Venezuelan Inflation Soars

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http://online.wsj.com/article/SB10001424127887324094704579067712446832226.html

CARACAS—Venezuela's soaring inflation, spurred on by a battered currency and grocery shelves running out of basic goods, climbed in August toward its fastest pace in decades, as the summer's end saw students preparing to return to school.

The central bank on Tuesday reported that the 12-month inflation rose to 45.4% in August from 42.6% in July. On a monthly basis, inflation slowed to 3.0% in August, after rising 3.2% in July.

The annual pace was the quickest under a new methodology introduced in 2008 to track consumer prices, and was among Venezuela's highest readings since hyperinflation struck in the mid-1990s.

While Venezuela's inflation rate stands among the highest in the world, many experts believe that rising consumer prices are biting deeper than indicated by official data because the leftist government caps prices on many basic goods.

Recently elected President Nicolas Maduro has blamed an alleged conspiracy, led by the country's opposition and Washington, for weakening the country's currency in an outlawed parallel market that is, nonetheless, the dominant reference point for merchants. In the black market, Venezuela's currency is trading at over six times the official peg of 6.3 bolivars per U.S. dollar.

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1. Venezuelan food prices report highest leap in 16 years

The figures of the Central Bank of Venezuela (BCV) show the population suffers the highest prices in food and non-alcoholic beverages in the last 16 years, the effects of which impact low-income families who spend most of their income in food.

Based on an assessment on prices among Venezuela's main cities, food price shot up 42.4% in January-August, the highest increase since 2008.

According to Caracas' consumer price index, the prices of food and non-alcoholic beverages jumped 41.1% in January-August, a record high in the first eight months of a year since 1998.

The most significant increase is reported in seafood with 65.4% in Venezuelan major cities, followed by agribusiness and agricultural products, at 42.5% and 41.6%, respectively.

http://www.eluniversal.com/economia/130911/venezuelan-food-prices-report-highest-leap-in-16-years

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2. Venezuela's economic, political woes knock its currency to its knees

Venezuela's official exchange rate for its currency, the bolivar,… (Juan Barreto / AFP/Getty…)BOGOTA, Colombia — Capital flight, political instability and misguided attempts to rein in double-digit inflation are being blamed for the weakening of Venezuela's currency on the black market, where it has fallen more than 75% against the U.S. dollar since April.

The sharp drop in the value of the bolivar has occurred as economic problems grow more acute for President Nicolas Maduro, the late Hugo Chavez's handpicked successor, and political divisions between Chavistas and the opposition become wider and more violent.


The official exchange rate is 6.3 "Bs" to the dollar through government agencies, although that price is rarely available. Venezuelan individuals and businesses needing dollars for foreign travel or to import goods and services generally must resort to the black-market exchanges.

Alejandro Arreaza, Latin America economist for Barclay's Bank in New York, said the government had fed the inflationary fires by beginning to print huge quantities of money last year, money used to underwrite voter giveaways aimed at boosting Chavez's popularity during his reelection bid in October and Maduro's bid in April.

In addition, he said, capital flight is underway, with Venezuelans desperately trying to acquire dollars to deposit or invest offshore for fear that even greater devaluations are on the way. Also seeking dollars are the increasing numbers of Venezuelan companies and individuals uncomfortable with the country's socialism and looking to cash out and move elsewhere.

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"The slowdown in economic growth, high and persistent inflation and high levels of scarcities [of basic foodstuffs] will combine to make Venezuela's the worst-performing economy on the continent, despite the extraordinary oil boom that the country is still benefiting from," Puente said.

http://articles.latimes.com/2013/aug/15/world/la-fg-venezuela-devalue-20130816