Venezuelan Inflation Soars Toward 30% as Shortages Mount

Venezuela Inflation Soars Toward 30% as Maduro Cuts Dollar Sales
Various denominations of bolivar coins and notes are arranged for a photograph in Caracas. Photographer: Meridith Kohut/Bloomberg

May 9 (Bloomberg) -- Venezuelan consumer prices soared the most in three years last month as President Nicolas Maduro’s government reduced dollar sales to importers and the central bank’s scarcity index reached the highest on record.

Prices rose 4.3 percent from March, the central bank said today, the most since April 2010 and faster than the 3 percent median estimate of nine economists in a Bloomberg survey. The annual inflation rate climbed to 29.4 percent, up from 25.1 percent the month before and the highest since August 2010.

“This has been caused by the government’s paralysis in distributing foreign currency,” Francisco Rodriguez, senior Andean economist at Bank of America Corp., said by phone from New York. “Inflation and scarcity will continue worsening.”

Venezuela’s government has only held one auction of foreign currency since introducing a new exchange system March 27, one month after it devalued the currency 32 percent. Fewer dollars for importers exacerbate shortages and push up the cost of goods that are available. Finance Minister Nelson Merentes said May 2 that 85 percent of the country’s economic problems would be solved “soon.”

The bolivar has declined about 33 percent on the black market this year, according to Dolar Today, a website that tracks the exchange rate on the Venezuelan border with Colombia. The currency currently trades at about 26 per dollar on the black market, compared with 6.3 on the Cadivi system reserved for importers of essential items, such as medicine.

The scarcity index, which measures the amount of goods that are out of stock on the market, rose to 21.3 percent last month, the highest since the central bank started tracking the measure in April 2009, according to the central bank report. Food prices climbed 6.4 percent in April, the bank said.

Shortages of basic goods risk worsening social tensions in Venezuela, said Rodriguez. The government alleges nine people died in the post-election violence on April 15-16.

To contact the reporters on this story: Jose Orozco in Caracas at jorozco8@bloomberg.net; Corina Pons in Caracas at crpons@bloomberg.net.

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.