Venezuela’s devaluing bolivar drives black market in essential goods

Venezuelans who can pay for imported goods head to stores such as Cine Citta, located in the middle-class Colinas de Bello Monte district in the southeast of the capital, Caracas.

In the upscale districts in the east of the city, there are other small stores selling imported goods. Here, half a kilogram of rigatoni pasta can cost as much as $2, bearing in mind that the black market rate is around 1,400 bolivars to the dollar. At the end of October, Cine Citta was selling a five-liter bottle of fabric conditioner for 33,000 bolivars.

The government blames the crisis on falling oil prices and internal opposition

To get some idea of the cost to the average Venezuelan, in dollar terms, the minimum wage was $15 a month until last week. The bolivar has fallen in value to the dollar by more than 100% over the last year. A decree issued at the end of October supposedly raised the minimum wage 40% to 90,000 bolivars, which at the black market exchange rate is around $65. But that will soon shrink, say observers, due to the falling value of the currency.

Little wonder that there are few lines outside stores like Cine Citta, which sells a packet of 192 Huggies diapers for 120,000 bolivars. The same packet on Amazon would cost just over half that, if you have the dollars to pay for it.

The government’s strategy is to allow supermarkets to import goods in a bid to win the support of the country’s poor by selling them subsidized food. Since the middle of October, a government order has required companies to sell half their output to so-called Local Supply and Production Committees that provide food to the needy when they can, “so as to combat and win the economic war of destabilizing sectors.”

Because most Venezuelans can’t afford imported goods, they have to depend on these government-run markets and stores that sell essential goods at the regulated, cheap prices. That’s why the country is seeing food lines stretching for multiple blocks.

Observers say that outlets such as Cine Citta are able to sell at high prices because they have connections in government. Provinces bordering Colombia and Brazil also sell imported goods. This summer, thousands of Venezuelans poured into Colombia to buy essential foodstuffs.

Most Venezuelans can’t afford imported goods, and depend on government-run markets

The crisis is due in large part to collapse of oil prices after 17 years of petroleum-fueled prosperity. Now Venezuela’s economy is considered by the International Monetary Fund as one of the worst in the world and, consequently, medical imports have become too costly to buy.

Venezuela’s embattled President Nicolás Maduro raised gasoline prices and devalued the bolivar in February. In January, he introduced a state of economic emergency.

Maduro defended the measures as being necessary to save the economy, which is expected to contract 8% this year after a 10% drop last year. The government blames the crisis on flagging oil prices and a concerted effort by the country’s business elite to wreck the socialist revolution begun by his predecessor Hugo Chávez.

English version by Nick Lyne.