Sun, Jun 05, 2016 - Page 14 News List

Oil-rich Venezuela scrabbles for dollars, food, medicine

Venezuelans sometimes have to wait up to a year to get their hands on US dollars by official channels, amid inflation forecast to hit 700 percent this year and a bolivar that has fallen 60 percent since February

By Ernesto Tovar  /  AFP, CARACAS

Security forces clash with people trying to reach the Miraflores presidential palace to protest against severe food and medicine shortages, in Caracas, Venezuela on Thursday.

Photo: AFP

Julio Ribas suffers from high blood pressure.

If only Venezuela’s currency were as high, he might be able to afford some medicine for it.

Venezuela is short of drugs, and to buy some from abroad, Ribas needs US dollars — but those are in desperately short supply, too.

Ribas is just one of the countless casual victims of the economic crisis in Venezuela, where inflation and anger are rising as the currency falls.

“I put in a request a month ago for US$300,” the 55-year-old shopkeeper said. “I want to send them to my daughter who is working in Panama. I need her to buy me my blood-pressure medicine there.”

However, in the meantime, the value of his bolivars to the US dollar has fallen by more than one-third.

At the exchange bureau, employee Manuel Guevara tells Ribas he will have to wait up to two months more. No one knows how much the US dollar will be worth then.

The weaker the bolivar gets, the more people want to get hold of the stronger US currency because they can buy more with it.

That growing demand drives up the price of US dollars and weakens the bolivar even more. It makes Venezuela’s scarce food and goods even more expensive.

“They’ve had this inflation-depreciation spiral now for more than three years,” US economist Mark Weisbrot said.

It has been aggravated by a shortage of US dollars and the fall in the price of Venezuela’s oil exports, said Weisbrot, co-director of the Center for Economic and Policy Research in Washington.

In February, Maduro reformed the state-controlled currency system, loosening state controls on the bolivar.

He maintained the strong fixed rate for essential imports, but allowed the rate for other goods to float.

He hoped that would close the gap between that official US dollar rate and the black market rate.

However, since US dollars are so scarce, the black market remains king.

That rate is much higher — at about 1,000 bolivars to the US dollar, it is currently about twice the official floating rate.

However, it is the only way Venezuelan citizens and businesses can even hope to get hold of the dollars they need.

Venezuelan Minister of Industry and Trade Miguel Perez Abad said the bolivar was undergoing a devaluation that would help it “adjust to the economic reality of the country.”

For citizens waiting in line to buy rations of basic food and goods, it has driven up prices.

The government last year reported an official inflation rate of 180 percent for last year.

Economists at the IMF forecast the rate will hit 700 percent this year.

Venezuelan economist Luis Vicente Leon says February’s reforms can correct the imbalances caused by an artificial over-valuing of the bolivar.

However, “the problem is that in reality there is no supply” of dollars, Leon said. “There is an artificial shifting of currency by the central bank, which has set itself a target to devalue the currency.”

Economists estimate the bolivar has weakened by 60 percent against the US dollar since the February reforms.

The way the exchange rates are being managed is a mystery to some analysts.

“The mechanism, like those before it, is very opaque,” Anabella Abadi of the consultancy group ODH said. “There is no information about how exchange rate decisions are being taken.”

The official floating rate is gradually edging closer to the black market rate.

“That is good for the market, but it is rising for no apparent reason and is applied to a limited range of currencies. That makes it a marginal system,” Abadi said.

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