations and restrictions on foreign currency transactions make people prefer black market deals

Unofficial reports in Venezuela speak of an increase of around 33% in mass-consumption products after the US dollar went up against the local Bolivar and local consumers increasingly prefer black market deals.

Oscar Meza, head of the Venezuelan Teachers Federation's Center for Documentation and Analysis (Cendas-FVM), said mass-consumption products had increased by around 33% one week after the increase in the exchange rate.

“You can force the formal sector to buy and sell at the official dollar price, but the informal sector also has a very big weight in Venezuela, and there the exchange rate is between 8 and 10 bolivars,” he said.

Meza said the inflationary problem in Venezuela seemed to stem from the need due of more international reserves to sustain currency parity. He added that accurate assessments were impossible in the absence of reliable data.

He also said it finally appeared that the government had understood at last finally assimilated that the exchange rate played a part in retail prices, only now they were trying to mascarade it.

“In a country where there is no investment because there is no credit, it is very difficult to achieve sustained growth in which companies can give better salaries, based on production and productivity,” he said.

Meza added that inflation problems hitting the world in addition to the pandemic and the war in Ukraine were also affecting Venezuela “because most of the products are imported, and in the case of producers, fertilizers and this type of necessary inputs must be paid in dollars.”

He also noted that the costs of gasoline and diesel oil must be taken into account, in addition to corruption at checkpoints where producers must pay to be able to move their merchandise. “All this has an impact on the final costs of the products,” he said.

Meza also pointed out that despite the lack of credits in the country, producers have been able to get ahead and there are no shortage problems, but the fear of once again lacking basic products as in recent years remains.

Meanwhile, the Banco de Venezuela has announced it would only allow cash withdrawals in US dollars in amounts of 100 and above, which has resulted in clients being unable to cash out their assets below that amount.

Authorities have recommended users go about the issue through electronic platforms, although foreign currency is available starting at US$ 1. Clients who can buy but who cannot withdraw went angry on social media saying that all these regulations and restrictions, in addition to taxes on each transaction, make people prefer black market deals.