Venezuela's low foreign exchange rate fuels imports
The inflation rate recorded by domestic products is 5.4 points higher than that for imported goods
While Venezuelan entrepreneurs face a 20% increase in costs, inflation in the countries where Venezuela buys food, raw materials, and a wide selection of products does not exceed 6%.
As a result, according to the Central Bank of Venezuela (BCV), from January to November this year, the wholesale price of imported products swelled 11.4% due to the fixed exchange rate. Meanwhile, the price of domestic products jumped 16.8%, a 5.4-point gap.
When imports are cheaper than domestic products, this phenomenon is technically known as overvaluation. According to a study conducted by the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC), overvaluation has attained a substantial level in Venezuela.
For measuring such variable, ECLAC relied on the real effective exchange rate index, which measures variations in competiveness taking into account inflation and the foreign exchange rate of Venezuela's main trade partners. The higher the index, the better the country's competiveness; the lower the index, the lower the country's competitiveness.
From late 2010 through the second quarter of 2012, Venezuela's index fell 20 points, which means that the local currency was the most appreciated across Latin America and the Caribbean in such a period. Hence, imports are very attractive on the market.
Translated by Jhean Cabrera
María Fernanda Astudillo is a store analyst for Alimentos Polar working at the company's facilities in La Yaguara. At only 23 years of age, she has made a career in that company where she has worked for the last six years. Now, besides her responsibilities, which include overseeing shipping/receiving and warehousing of goods, she is taking part in the roundtable discussions among the other companies operating in the La Yaguara industrial park, the Government and the workers exploring possible ways of coping with the order to expropriate the land.