Thursday, September 4, 2014

Why are Venezuela’s Supermarkets so Empty?

By Matt O'Brien

Venezuela's supermarkets don't have enough food. Or toilet paper. Or, well, anything really. And that's why the government is about to start fingerprinting people to ration goods.

But why can't an oil-rich country even keep its stores stocked? Well, it's the price controls, stupid. They always and everywhere create shortages. Here's why they have done so in Venezuela.

1. The government is running a massive deficit, around 14 percent of GDP, that it's financing with the printing press. The problem, of course, is that money is worth less when you create more of it to pay your bills. So it's not surprising that Venezuela's inflation is officially 60 percent, and might actually be as high as 300 percent.

2. But the government thinks it can wish away this inflation with currency and price controls. Here's how they work (or don't). There's an official exchange rate of 6.3 bolivares per U.S. dollar that only the government and its cronies have access to. Then there's a second tier for the slightly less connected at 10 bolivares per dollar. A third one at 50 bolivares per dollar for those even more on the outside. And finally, there's the black market exchange rate—emphasis on the word "market"—that tells us it should really be something like 68 bolivares per dollar. In other words, political insiders can get dollars for ten times cheaper than almost everybody else.

Venezuela strictly controls prices, too. Everything from milk to sugar to, yes, toilet paper has an official price that stores aren't supposed to change. Of course, sometimes they do. But the Maduro regime has promised to inspect them even more closely to put an end to these market prices.

3. Now, anytime you try to suspend the law of supply and demand like this, you'll get shortages.

Read the rest here.


  1. Why is there an intelligent person writing on WaPo?

  2. Re: Wags,
    ---"Why is there an intelligent person writing on WaPo?"---

    It may have been a breach in security.

  3. #venezuelan government will never progress without changes to the economic failure of their 21st century socialism. So sad to see these incompetent thieves robbing the country to bankruptcy.