Recent articles about Venezuela draw attention to the lack of basic goods in stores. People can hardly find groceries in supermarkets and the situation has gone to such an extent that nervous purchases have generated an unnatural sharp increase in demand. But what is the root cause of this phenomenon and does the United States have anything to do with that, as we are used to hear when it comes to Venezuela?
What stands behind the food shortage in Venezuela
Since April this year, Venezuela is facing a scarcity index of 21.3% for consumer goods, according to Banco Central of Venezuela which means that people cannot find a specific item at 21 out of 100 retailers. Although a common misunderstanding states that 1 in 5 goods is not available anymore in the whole country, this is not true. The scarcity index is used to measure the rate at which surveyed retailers have specific items out of stock. The index therefore is not a measurement of how many different goods are in circulation, but rather, how they are distributed.
So the decrease in agricultural production that could have been blamed as the main reason why people have difficulties finding food cannot really be considered. Actually, FAO statistics indicate that domestic agricultural output has marginally improved between 2010 and 2011. It is true that the land seized by the Venezuelan government sits idle because investments are redirected to other industries at the expense of agriculture. However, as the Minister of Commerce Alejandro Fleming states, ‘there is no deficiency in production, but rather an excessive demand which has generated nervous purchases in the population.’
If we want to go at the very heart of the food shortage problem in Venezuela, we have to name inflation or, even better, the inflationary psychology. On one hand, the economy relies heavily on imported goods, given that 74.3% of the goods consumed are imported, as the BCV informs. On the other hand, almost every imported good requires the US dollar, yet the exchange rate is strictly controlled by the Venezuelan government, which limits the amount of US dollars people can buy. This entails the development of the black market with an exchange rate of almost 40 Bolivars for 1 USD. According to the Venezuelan economist Luis Zombrano, ‘it’s the black market, not the government exchange rate, that’s setting prices’. He also added in an interview with Public Radio International, that ‘where the people believe the value of the USD is going to be, the rate at which they think it is going to increase, this is the rate at which inflation increases, and not the official government rate.’
Moreover, when a situation goes like that for almost ten years, it’s not surprising that people in Venezuela fight each other in food stores for the last arepas, their traditional flatbread, not necessarily because they are starving, but because they fear the prices will increase, so they are overbuying. It is the pure illustration of the inflationary psychology: in times of higher than average inflation, consumers have a higher likelihood of buying things because they assume goods will cost more tomorrow than they do today. This artificially increased demand only exacerbates inflation.
Where the geopolitical games come into play
The Venezuelan President Nicolás Maduro also thinks that food shortages are artificially induced, but he blames the CIA and the opposition for that. He thinks that the two forces are working together to sabotage him. Not only has he instated a council to inspect private companies and to prevent them from decreasing production, but he has also expelled three US diplomats from Venezuela, accusing them of having bribed companies to cut down production.
The fact that the Venezuelan leader allegates again the Unites States for a major economic problem they face is something neither new, nor unusual. In addition to the food shortage, it is worth mentioning the water crisis or the power cut that left most of Venezuela without electricity for about three hours in September. What is surprising is that the Unites States acted in response and expelled at its turn three Venezuelan diplomats.
In fact, the tense relations between Venezuela and the United States date back in the times of the former president Hugo Chávez who was elected in 1999. In 2002, Chávez was briefly removed from office by a coup d’état that Venezuelans were persuaded as having been tacitly approved by the United States. Later on, during the Obama administration, both countries declared their intentions to improve diplomatic relations and continue to cooperate against the production and transit of illegal drugs.
In spite of the stated desire of cooperation, Nicolás Maduro broke off diplomatic relations when he expelled the three US diplomats from Venezuela. He also claimed that officials from the State Department, the National Security Agency, the CIA and the Pentagon started working on a plan called ‘Total Collapse’, intended to destabilize Venezuela.
To put things in perspective, whether the relations between the United States and Venezuela did not change significantly when Nicolás Maduro came to presidency, what did change was the share of forces between the leading chavistas – the left-wing ideology, supporting the ideas of Chávez – and the opposition, the so-called ‘dos mitades’ (two halves). Professor Javier Corrales at the University of Massachusetts Amherst talks about a symmetry that was instated in Venezuela with the last presidential election. It was the first one since 1998 with an electoral tie between the two parties.
Finding themselves in a position of mutual check-mate, as the economist Mancur Olson points out, the chavistas under Nicolás Maduro and the opposition supported by the Unites States might find it rational to move towards a conciliatory position. Or, on the contrary, they might attempt to weaken each other’s power even more, taking hasty measures like the recent expulsions.
In conclusion, whether the recent food shortage problem that Venezuela is facing is a form of sabotage from the Unites States or not, the leading chavistas party would gain more if they worked on decreasing inflation and eradicate the bolivar black market, than engaging in geopolitical games with the Unites States and increasing tension with the opposition.