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Venezuela faces the highest inflation in Latin America

The food climbing cost is one of the highest in the region

In a 12-month term, foodstuffs soared 47.3 percent despite price control (File Photo)

Economy VÍCTOR SALMERÓN
EL UNIVERSAL

Between May 2007 and May 2008, inflation in Venezuela rose to 31.4 percent, the highest rate in Latin America. Indeed, official numbers show that during the same period, Mexico accrued 4.95 percent, Peru 5.39 percent, Brazil 5.58 percent, Colombia 6.39 percent and Uruguay 7.2 percent.

Nicaragua, with an inflation of 21.74 percent, and Bolivia, 16.84 percent, are the countries in the hemisphere closer to Venezuela in this regard.

While rising food prices are striking the whole world, the Venezuelan unbalance is out of range. Over the past 12 months, food prices in Caracas skyrocketed 47.3 percent, compared with 9.73 percent in Colombia, 19.4 percent in Chile, 22.74 percent in Costa Rica and 9.2 percent in Peru.

Under the siege of inflation and economic slowdown from 8.8 percent to 4.8 percent in the first quarter, Venezuelan President Hugo Chávez announced last week a number of measures.

In order to contain prices, the remedy was to remove the financial transactions tax. This levy forced businesses to pay USD 0.7 out of USD 46.6 mobilized through their bank accounts, resulting in the direct transfer of the costs to end users.

While this step was viewed as positive, analysts deem it purely circumstantial; that is, inflation will possibly go down from step four to two, but will continue on the rise next month.

Last year, thanks to the VAT rebate, inflation in March stood at 0.7 percent. However, in April and May resumed its upward trend as it increased 1.4 percent and 1.7 percent, respectively.

The disease
Stuffed with petrodollars, the Chávez's government injected large doses of money in the economy, resulting in an excessive demand that has fueled inflation.

In order to curb the escalation, the national government regulated the costs of a wide variety of commodities; but then production was strongly discouraged and shortage prevailed in markets and stores.

Lashed by foods in short supply, the Ministry of Finance has had no choice but to okay adjustments of 30-84 percent in staples, including poultry, rice and corn flour -a move that makes an impact on the low-income sector.
vsalmeron@eluniversal.com

Translated by Conchita Delgado


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