By Ricardo Fuentes-Ramírez
Retrieved from http://www.populareconomics.org
A burning street barricade (Roberto Gil)
The violent opposition protests that erupted during February 2014 in Venezuela are difficult to comprehend relying only on the mainstream media. One of the main sources of this difficulty is the significant number of exaggerated, manipulated, or uncorroborated social media postings. These postings are best exemplified by the number of images from police brutality from other countries that are shared claiming they are from Venezuela in order to discredit the current government. Steve Ellner’s article on Green Left and Pablo Vivanco’s article on BASICS News are recommended in order to give some context on these protests and their aftermath. However, another complicated subject is the economic problems that are mentioned as the causes of these protests, specifically inflation and basic good shortages. Therefore, it is useful to go over some articles that discuss these issues in more depth.
Inflation has always been a problem in Venezuela. As Gregory Wilpert explains, during the 1990s, annual inflation rates averaged around 50%. However, under the Chávez government the trend was finally turned around, with inflation going down to an average 22% per year. Nevertheless, it has continued being a problem. The main cause of inflation is having an oil-based economy. Wilpert explains, “Venezuela receives an influx of petrodollars that basically come into the economy and raise the level of wages and raise the level of prices in a way that heats up inflation.” What the media fails to mention, as Tamara Pearson has emphasized, is that “the government regularly (once or twice a year) increases the minimum wage to match inflation levels, or higher than them, and the informal sector increases its prices to match inflation as well,” so “people’s purchasing power has actually increased significantly under the current government.” In other words, even though there is inflation, Venezuelans’ purchasing power is actually increasing, not decreasing.
The other issue mentioned is shortages of basic goods. Many news sources have tried to give the impression Venezuelans are close to starving. However, as discussed by Ryan Mallet-Outtrim, “food consumption increased by 80% between 1999 and 2011,” while the United Nations Food and Agriculture Organization “awarded Venezuela for halving hunger within its territory between 1990-1992 and 2010-2012.” Similarly, Oliver Levingston notes “Venezuela’s average caloric intake has gone from 91% of recommended levels in 1998 to 101.6%” so “the average Venezuelan went from being under-fed to exceeding their recommended calorie intake within the space of decade.” Nonetheless, it is true that basic goods like corn flour, milk, and toilet paper are in and out of stock at unpredictable rates. So while Venezuelans aren’t going to be out of flour for more than a few days, you can’t plan to bake a cake next week because maybe there won’t be any (See Pearson’s The Scarcity Diaries).
So what’s behind this occasional scarcity? Is it just bad government policy? Not exactly. In fact, scarcity is mostly fueled by deliberate actions taken by wealthy Venezuelans, which as the government has denounced, are nothing less than an economic war waged against the people. As Levingston explains, private food producers and importers deliberately hoard and engage in investment strikes in order to undermine support for government policy. As evidence of this practice, Levingston mentions some of the numerous cases of government inspectors discovering tons of hoarded food. In early 2008, 13,000 tons of hoarded food were found in two weeks of state inspections. In March 2009, the government nationalized a rice-processing plant after it found 18,000 tons of rice hoarded in warehouses. He adds further evidence lies in the fact that scarcity moves so closely with the electoral calendar, it is difficult to argue it is not, at least in part, by political design. As an example, he mentions one of the periods of greatest shortages were the months prior to the December 2007 referendum. Similarly, “in the lead-up to April 2013 elections, scarcity and disinvestment skyrocketed,” and between the two general elections from November 2012 and June 2013, more than 40,000 tons of hoarded food were uncovered.
In terms of wealthy Venezuelan importers, these usually take advantage of the government’s currency controls in order to acquire US dollars at low rates with the pretense of importing goods for consumption in Venezuela, but instead sell these dollars in the black market. Of what they actually import, as Wilpert explains, between 30% to 40% is smuggled out of Venezuela. Furthermore, what they do offer in stores for consumption in Venezuela is overpriced at black market exchange rates, instead of the exchange rate at which they actually imported it. Tamara Pearson gives the actual example of what she calls one of her few vice foods: Pringles. At the rate at which importers acquire dollars from the government, Pringles should cost close to $2.20. However, they mark up the price according to the rate at which they are selling dollars in the black market, so they actually sell for $15.70! Thus, these wealthy Venezuelans fuel both inflation and shortages in the country.
Why are rich Venezuelans sabotaging their own country? Since the election of Hugo Chavez, and continuing with the presidency of Nicolas Maduro, government policy has been designed to democratize not only the political structures of the country, but the economy as well. The poor Venezuelan masses, for the first time in history, have benefited from the country’s vast resources; they have had substantial access to education and health care, and they have been politically empowered, both through traditional political structures as well as new ones, such as the innovative Communes. As the poor working masses have been empowered, the rich have been proportionately disempowered. Thus, wealthy Venezuelans have engaged in political and economic war, through the media and through their resources, to avoid further democratization of Venezuelan society. In a nutshell, that is what’s going on Venezuela.