Our friend and reader Island Canuck sent me a while back his final numbers for inflation in 2010. Recall that at the end of June the expat sent us his numbers and inflation was running at a 30% clip for the first half of the year. Well, despite the fact that there was no devaluation in the second half of 2010, his food and beverage index essentially doubled in 2010 as you can see in the table below. Note that most vegetables had triple digit increases in the year (They are mostly produced locally). Note also that things that are not available had small increases. Any insights by readers are welcome.
The Devil's Excrement 
February 12, 2011 at 12:52 pm
[…] On the left below, a “good” shelf, that one with grains and imported can goods, lost of soy sauce and olives have reappeared on the shelves, something I had noticed was getting scarce. I guess Sushi and Gran Martinis’s can still be made.On the right, about the only healthy looking area: That of fruits, vegetables and greens. Most of this stuff is produced locally and not subject to price controls, therefore you can find plenty of almost everything, another example of supply and demand and market forces at work. Of course, these products rose in price in triple digits in 2010 as reported by the Island Canuck Index earlier. […]
January 25, 2011 at 9:07 am
To borrow A_Antonio’s word, I can actually see Chavez’s departure becoming a nightmare. I mentioned the suppression of inflation. In truth, there are so many distortions in the economy right now, that many inefficiencies and other problems are being artificially suppressed to some degree. Someone (individual or group, doesn’t matter) attempting to unwind those could possibly set off a massive explosion, so to speak, economically.
While this – the unwinding – needs to happen for there to be any real long-term hope for the future, the challenge will be to avoid the explosion. Job creation will be absolutely essential in this. I also believe that will be impossible without significant foreign investment. (As Chavez has impoverished Venezuela, there isn’t a lot of ability to do it, certainly not on the scale needed – and the longer it takes, the more that will be true.) But the problem is that current investors in Venezuela are getting robbed, some by outright expropriation, others by having their investment value crumbled by various means (devaluation, price controls, employment rules that limit hiring/firing and therefore maximixing productivity, and many more).
So how do you create jobs and fix things while resolving these massive debts to investors? I think there has to be an enormous sales pitch to these investors, convincing them first that investing heavily in Venezuela will reap dividends. That could be the easy part, but for one factor which I will mention momentarily. The second part will be harder: persuading them to write down the debt that Venezuela owes them.
Because here is that other factor – the spectre of a Chavez return, or a popular swell to reinstall someone like him (if he is for some reason unable to return). You know, someone who promises a quick fix, because the current situation is unbearable. Never mind that it’s impossible, because you cannot deny that some people everywhere want it and believe in it. That would place investments at great risk. And the economy will be a ticking time bomb – really, only new jobs can alleviate that, I think – and the bigger the debt owed to various businesses is, the harder it will be to dig the country out of its deep, deep hole. That’s why the debt part will also be essential. The less the future is mortgaged, the less chance of an explosion. Or at least, the smaller it will be when it happens.
January 24, 2011 at 8:50 pm
Mora, sharp eyes.
Yes it’s 27.2%
January 24, 2011 at 8:15 pm
Is there a missing decimal in the Act II popcorn rate of inflation rise under the snacks section? I think it should be a 27.02% rise instead of a 2702% rise unless there’s a dot I can’t see.
January 24, 2011 at 7:25 pm
Kepler and some others that may want to see the photos of gasoline / food smuggling between Tachira y Cúcuta.
http://www.jansochor.com/photo-essay/contraband.html
Note, these quality photos are copyright protected and the personal property of the blog owner.
And a map of petrol distribution divided by population giving a potentially sky high figure for border gasoline consumption would certainly be interesting.
It’s probably classified. Someone needs to read through the other 99% of the wikileaks…
January 24, 2011 at 5:37 pm
Having a nightmare, after read last comments: How much will be the inflation index if: Statistical National Institute (INE) does not manipulate the data, without price control and without currency controls?. 😦
January 24, 2011 at 4:32 pm
“Remember that the 1996 inflation figure was partly influenced by the removal of currency controls.”
Of course, sanity does not return in a flash, and might well be very shocking to those experiencing it’s return.
January 24, 2011 at 2:06 pm
As your name, interesting observation.
January 24, 2011 at 1:50 pm
“we have like two years in a row with big devaluations. At that pace you can figure out the outcome”
In general terms, but not in specifics. Remember, with price controls and currency controls, a significant portion of the devaluation needed to reach equilibrium is being artificially suppressed. Remember that the 1996 inflation figure was partly influenced by the removal of currency controls.
January 24, 2011 at 12:27 pm
I found an average of 20$ per barrel in 1996 and 70$ in 2010, another favorable point to Gracía Banch conclisions.
January 24, 2011 at 12:14 pm
An interesting article in elunivesal.com from a PHD in economy about Venezuelan inflation (I don’t like put the links), the article title is “La Mayor Inflación del Planeta”, (The biggest planet inflation) from Dr. Ángel García Banchs.
In this article, for example, compare inflation in worldwide perspective between the inflation in 1996 (103 %) and in 2010 (27 %).
In 1996 Venezuela have the 6th higher, last year was the first higher worldwide (well, I do not know if the author include Haiti and another African country in this rank). Also, would be interesting compare the prices of oil in 1996 and in 2010.
His conclusion, Chavez has the worse administration in inflationary matters in Venezuela History and in the present time, worldwide.
January 24, 2011 at 11:32 am
To prevent inflation you should have a serious and successful economy confirmed with the absence of big devaluations.
Venezuelan’s economy fails soundly; we have like two years in a row with big devaluations. At that pace you can figure out the outcome.
January 24, 2011 at 10:46 am
To do that you have to control the growth in M2 and stop taking international reserves to the Fonden.
January 24, 2011 at 10:43 am
Excellent job, Island Canuck. Though I agree with the comment by Mike E. that it would be more accurate to consider that an average household might buy many more kilograms of tomatoes than of bell peppers.
Also, the comment by captainccs is quite telling the tale,
“The price of food in US dollars has not changed in 20 years. What has changed or rather, what has remained constant since Black Friday, is that the government steals the people’s buying power by inflating the currency at a rate of approximately 30 to 35 percent per year since Black Friday. In this democracy and dictatorship have been equally thieving.”
This kind of monetary “administration” cannot continue if we want Venezuela to become a normal enough country, or people to become prosperous.
Before instituting another program of giving freebies, before ANYTHING ELSE, ending double digit inflation and insuring monetary and financial stability IS A SINE QUA NON for reducing and ending poverty.
It is not the only the only one, but still IT IS INDISPENSIBLE and probably more important than most of the other conditions.
January 24, 2011 at 10:15 am
I know for a fact that there’s smuggling of food in the Falcon/Dutch Antilles area. Back and forth that is!
The peñeros sell harina PAN, plantains, etc. They bring back Dutch cheese and whiskey. I wouldn’t be surprised if larger boats smuggle gasoline.
January 24, 2011 at 9:40 am
I thought the other side of the trip would be FOOD for thought also. Nice pun Kepler.
January 24, 2011 at 2:47 am
Mick,
Petrol smuggling has been the livelihood of many thousands of Venezuelans for many years now.
The Wayuu people smuggle petrol as one of their main activities.
There are many thousands of Venezuelans and Colombians who cross every day in the different sectors all through Táchira, Apure and Amazonas (by boat) with petrol to make a living. The same thing happens in Gran Sabana.
And then there is a very important flow from Sucre via boats and even from Margarita.
I would not be surprised if there is a lot of that from Falcón to the Dutch Antilles as well.
It would be interesting to see a map of petrol distribution in Venezuela. PDVSA must (or should) have something like that so that one could find out how much petrol is delivered to what municipio.
That would be an eye-popper. We won’t have that kind of information, though. It would be really fuel for a lot of talk.
January 24, 2011 at 12:57 am
Off topic, but OMG, this guy has gone off the deep end:
http://globalresearch.ca/index.php?context=va&aid=22917
January 23, 2011 at 9:41 pm
If I recall correctly, gasoline prices in Colombia are international ones or almost international ones, we are talking 3 bucks a gallon versus 8.5 cents per gallon in Venezuela, times 40 gallons, its like $120 bucks, minus 3.2 bucks cost.
January 23, 2011 at 9:32 pm
Seriously. How much money could you make if you had a little four cylinder fit with a 40 gallon gas tank that you bought in Venezuela and sold in Colombia? Then on the return, buy a normal amount of groceries to bring home. Not a car load, just normal for a family so as not to be suspicious. Even if you had to include bribe money, I bet it would very lucrative.
January 23, 2011 at 9:22 pm
If prices keep rising, food and gasoline smuggling will displace drugs in profitability.
January 23, 2011 at 8:45 pm
Today’s price for 2 liters of Pepsi at Central M: 8.2 Bs
That’s an exact correlation to the real exchange rate.
January 23, 2011 at 7:05 pm
F… the official inflation rate, the important index is the index that you suffer, and food infation is the main stream index suffering for plain people.
January 23, 2011 at 6:17 pm
Inflation is a monetary phenomenon in the end, Venezuela’s M2 has increased by a factor of 10 since 2005, without a commensurate increase in goods and services, that is, there are ten times more Bolivars in circulation chasing after a small increase in the supply of goods and services. Thus, prices go up up, but Giordani does not understand that concept.
As for the alcohol, if people consume it, it has to be part of the index.
January 23, 2011 at 6:11 pm
Excellent job and a real effort to keep this going for a year. My own experience in Los Palos Grandes (Excelsior Gama) indicates that Island’s prices look very high – especially for vegetables. Some of these prices make it obligatory to shop at Mercal and PDVAL to save some pennies and not drink alcohol. Still I guess it is the private sector pushing up the prices rather than the government, but that’s inevitable in what is bascially a capitalist system with plenty of free enterprise and Venezuela’s inflationary sickness since Black Friday in early 1983 which has still not yet been cured. No matter – if inflation as defined by IC is 59.7% then I will just put up my prices by 70% – end of story.
January 23, 2011 at 3:20 pm
Mike E:
You are correct. This is not an INFLATION index.
As you point out it is just an increase in prices however it is an indication of what we all feel every time we go to the supermarket.
It also indicates that the manipulated number provided by the government is total bull hooyey.
January 23, 2011 at 3:14 pm
Outstanding job, island canuck!
What I am going to say is not an attempt to rain on your parade, but it seems to me that we have to be careful to throw around this number of 59.7% as Venezuela’s inflation, because it is simply the mean of a series of products (i.e. sample population) that is not statistically weight adjusted.
I don’t know on what products the typical Venezuelan “basket” or budget is based on, but it would have to be taken into consideration to have a more meaningful statistical mean. The outcome might well be that the number is actually higher, supported (in my case) by the empirical information I am getting from people living in Venezuela stating that “prices have more than doubled from a year ago”.
January 23, 2011 at 2:23 pm
Everyone should be reminded that inflation and price increases are not the same thing, even though they are related.
In this case, part of the price increase is simply due to increased costs due to new punitive government regulations, corruption, and deteriorating infrastructure. The currency inflation component of the price increases may actually be only 30%. The remaining 20-30% of the price increases are due to the government’s policies that make it harder and less cost effective to do business here.
It is worth noting that the agricultural produce items that have more than doubled in cost are labor intensive to produce. Items that are a straight importation with minimum local labor are more likely to have increased in line with official inflation.
January 23, 2011 at 2:00 pm
Island,
Good job. Looks like the Island Canuck Inflation Index will soon be as famous as the Big Mac Index.
January 23, 2011 at 1:33 pm
It is sad that I left the country 3 years ago, and inflation problem do not change, I always make there all the buys of products to my home, and always felt that real inflation double official rate.
January 23, 2011 at 12:57 pm
I might remind people that these are prices here in Margarita Island and are not subject to IVA. It also creates more shortages due to delivery problems from the mainland.
The vegatable & fruit prices are probably higher due to the rains in late November & early December but 250%?
I also agree that some of the products I have marked as not available may in fact be available at a corner store or from a street vendor.
I was trying to restrict both the prices & availability to a large supermarket however the reality is that we must spend hours searching for products if you haven’t stocked up.
I will use these Jan prices for the base for 2011.
My prediction is that it will be higher inflation this year regardless of what our economic ministers are predicting. My guess is 70%.
January 23, 2011 at 12:52 pm
That is why I find the 30% laughable.
Take my VW crossfox which I am selling as I leave the country. I bought a 2008 model some 3 years ago. I bought it for 50k Bs. I am selling it with 80k kms for 110k Bs. Even on the black market, I am making more money then I purchased it. Reason being there are so few new cars coming in and demand is so high for newer cars.
Seriously, even if inflation was only 30% each year, and with three years 90%, my car should have lost some 40% of its value, or more the first 3 years. Hear it simply more then doubles.
The new cross fox is being sold for 190k is what my VW dealership told me when I took my car in for regular maintance. Meaning in three years the cost has tripled. Mind you they were only to get 1 last year.
January 23, 2011 at 12:52 pm
The Economist maganize (“The World in 2011” issue, page 121) reports an inflation rate of 40.3% for 2010 whereas Venezuela’s Central Bank reported 26.9% (though depending on which report you look at in “http://www.bcv.org.ve/blanksite/c2/indicadores.asp” you get a slightly different number).
The official inflation rate (< 30%), if it were true, already would not only be the highest in Latin America, but currently one of the highest in the World.
And you ask yourself, is it that the "bozal de arepa" (i.e. Mercal, cheap gas, etc., etc., etc.) works so effectively that there really isn't a clear prospect for Chavez to be defeated in 2012?
January 23, 2011 at 12:25 pm
When you put this against the latest news that 69% of Venezuelans are now poor http://english.eluniversal.com/2011/01/21/en_ing_esp_bad-news-for-venezue_21A5022771.shtml its very grim. Looking just at items that use to be produced in country and were very cheap they are now higher than here in the US and from as far away as Chile and Argentina.
January 23, 2011 at 11:34 am
[…] This post was mentioned on Twitter by Democracy News Ven and Venezuela Blogs (en), News Watcher. News Watcher said: Island Canuck inflation Index closes at 59.7% in 2010 http://bit.ly/i7dYvi #tcot #p2 #news […]
January 23, 2011 at 10:44 am
Congrats to Island Canuck! he finds a lot of products cheaper than I do…
Examples:
Pantene Shampoo = over 30Bs, on sale!
Ketchup Heinz = over 5Bs
Pringles = over 22Bs
Green Peppers = over 50Bs
Avocado = Bs44
Anyway, great job! I do concur that local produce -be it vegetables or fruits- is way too expensive. Not to mention that we cannot eat fish without expending a fortune -having, what I guess is the largest Caribbean coast-.
I always wonder how on earth is the inflation calculated -yeah, yeah… they average a lot of data- but groceries is the item that takes the biggest chunk in the budget of any Venezuelan household. Of course, I’m not talking about well off people thou.
January 23, 2011 at 10:26 am
Miguel:
Last week I bought a box of 100 bags of Lipton tea and a jar of French’s mustard. I even found the brands of coffee I like. Patience and hoarding will supply your pantry quite well. Of course, there is no wheat flour not even for the love of money. Powdered milk was available in December but it’s gone with the Old Year. During December canned tuna was scarce but is now back on the shelves
Ever since I came back from the US in 1990 I have been comparing prices by checking out the cost of my usual supermarket shopping cart which changes little from week to week, month to month and year to year. In bolivares, prices are skyrocketing. I get upset at the increasing prices and then I do a quick check of what it cost me in parallel dollars. Would you believe that it has been between $100 and $125 a cart for the past 20 years? The price of food in US dollars has not changed in 20 years. What has changed or rather, what has remained constant since Black Friday, is that the government steals the people’s buying power by inflating the currency at a rate of approximately 30 to 35 percent per year since Black Friday. In this democracy and dictatorship have been equally thieving.
Capitalist vs. Socialist Chickens
http://softwaretimes.com/files/capitalist%20vs%20socialist%20chickens.html
January 23, 2011 at 10:12 am
Holy shit.
January 23, 2011 at 9:58 am
What can we hope for now….we are really dead this year.