For years, the socialist government of Venezuela has imposed price controls that appear to artificially– and arbitrarily– make some necessary goods impossible to find while making useless luxuries accessible. Never has the situation been as chaotic as this year, experts say, when the market has been flooded with Canadian pines and barbie dolls, but flour and milk remain luxuries.
Reuters reports that the Venezuelan government’s imposed currency controls– perhaps stricter than ever given the plummeting price of oil and the ongoing holiday season– have launched the market into chaos, as the Bolivar currency is fixed to be worth different amounts depending on the product on which it is used. The news agency explains:
Maduro’s government maintains three exchange rates assigned to different types of products: the best rate of 6.3 bolivars per dollar for food and medicine, an intermediate rate of around 12 called Sicad I for less important goods, and a “complementary” third rate of around 50 called Sicad II.
For comparison, they note that, in the black market, a dollar is worth 173 bolivars, likely a more accurate estimate of the real world, free-market value of that currency.
The exchange rates have created a situation where expensive spirits and luxury items are extremely easy to purchase. For example, earlier this year, President Nicolás Maduro announced the release of “Socialist Barbie”— a $2 Barbie imposed by the government that threatened to put shopkeepers out of business. Along with Scotch and other non-essentials, this is much of what traffics in the legal markets of Venezuela. Meanwhile, hospitals and clinics struggle to find basic necessary items, and Venezuelans are creating their own economy of “pop-up” street markets to buy items ranging from laundry detergent to vegetable oil.
Asdrubal Oliveros of Caracas-based consultancy Ecoanalitica tells Reuters the economy is in “complete disorder,” as the government is attempting to hide shortages by choosing specific coveted, yet non-essential, items to force sellers to provide on the cheap. “They’ve provided subsidized currency for things like toys and clothes to create the sensation that they are relieving shortages,” he explains.
Meanwhile, the price of oil– Venezuela’s most valued commodity, continues to drop in the international market. According to the Wall Street Journal, “the price of credit-default swaps on Venezuela debt, a type of insurance, indicate a 61% chance of default in the next year and a 90% chance in the next five years.” In interviews with BBC, Venezuelans note that they have noticed a difference in difficulty of acquiring basic needs since the price of oil began dropping: the cheaper the barrel, the longer the lines in stores for important basic goods.
Economics and political experts see no easy solution to the Venezuelan crisis, as it is more than a decade in the making, a product of socialist Chavismo as much as any international developments regarding the price of oil. Because Maduro’s government has focused more on targeting “counterfeiters” and accusing Colombia of meddling in their marketplace than in trying to get the free market to flourish, it is difficult to see the situation improving in the near future, resulting in the worst Christmas yet for Venezuelans under Chavismo.