Consumers Scramble in Venezuela Amid Shock Economic Shifts

January 11, 2012
By Beatriz Lecumberri

CARACAS — Venezuelan consumers emptied supermarket shelves and jostled Monday to buy new TVs and refrigerators before prices soar after President Hugo Chavez announced a huge devaluation of the bolivar.

Photo: Members of the Venezuelan National Guard stand guard in one of the aisles at a supermarket in Caracas. (AFP)

"We have sold three times as much as normal," said the owner of an appliance shop in Caracas, as panicky buyers formed long lines outside stores following Chavez's announcement.

As an election year grinds into high gear, Chavez has said he was devaluing the local currency for non-essential imports to 4.30 bolivars per dollar -- double the present rate -- while holding the rate at 2.60 bolivars for basic goods to help poorer Venezuelans.

That means imported cars and industrial goods suddenly cost twice as much as before the jarring step was taken.

Chavez warned Sunday that any price speculation by shopkeepers will trigger business seizures, and called on the National Guard to help people fight price gouging.

"To those gentlemen, let's call them looters of the people... If they want to, go ahead and do it, but we'll take their business and hand it over to the workers," Chavez said on his weekly radio and television talk show "Alo Presidente."

Still, consumers here were not feeling comforted.

And refrigerators, TVs, microwaves and sound systems were flying off shelves.

"Pretty soon, they are all going to cost twice as much, but I am not going to be earning twice as much," said a systems analyst waiting to buy a new TV set he had had in mind for months. He asked that his full name not be used.

"Really, I am not sure of the price is going to go up not, but just in case I came down here to get my oven," said Rosaura Martinez.

Confusion was rampant in many businesses Monday.

One travel agent said there were no sales as it was not clear if ticket prices would rise 100 percent or if the increase would be phased in.

Even currency traders were not up to speed on the shifts.

One well-known currency agency had workers standing with their arms crossed; they indicated that there was no dollar trading for now.

Photo: A member of the Venezuelan National Guard patrols one of the aisles at a supermarket in Caracas. (AFP)

The bolivar's devaluation was the first since 2005, and was designed in part to bolster public finances that have withered amid dwindling oil revenues and a rapidly contracting economy.

Critics said the move would allow Chavez to boost public spending ahead of elections in September, but would severely damage the health of the economy.

Since coming to office, Chavez has sought to remake the Venezuelan economy, vowing to create a more equitable, socialist system.

He has initiated a string of nationalizations of foreign firms, banks and measures that have sent inflation soaring to 25 percent -- the highest in Latin America.

The government official gazette, meanwhile, published details Monday of the multiple exchange rate system following Friday's devaluation announcement.

Among the announcements: Venezuela's central bank will determine the exchange rates at which it will obtain hard currencies to service foreign sovereign debt with international financial institutions or other countries.

"Acquisition of hard currency to service capital, interest, guarantees or other collateral for foreign debt with any foreign creditor (of the state) will be done at the exchange rate set by the presidency and the Central Bank," the text reads in part.

In the current dual exchange rate system, Chavez has said health, food imports, machinery, books and technology sectors, as well as public sector imports and remittances would benefit from the preferential rate.

The higher exchange rate would apply to items such as automobiles, telecommunications, tobacco, beverages, chemicals, petrochemicals and electronics.

The largest oil producer in South America, Venezuela slipped into a recession in 2009 for the first time in six years due to a drop in oil prices and production.