Prices in Venezuela have been skyrocketing in recent months, but not only in terms of Bolivars but also in terms of US Dollars. That might be the consequence of an implicit government policy designed to “equalize” the prices of goods and services to international prices but a lot of Venezuelans are realizing that things are going out of proportion and aren’t taking in consideration the Venezuelan salaries, which are way behind international salaries.
Based on a post on Facebook, from the famous Venezuelan blogger, Luigino Bracci Roa, the social media networks went crazy yesterday with a comparison he made in which he asked himself what is the cause of the hyperinflation and he goes through the normal market rules like: lack of production in front of a high demand and the illegal US dollar price and it’s effects.
He used the price of a 2 liters EFE ice cream from the Polar conglomerate in Venezuela (Bs. 44,640) and made a comparison:
- 44,640 equals US$69, DICOM reference.
- 44,640 equals US$53, DolarToday reference.
- 44,640 equals US$46, AirTM reference.
And then he compares the price with one from Walmart’s website where you can find a family size Blue Ribbon ice cream very similar to the one from EFE but almost double in size (3.78 liters) for only US$ 6.
Bracci wonders if there is a high demand of this products in Venezuela— which is very questionable— and then he asks himself how an ice cream that uses mostly only local ingredients can be affected by the illegal dollar price.
At that point he states that he believes those unbelievable prices are POLITICALLY motivated and even in the event Polar receives subsidized dollars (which is not the case currently) they still will have those prices. So he asks himself why there is NO CONTROL from the government.
Some believe the cause of this lack of control is what we describe at the beginning of this piece, others believe that the government doesn’t want to affect the few food producers that still operates in the country.
For this dilemma Bracci suggests to apply an antitrust legislation forcing polar to split and open the sale of its units to local and international capital with the condition to avoid setting this king of pricing strategies, increase production and to not lay off workers.
Bracci might be missing in his analysis about the current investment environment in Venezuela and the “normal” behavior of the capital, but the truth is that the situation is lacking any economic reasoning.