Hypeinflated Arepa Index (HAI) Part VII: Inflation Accelerates

July 26, 2015

ArepaJulyI arrived to Caracas thinking that after the big jump in the price of my favorite arepa, the arepa de queso de mano (hand cheese, a uniquely Venezuelan cheese) in the last two months, there would be a lull and the pace of increase would slow down.

But it was not to be, the price actually jumped 46.7% since five weeks ago, a jump actually quite similar to that of the April to May change. At this pace (average so far in seven plus months), we would be at Bs. 675 by November 17, the first year anniversary of the index, which would be a 337% increase in the HAI (Hyperinflated Arepa Index) for 12 months, but since it is clearly accelerating (46.7% in 35 days is close to 5,000% per year!), we should see a higher number.

Since some people have asked, I eat this arepa, which is delicious and my favorite, at the same arepera close to where I stay in Caracas, in order to be consistent in the measurements.I will not say which one, to protect my source of these delicious arepas.

That prices are accelerating is very clear to anyone coming here. I always keep a few Bills  to buy stuff on Sundays at the Mercado Libre where I like to shop. I only buy three or four identical things. Well, lately, I have begun paying with credit cards, so as not to run out of cash.

A second observation is that I went to buy bread and there was none in my usual bakery, due to the lack of flour. And at a drugstore, full of empty shelves, I was told the “sought out” item of the moment is toothpaste, either because there are shortages, or because there are rumors that the price is going to jump up. I was also told that when this particular drugstore receives locally made toothpaste, a swarm of “bachaqueros” (the name given these days to anyone that lives off the arbitrage of regulated or scarce products) shows up, mostly in motorcycles, soon afterwards and buys the whole inventory.

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45 Responses to “Hypeinflated Arepa Index (HAI) Part VII: Inflation Accelerates”


  1. […] en los mismos lugares, para de esta forma llevar un control de la inflación del país, que según su blog, al menos en el caso de las arepas podría acercarse a un 5.000% por […]

  2. moctavio Says:

    The Hyperinflated Arepa Index (HAI) and the DEVIL make it into the WSJ:

    http://www.wsj.com/articles/in-venezuela-economists-improvise-to-track-economy-1439759978

  3. M Rubio Says:

    Getashrink, I’ll be glad to tell you some of what I’ve seen here re agriculture.

    Example 1: One of my first exposures to the insanity that is Venezuela occured years ago when I stopped to buy drinking wáter at a local establishment. Stacked floor to ceiling in one corner of the place were dozens of sacks of seed corn and several hundred sacks of fertilizer, urea, and boxes of herbicide and insecticide. Appeared to me to be enough to plant something close to a hundred hectares.

    I asked the owner how many hectares of corn he planned to plant and he replied that the material wasn’t his, “belongs to the guy across the street who got it on credit from the government”. When I pointed out that it was getting pretty late in the season to be planting corn he replied, “yeah, I know, but he doesn’t own any land to plant”.

    What?

    I’ve seen the above repeated dozens of times, almost always with the same result…..the material is eventually sold to others and the credit is consumed in the form of a bottle. Of course, no one is ever held accountable, ever. And if I’ve seen this play out here in my community dozens of times, you can imagine it’s repeated all over the country.

    Example 2: This área was once a thriving agricultural región. If you owned land but didn’t own the equipment to farm it, it was easy to find someone who would do the work for pay. Plowing, planting, fertilizing, and harvesting equipment and crews could all be leased to do the work by those who did own such equipment.

    The Chavez government, in its infinete wisdom, decided it could do this work more efficiently and at less cost by setting up local cooperatives. Well-connected Chavistas in each pueblo were given the money to buy the land and facilities to store equipment and then provided free of charge new tractors, plows, planters, fumigators, and even combines. The idea being to charge more attractive rates for the locals than what they could find on the open market. Those managing the business would keep a percentage of the earnings and pay the remainder to the government.

    The outcome?

    Today, I’d estimate that about 90% of this equipment sits in disrepair due to lack maintenance, lack of spare parts, abuse, neglect, and outright theft and fraud. What kind of fraud? An example. Last December when it was time to harvest my grain sorghum the fellow who usually does my work couldn’t because his machine was down and he couldn’t find the spare parts he needed to repair it. I called the local cooperative because I knew they had a harvester with a cutting bar to handle grain sorghum. The lady in charge told me that the government had removed their machine because it wasn’t getting enough use. I found that odd, but went on about my business of getting my crop harvested.

    Some months later I mentioned the story to a buddy of mine who’s connected with the local consejo comunal. He laughed and told me that those in charge of the local cooperative had actually sold the combine (a machine they don’t own) and that it was now several states over to the west. They were trying to recover the machine and would then change out the managers of the cooperative. Of course, no one will suffer because no one is ever held accountable for anything in Venezuela.

    Let know if you’d like to read my observations and views on PDVAL.
    .

    • Dean A Nash Says:

      Why work when it’s easier to steal? Here’s my 2 cents on the current situation: YOU AIN’T SEEN NOTHING YET. If you think this is rock bottom, you don’t know what rock bottom is. There is much more just over the horizon. See that cloud of dust? That isn’t from a drought, it’s from the depraved brutality that is coming. Why work when it is easier to brutalize? After that, you’ll be much closer to rock bottom. I’d say rock bottom is when you are eating the roots of trees and have about 2 hours per day of electricity (in the city).

      • M Rubio Says:

        Last night when I went to turn on the lights on the porch of my bodega, what a surprise. Someone had stolen the lightbulbs!!!! This was obviously done right under my nose yesterday while I attended customers.

        Lightbulbs btw, are another ítem that’s hard to find. This morning I removed them for storage inside until late today.

        What a country.

    • Getashrink Says:

      Thanks for sharing. I think it is important to make public this type of stories. One of the fairy tales chavismo has been trying to sell at home and abroad is how they have “improved and revolutionized agriculture” in Venezuela. This bullshit needs to be debunked by those who have seen the truth with their own eyes.

      “Let know if you’d like to read my observations and views on PDVAL.”

      Yes, of course, I would like to read about it.

      • M Rubio Says:

        Agriculture, like most other industries here, has almost been completely destroyed. How can you farm when you can’t find spare parts? How can you fuel your tractors when you’re stopped at checkpoints and your drum of diesel is confiscated, or worse, your vehicle? How can you plant when it’s almost impossible to find seed, fertilizer, herbicide and insecticide? What little of those ítems enter the country go directy to AgroPatria (formerly a fine private company known as AgroIslena), bought at greatly reduced prices by “socialist” Chavistas who have the right “documents”, and then resold for outrageous profits. Fertilizer and urea cost less than 200 bs at AgroPatria. By the time they reach guys like me, the cost is 800-1000bs. Revolution!!!!

        I spoke of leasing equipment in my earlier post. Last year while plowing my place to plant grain sorghum, I had mechanical problems with my tractor. Of course, I couldn’t find the parts I needed to repair it in time so I started looked for leased equipment. Spoke to a buddy of mine (former Chavista) who in the past did a lot of work for others with his equipment. He basically told me that it was no longer worth it to provide such services. “When I have equipment problems I can’t find the parts I need, and when I finally do, I have to pay an arm and a leg. In the end it costs more to repair the tractor than for what I was able to charge. And if I don’t get payment up front, I have trouble collecting what’s owed. Just not worth it anymore”.

        Later today I’ll try to post my observations and thoughts on PDVAL.

  4. Kepler Says:

    A friend, former upper middle class, told me he hasn’t found Harina Pan in months.

    • M Rubio Says:

      I have harina pan offered to me from time to time but I rarely buy it. It’s typcially offered to me by Chavistas and at a price well above the regulated price. It’s one of those products that’s so important to the average campesino here in the pueblo where I opérate my bodega that I don’t want to get crossways with the local consejo comunal because of pricing,

      For a long while I was buying “pacas” of spaguetti and rice from a bachaquera, but she finally gave up because the National Guard was stealing so much of her product. They’d stop her truck, look at what she was transporting, and then either confiscate a percentage for themselves or just outright extort her for money. And now with so many alcabalas, by the time she’d get here the trip was no longer worth it.

      As for agriculture, the stories I could tell would curl your toes. It’s almost criminal that the this country with so many resources is in the shape it’s in…..probably is criminal actually.

      • Ira Says:

        Wow–thanks for these insights.

        I feel your pain and hope things get better, but your comments are very valuable to us to know what’s going on on the street level.

      • Getashrink Says:

        “As for agriculture, the stories I could tell would curl your toes.”

        I would like to hear a couple of those stories, if you don’t mind.

  5. M Rubio Says:

    And for the record, here in my part of the country, the following ítems are extremelely scarce: rice, spaguetti, harina pan, cooking oil, flour, meat, poultry, fish, bread, sugar, butter, mayonaise, kétchup, bathing soap, clothes washing detergent, canned tuna, tires, and all repair parts for autos and trucks. Prices are increasing weekly and with only a rumor that something (anything) new is going to arrive at one of the chinese markets, long lines form and people wait of hours, sometimes nothing arrives. The country is a disaster.

  6. M Rubio Says:

    I had a conversation with a Chavista here at my bodega the other day after replying no hay, no hay no hay to his request for products. He made the comment that the reason there was no rice of spaguetti to be found anywhere is because it’s all being hoarded (that’s to say, hidden) in warehouses around the country. I pointed out that this government has had complete control of the country for over 15 years, including the exchange of dollars, the ports, the military, etc, How is it then that millions of tons of rice and spaguetti can be hidden in warehouses without the government’s knowledge?

    His response: Blank stare.

  7. amieres Says:

    When I visited recently what surprised me most was how empty the arepera that I frequent was. This place usually was very hard to find parking and it had a constant influx of people. The night I went it was practically empty, I have never seen it like that. It was eerie.

  8. Pancho Pazos Says:

    Mi viejo dice que la guerra ecónomica está por entrar en la fase kamikaze!

  9. Gioia Kinzbruner Says:

    Mi mamá siempre dice: esto se cae cualquier día, pero yo veo que la cosa empeora y empeora y nada sucede. Cuando van a tocar piso? no hay piso? quien compra una arepa a esos precios?

    • moctavio Says:

      Los paises no tienen piso.

      Yo compre la arepa ayer, mientras alguien lo haga, seguira abierta la arepera.

  10. Rafael Vicente Says:

    Diablo, lo de la arepa es la realidad que vivimos lo venezolanos, y en mi caso particular, me paso con las empanadas, en un Centro comercial del este, donde acudo los domingos a desayunar, la cual , paso de costar Bsf. 50,00 a Bsf. 90,00, un aumento de Bsf. 40,00 o lo que es lo mismos 80%, en solo 7 días, y en la hortalizas y verduras, los aumentos son hasta del 1000%.

    • moctavio Says:

      Yo empeze este indice por eso. Me asombre como subian los precios cada vez que me comia esa arepa, que era algo que hacia cada vez que iba, y decidi guardar un record de lo que pasaba.

      • Kepler Says:

        Miguel, but perhaps you are not the reference. Yo don’t get an average salary in Bs. Probably less than 5% of people in Eastern Caracas can earn what you do abroad.


        • And what does that have to do with the index?

        • Kepler Says:

          I placed the comment on the wrong sub-thread.
          It was meant to answer this:
          “Yo compre la arepa ayer, mientras alguien lo haga, seguira abierta la arepera.”
          Basically what I am trying to say is that you, Miguel, cannot keep all the areperas open in Venezuela…not even that one unless you really eat a lot of arepas.

    • Island Canuck Says:

      I think Kepler has gone a little unconscious after they named a planet after him. 🙂


  11. What percentage would you estimate of “bachaqueros” are chavistas?

    • moctavio Says:

      I imagine in the same proportion that Chavistas are part of the population. It’s Economics 101, people look out for themselves first.

  12. isabel salazar Says:

    The shelves in Margarita Island are full of toothpaste and nobody buys them….bachaqueros are busy with other items

  13. Island Canuck Says:

    One discussion we had this weekend with my Venezuelan family is that the seemingly high prices are not, in reality, high.
    They are normal prices based on comparable items in the world market at the real exchange rate posted in Colombia.

    The problem here is the distortions in prices between reality and the incomes of the people which are now around US$12 per month.

    The only way we are ever going to fix this is by eliminating all the controls.

    • Kepler Says:

      Canuck,
      You forget something: for the mean Venezuelan those prices are very high. The best way to gauge how pricey items are is to compare the amount of hours the average worker needs to work to buy them in that country compared to other similar countries.

    • Island Canuck Says:

      Kepler,
      I didn’t forget that.
      I pointed out that the disparity is in the stupid low sueldos that they are paid.

      The prices are actually quite reasonable when compared to international prices & considering that they have to be imported and a profit gained.,

      There are no more dollars available through normal government sources.

  14. Ira Says:

    Does the U.S. Government still
    pay farmers not to grow certain items, in order to avoid price collapses and assure sufficient supply?

    • Island Canuck Says:

      What does that have to do with Miguel’s post or Venezuela???

      • Ira Says:

        I was trying to make a comparison between VZ’s declined agricultural production as it relates to national farm policies, and policies in the U.S.

        I didn’t know where I was actually going with the question (what else is new?), but I thought it would lead to a relevant discussion on commodities availablility and price, like Harina Pan.

        I’ve read (okay, I saw on TV) that the U.S. has the lowest food costs on earth, when calculated with other economic factors.

    • W. Peden Says:

      Not to ensure supply, but to subsidise farmers, especially the rich ones, and prevent many of them going out of business due to the hyper-efficiency of US agriculture.

      • Ira Says:

        But if they go out of business, doesn’t that affect supply, as well as prices? In other words, you can’t really separate the categories, can you?

    • Nat Says:

      The U.S. has moved away from paying people not to plant with the exception of land that has environmental protection value. Examples of lands farmers can be paid not to plant are wetlands, lands next to rivers, and lands that will be converted into native grasslands.

      • Ira Says:

        Thanks, Nat.

        I always found U.S. agricuktural policy to be weird and interesting, because it’s turned out to be so effective.

  15. Roger Says:

    Go to any other city in the world and the price there is the global price for the same product. More common, local staples are lower cost being localy produced and often subsidized by the government to keep people happy. In Venezuela localy produced is long gone and the government has long since run out of subsidy. Now they want to take over the private markets to supply the Mercal. Problem is that all the stuff they want is imported and has to be paid with USD up front COD. It is obvious that the official exchange rate can not provide the import needs of the Venezuelan people and/or dark hairy hands that have a hand in the peoples food import funds. Venezuela has gone from being a food exporter to a food importer in a dozen years. I think I will stop before some think this is an anti-government rant or something!

  16. CarlosElio Says:

    I feel sorry for young mothers raising kids in that toxic place, many of them unemployed or with fixed incomes. To survive, most Venezuelans are developing skills with little value in a normal country. You may want to consider developing the index of tracalería and see how well it tracks the HIA


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