Venezuela raised government-set price caps on some food products by as much as 48 percent even as President Hugo Chavez’s government struggles to contain one of the highest inflation rates in the world.
The government raised the price on cans of powdered milk 48 percent to 23.7 bolivars ($5.50) and on corn oil by 36 percent, according to a resolution published today in the Official Gazette. The costs of sunflower oil and mixed vegetable oil were also raised.
Venezuela, a net importer of food, avoided raising prices caps following a devaluation of the bolivar earlier in the year in a bid to stave off an inflationary spike. Food is the principal driver of inflation in Venezuela, according to the central bank, and consumer prices may climb more than 4 percent in April with today’s decision, said Boris Segura, a Latin America economist at Nomura Securities International.
“That’s the problem with price controls - they are unsustainable,” Segura said in a phone interview from New York. “The trigger is a devaluation but the reality is that Venezuela has severe inflationary inertia.”
Consumer prices in Venezuela rose 27.4 percent in March from a year earlier, the most among 78 economies tracked by Bloomberg. Prices rose by 5.2 percent, the most in seven years, in April 2010 from a month earlier after the government raised price caps on dairy products and cheese.
The International Monetary Fund forecast inflation in Venezuela will accelerate 29.8 percent to 31.3 percent in 2011, according to its World Economic Outlook report released this month.
Chavez devalued the bolivar for the second time in less than a year in January by weakening the exchange rate on so-called essential goods such as food and medicine by 40 percent to 4.3 bolivars per dollar and unifying the two fixed foreign-exchange rates.
The government, which controls the price of more than 100 basic food goods, raised price caps on bread and pasta last month by as much as 33 percent.