Shortages, soaring prices: What's not to love about Chavez?

McClatchy NewspapersFebruary 3, 2009 

CARACAS, Venezuela — Desiree Pereira couldn't decide among the squash she was squeezing at a food stall here on Tuesday.

Pereira expressed no uncertainty, however, when asked about the Venezuelan economy under President Hugo Chavez.

"Prices are always going up, and salaries can't keep up," said Pereira, a 30-year-old computer programmer. "It's time to give someone else a chance."

Inflation of 31 percent — easily the highest in Latin America — and continuing food shortages are presenting major problems for Chavez as he asks Venezuelans on Feb. 15 to lift term limits so he can run for re-election indefinitely. Food prices alone rose by nearly 50 percent in 2008. Government price controls kept down energy costs and electric and telephone rates.

Chavez is making a determined defense of his 10 years in office as he campaigns across Venezuela, noting that he inherited an economy in recession in 1999 and has overseen an economic boom. During his tenure, the percentage of Venezuelans living in extreme poverty — those who subsist on $1 a day or less — has been halved, government statistics show.

In an economy that's increasingly dependent on oil revenues, Chavez has used the windfall from record-high oil prices to spend billions of dollars to offer free schooling and health care and to sell food to the poor at below-market prices.

The number of retirees receiving pensions also has risen sharply, from about 387,000 in 1998 to nearly 1.3 million in 2008, according to the government.

These subsidies — now imperiled by the collapse in oil prices — have made him a slight favorite to win the upcoming referendum.

"The situation here is good, thanks to Comandante Chavez," said John Fernandez, a 55-year-old real estate broker, as he bought a couple of pounds of shrimp and squid Tuesday at the Quinta Crespo public market. "Thanks to him, the poor eat three times a day. I hope he stays in power a long time."

If Chavez wins the Feb. 15 referendum, he'd seek re-election in 2012 to another six-year term.

While polls show that rampant crime is the public's biggest concern, inflation and the country's economic problems rank high, said Oscar Schemel, a Caracas-based pollster.

Analysts think that Chavez has called the referendum now because Venezuela's economy is slowing rapidly. Venezuela grew by 8.5 percent in 2007 but 4.9 percent in 2008. Caracas-based economic analyst Pedro Palma is forecasting negative growth of 1.5 percent in 2009 and overall inflation of 45 percent.

Asdrubal Oliveros, chief economist for Ecoanalitica, a Caracas-based consulting firm, blames Chavez's heavy hand and heated rhetoric for the rising prices.

Chavez's spending, Oliveros said, has left Venezuela awash in money. Paradoxically, however, Venezuelan and foreign companies aren't investing to expand production to meet the increased demand.

Oliveros said consumer demand rose about 20 percent per year for each of the past two years, but production rose by only 8 percent. A 40 percent per year increase in imports covered the difference.

Rising inflation is the result.

"Businesses view Venezuela as having a hostile investment environment because of Chavez's constant attacks on the private sector," Oliveros said.

Business owners were apoplectic after Chavez decreed on Sunday that all establishments had to close on Monday to celebrate his 10th anniversary in power.

Chavez has attempted to fight food inflation by having government officials require that meat, chicken, milk and dozens of other products be sold at artificially low prices. Government agencies also sell food at below-market prices in poor neighborhoods.

The measures have had some success, said Ylva Mora, who heads a Caracas-based non-profit that tracks inflation.

"But the poor feel the price hikes when they can't buy the subsidized food," Mora said, adding that while 15.6 million Venezuelans bought subsidized food in 2005, only 9.9 million did in 2008.

Like many food sellers, Manuel, who didn't want his last name used so he could speak freely, blamed the government's price controls for chronic food shortages.

"It costs me 11.3 bolivares per kilo to buy meat," Manuel said, as butchers carved up part of a cow behind him. "The government requires us to sell this for 11.9 bolivares per kilo. I can't make money doing that. So I sell only 10 percent of the meat to the public and sell the rest to restaurants that pay me 18 bolivares per kilo. As a result, customers here can't find the meat they want."

There are 2.2 pounds per kilogram and a little more than 2 bolivares per dollar.

Tito Ramos, who runs one of the dozens of food stalls at the Quinta Crespo market, said the products currently in short supply are sugar, white rice and coffee.

A year ago, they were milk, eggs and cheese.

Jose Pena said he typically runs out of chicken by 11 a.m. every day from a lack of supply.

"I had to lay off two of my three workers last week because I'm not earning enough money," Pena said.

Maria Rondon, who was putting her food purchases into a cloth bag, lamented that she couldn't buy white rice on Tuesday.

"The price has gone through the roof," Rondon said. "It was three bolivares per kilo before. Now it's 6.5 bolivares per kilo."

Rondon doesn't blame Chavez for the price increases, however.

"The food sellers are the problem," Rondon said. "They are multi-millionaires. Chavez is the only one who cares about the poor."

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McClatchy Newspapers 2009

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