A cheap US dollar prompts imports

In the light of an official exchange rate at VEB 4.30 per US dollar since January 2011, whereas inflation in Venezuela overtakes that of its trade partners, imported goods are cheap and the demand of foreign currency skyrockets.

The numbers of the Central Bank of Venezuela (BCV) signify that between May 2011 and May 2012, the wholesale price of domestic goods has accumulated an 18.8% hike, compared with 10.9% for imported goods.

Cheap imports have helped to meet a good deal of the rising consumption, bolstered by the Venezuelan government through a huge injection of public spending.

However, while imports have soared, up to 32.6% of the overall supply versus a 25% average over the past 10 years, the economy asks for more foreign currency. Thus far, the Foreign Exchange Administration Board (Cadivi) has been unable to allocate the necessary US dollars.

Cadivi, the agency entrusted with the allocation of foreign currency at the official exchange rate of VEB 4.30 per US dollar, reported that in the first five years of 2012, USD 9.4 billion was endorsed for imports, a 3.5% drop versus USD 9.7 in 2011.