Huffington Post interviewed LatinAmericaGoesGlobal editor Chris Sabatini on the economic situation in Venezuela.
We read a lot in the press about Venezuela’s unusual currency system, which can be confusing to outsiders. What is the Venezuelan government trying to do?
Basically there’s a three-tiered system and a black market system. At the top tier, the rate is about seven [Venezuelan] bolívares to the dollar, while on the black market it’s about 300 bolívares to the dollar — so you can see the huge level of overvaluation of the bolívar. One reason they do it is they give food imports a generous rate. Venezuela imports almost all of its food. It imports a lot of things because the oil-based economy has squeezed out other sources of production. So they ensure favorable rates to hopefully make food available and cheaper for Venezuelan citizens.
How is it working out for them?
It’s working horribly for them. First of all, they have to spend a lot of dollars to keep that rate up. Consequently, their central bank is really strapped for hard currency. Second, it’s created a whole system of corruption — a three-tiered rate and a black market in which people, often times close to the government, are arbitraging these different rates. So people will claim they’re going to import, say, foodstuffs and get dollars at the official rate, the best rate, and then they’ll turn around and sell the dollars on the black market for 300 bolívares to the dollar. It’s a huge windfall, as you can imagine. There are huge opportunities for corruption.
We also see a lot of reporting about shortages of everything from corn flour to condoms. Why does Venezuela keep running out of things?
To read more, please follow the link: http://www.huffingtonpost.com/2015/05/17/venezuela-shortages-explained_n_7298426.html?1431886149