Venezuela with the highest increase in food prices in 12 years

[Bacchus39]

http://english.eluniversal.com/2009/01/26/en_eco_esp_venezuela-with-the-h_26A2206211.shtml

Venezuela with the highest increase in food prices in 12 years
In 2008, food prices soared 46.7 percent, which is higher than the increases during the domestic economic and political crisis that prevailed in 2002 and 2003

Climbing food prices have a greater impact on low-income households (Photo: Nicola Rocco)
Economy
Shrinking purchasing power in Venezuela is hitting people at cash registers in supermarkets, grocery stores, bakeries and any kind of store selling food and non-alcoholic beverages.

According to official data, in 2008 the cost of food skyrocketed 46.7 percent, that is, foodstuffs that were purchased, in average, with VEB 100 (USD 46.5) in 2007 cost VEB 146.7 (USD 68.23) in December 2008. This was the highest increase in the last twelve years.

In fact, the inflation rate in 2008 was much higher than the increases in food prices during the toughest years of the country's political crisis. In 2002 and 2003, years in which the activities of the private sector virtually came to a halt, Pdvsa froze production and there was a coup attempt, the rise of food prices ranged between 39.5 percent and 36.3 percent.

The negative effects of soaring food prices on households are not the same for all social sectors. While in high-income sectors people use 15 out of 100 bolivars of their revenues to buy food, low-income sectors use 45 out of 100. Therefore, the economic imbalance mainly affects the least favored groups of the population.

Economic illusion
The government of President Hugo Chávez has tried to minimize the impact of the increase in food prices on the population. The ruler said that the data issued by the Central Bank of Venezuela do not take into account the effect of Mercal, the socialist food distribution network for the welfare of people, where the inflation rate is reportedly zero.

Chávez claimed that for "thousand families that buy food at Mercal, the inflation rate of foodstuff was far below the average inflation rate as measured by traditional methods. In fact, the inflation was zero in some items," he said.

However, according to data from the official National Statistics Institute (INE), published by the Ministry of Information, Chávez's statement is not true.

INE figures show that the price of the official food basket, which includes the food items consumed by a Venezuelan household comprised of 5.2 people, increased in Mercal as well.

According to the INE data, the official food basket increased 199 percent in four years, from VEB 299.2 (USD 139.16) in January 2004 to VEB 895.1 (USD 416.33) in December 2008. The official food basket, without taking into account Mercal stores, rose from VEB 299.2 (USD 139.16) to VEB 989.8 (USD 460.37) during the same period.

Therefore, in December 2008, the savings made by the people who buy in Mercal totaled 10.5 percent.

Chávez's government injected a significant part of the oil windfall to the economy, thus pushing demand up in a climate of poor supply, which in turn fueled inflation.