AC in NC writes:
While I would not deny that the private sector might be doing something to add pressure on the system, I don’t think that is the root cause. The government price controls, starting with currency valuation and gasoline subsidy, are the reason for the inflation.
I know there will be an objection that rice is different from gasoline or that the private sector is not allowed to sell gasoline. But just as an example, how could the private sector import gasoline and make a modest profit selling it for US$0.60 per gallon (recently raised from US$0.06)?
The cost of imports is not going to be related to the official exchange rate. It’s going to be related to the black (free) market exchange rate. What does the private sector have to exchange with the world to pay for those imports?
My understanding is that you can make a modest profit on price controlled goods. Also only some things are price controlled. Anyway the private sector has refused to import or make any price controlled stuff anyway, so why are they complaining that they are being forced to sell at a loss? They’re aren’t selling any of that stuff and they never have, so how could they be selling at a loss?
It is also my understanding that the government dollars are perfectly sufficient to buy whatever you want. In other words, the government gives you $500,000 to import stuff, you can go out anywhere in the world and get $500K worth of goods for that.
I don’t see what the gas subsidy has to do with anything. Gas is sold at a very, very cheap price in Venezuela. How is this dirt cheap gas fueling inflation? Inflation is caused by high prices, not extremely low prices.
The government recently devalued the currency somewhat but not nearly as much as it needs to be devalued. Nobody wants to devalue their currency as it can cause all sorts of problems and it is a sort of a sign of defeat and waving the white flag of surrender. So I would agree that Maduro has completely blown it by not letting the currency float. Devaluing the currency is a very tough decision decision to make and it would probably be very unpopular with the people. Maduro just did not have the guts to make a potentially very unpopular decision.
The private sector is drowning in money. They are making money hand over foot.
The stores are stocked to the rafters in the rich areas. There are no shortages of anything, not even one thing. You still think is a natural state of shortage.
The private sector gets government dollars to import products. Those dollars are very cheap and can be used to import whatever they want and they are very much sufficient to import whatever. The state gives the private sector the dollars to import stuff. Or maybe they sell it to them? Not sure how that works.
They import the stuff, but when they do, they divert a lot of it to the black market where they can sell it for a lot more, or they smuggle it out of the country to Colombia where they can get a lot more money for it. So there is your shortage right there. The private sector does not want to sell at normal prices on the normal market because they can make so much more money on the black market or smuggling.
Also increasingly the government would give them money to import stuff, and they would not even use the money to import things at all. In other words, they would not do what they said they were going to do with the money. Instead, they would take the cheap money and play games with it on the black market currency market while lying and saying they were using it to import stuff. So after a while, the government got very leery about giving out cheap dollars to import stuff with. Then the private sector started screaming that the government wasn’t giving them any money to import stuff with and that was the reason for the shortages.
If the shortages are not caused by an economic war, why are the shelves full in the wealthy areas? Nobody has any problems making money there.
If there is no economic war, how come before every single election since Chavez came into power, serious shortages of many different products would suddenly appear about 1-2 months before the election. Why did these mass shortages appear if there is no economic war?
If there is no economic war, then why after the Opposition won the latest Legislative elections, did many products formerly in serious shortage suddenly appear on shelves in large quantities all over Venezuela?
If there is no economic war, then why does the government seize huge warehouses full of hoarded goods all the time? They seize these warehouses constantly. Recently they seized a warehouse full of 21 million syringes that had been hoarded.
You say there is no economic war?