Hunt for Food Sends Venezuelans to Colombian Border Towns
Venezuelan taxi driver Jose Sotomayor drives four hours through army checkpoints every week from the city of Maracaibo to buy rice in Colombia for his family at 10 times the government-set price back home.
“You can’t get anything in the shops here, I don’t even bother going to them for basics anymore,” Sotomayor, 39, said in a phone interview. “All of our food is taken to Colombia, it’s like a locust plague.”
Sotomayor hasn’t seen rice for sale in the shops of Venezuela’s second-largest city since July, as smugglers snap up the staple for a maximum of 7.2 bolivars ($1.14) per kilogram, just $0.11 at the black market exchange rate. While many Venezuelan shelves go bare, the country’s rice exports to Colombia have doubled this year and now represent 11 percent of the market, according to the U.S. Foreign Agricultural Service and Colombian rice growers association Fedearroz.
The bolivar’s 73 percent decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue. The government will weaken the official exchange rate before the end of March for the third time since 2009, according to all 14 analysts in a Bloomberg survey.
A weaker bolivar reduces Venezuelans’ purchasing power by making imported goods more expensive.
“To reduce demand and lower consumption, the government needs to devalue,” said Efrain Velazquez, president of the National Economic Committee, a group of academics and business leaders created in 1946 to advise the government. “Regulated goods are just too cheap to stay on the shelves.”
Under a decade-long system of currency controls, the government provides about 95 percent of dollars in the economy to selected companies and individuals at 6.3 bolivars per dollar. The exchange rate on the illegal black market is about 64 per dollar, giving foreigners and Venezuelans with access to dollars about 10 times more bolivars for their currency.
Maduro said at a Dec. 30 news conference that he will create a unified exchange system in 2014 to provide “foreign currency at a fair price for the functioning of the economy.” No further details were provided.
To reduce shortages, the central bank today offered importers of products including rice, flour and pasta the opportunity to buy $90 million in an auction this week, without saying what the exchange rate will be. The rate used in a previous auction was 11.3 bolivars per dollar, almost half the official rate.
As import costs rise, the government will be forced to gradually raise food prices, Asdrubal Oliveros, director of Caracas-based consultancy Ecoanalitica, said via e-mail today.
Venezuela’s economic growth slowed to 1.6 percent in 2013 from 5.6 percent a year earlier, Maduro said. The average yield on Venezuelan bonds has climbed about 5 percentage points to 13.8 percent in the past 12 months, the highest among 50 emerging markets in JPMorgan Chase & Co.’s EMBIG index. The benchmark dollar bond due in 2027 fell to 75.82 cents on the dollar as of 3:30 p.m. in New York.
Price controls introduced by Maduro’s predecessor Hugo Chavez in 2003 to boost nutrition among the poor have fueled demand for staples such as flour, rice and milk as shoppers snap up products whose prices don’t change amid 56 percent annual inflation, the highest in the world.
Dozens of people take shifts to line up outside supermarkets in Maracaibo, a city of 2.1 million people located 800 kilometers (500 miles) west of the capital, waiting for the next delivery of regulated goods. The new stock is bought up as soon as it hits the shelves, leaving shops barren of products such as meat, grains and toilet paper.
The goods are then loaded onto trucks and taken to Colombia. Many of these professional shoppers are native Guajira Indians dressed in bright floral-print dresses who have double nationality and are exempt from border controls.
More than 300 trucks with everything from rice to car tires made the 130-kilometer drive from Maracaibo to the border through eight army and police checkpoints when a Bloomberg reporter did the journey on Nov. 10. Drivers of cars carrying food pay those staffing the checkpoints anywhere from 20 to 300 bolivars for quick passage, according to Sotomayor.
Some of the contraband is also used to launder money from the drug trade, said Colombian General Gustavo Moreno, director of the border police.
Maduro has urged citizens to abstain from “nervous buying” of imports, saying on state television Jan. 6 that “consumerism is an addiction that destroys the human being.”
Press officials at Venezuela’s Food and Information Ministries didn’t respond to e-mails and phone messages left by Bloomberg News.
Smuggling to Colombia is a greater problem in cities on Venezuela’s periphery. In Caracas, shortages regularly affect foods including wheat flour, corn flour and milk, while in Maracaibo it can be difficult to find any major grains.
Nationally, the central bank’s scarcity index was 22.4 percent in October. That reading, the highest since January 2008 and up from 16.1 percent a year earlier, means that more than one in five basic goods were out of stock at any given time. The bank didn’t publish scarcity data in its latest report on Dec. 30.
Price controls and increased food imports helped boost the caloric intake of the average Venezuelan by 50 percent during Chavez’s first 12 years in office, with rice consumption surging 70 percent, according to the National Nutrition Institute. Using the country’s oil wealth, Chavez cut poverty in half before his death from cancer in March, according to the World Bank.
As demand rose and production stagnated, Venezuela moved from being a net rice exporter in 2006 to importing 44 percent of its needs in 2013, according to estimates in a Nov. 1 report by the U.S. Department of Agriculture.
Nicaragua and Guyana sent Venezuela 315,700 tons of rice in 2012, 53 percent more than the previous year, in payment for oil supplies, according to the latest report from state-run Petroleos de Venezuela SA, known as PDVSA. PDVSA operates a national chain of supermarkets which sell a kilo (2.2 pounds) of rice for 7.1 bolivars, near the maximum price allowed.
Sotomayor prepares for his trips by filling up the custom-fit out-sized tank of his rusting 1976 Chevrolet Malibu with the world’s cheapest gasoline at home for about 4 bolivars. After stocking up on food and medicine unavailable at home, he heads back to Venezuela on a highway choked with hundreds of empty trucks ready to reload for their next cross-border journey.
“It’s an endless caravan,” said Sotomayor. “The price difference is so great, no amount of soldiers can stop it.”