Butter, Corn Flour and Toilet Paper

It was supposed to be a “socialist dream,” a “Bolivarian revolution” started in 1998 by populist President Hugo Chavez, who broke the elitist stranglehold on the Venezuelan political system. Becoming perhaps the greatest “hater of United States” in Latin America, Chavez died of cancer earlier this year, and his successor, Nicolas Maduro, took his place and narrowly claimed victory in recent presidential elections. This socialist juggernaut has nationalized major corporations, seized private property in the name of the people, placed caps on the price of consumer goods and generally catered to a nation in which 60% of the people are mired in poverty.

With South America’s largest oil industry, people assumed that there was more than enough financial support for this socialist effort, but as oil output has stabilized, that assumption seems to have fallen on hard times.

Inflation was officially recorded at over 27% in 2010, and as recently as this summer, the official inflation rate was placed at 45.4%... Unofficially, the rate is a multiple of quoted statistics. The currency is literally falling apart. With caps on the price of locally produced consumer staples set once a year (in November) but inflation flying high all year long, producers of basics have found other ways of making money. Their ability to survive at official government limits is no longer realistic.

Instead of adhering to governmental mandated price caps and restrictions on exports, many farmers, particularly those living near international borders, have taking to shipping (smuggling?) their produce and farm products across the border, where they get fair market value for their production. Rich folks pay for private shipments, and others “transform” their basics (e.g., dairy farmers make more cheese) into goods that generate higher prices.

With mega-inflation soaring out of control, imports are sliding out of the reach of even middle class buyers. Product shortages, literally empty shelves at most grocery stores and marketplaces, have led to absurd prices – like a quoted $30 a roll for toilet paper – near-total unavailability of items like ordinary butter and forced rationing of staples like corn flour, sugar and cooking oil.

The government has reacted, blaming corrupt capitalism for the shortfalls, but at the same time embracing some practical solutions to the empty shelves: “The Venezuelan government has announced measures to facilitate the import of essential goods, which have been in short supply… Vice-President Jorge Arreaza said the government was cutting red tape for companies willing to import food, toiletries and mechanical parts…[In mid-September], the government took over a toilet paper factory… The government has accused unscrupulous traders of trying to undermine its left-wing policies.” BBC.co.uk, September 25^th.

Facing the risk of governmental seizures of property and capped rents, construction in the country has almost ground to a halt. There are not remotely enough homes/apartments being built to accommodate a growing population. Builders no longer have the slightest incentive to meet the demand for new residential units.

“Opposition leader Henrique Capriles says a new model is needed to save Venezuela from economic collapse… ‘We have enough land to turn Venezuela into a food-producing country. Oil needs to be a lever for development. We have 30 million hectares of fertile land. We are importing fish ... and look at how large our coast is!’ Mr Capriles told BBC Mundo before narrowly losing the election to Mr Maduro.

“Even in the 23 de Enero neighbourhood, a bastion of government support, confidence in the government has started to wane… ‘You need to scrounge around to find what you need,’ says Vicenta Martinez, an 81-year-old retiree, while queuing outside the Mercal supermarket… ‘There is nothing here, everything is imported,’ she says. ‘I come from the countryside, and we used to produce food, but now we don't anymore.’

“Mr. Chavez had promised to turn Venezuela into a self-sufficient country that could even export food. To do so, he expropriated land and nationalised companies. Fourteen years on, the country still imports 70% of its food… ‘The government is responsible for this,’ says Ms Martinez, lowering her voice, worried that other people may overhear her.” BBC

Anger seethes in the streets; violent crime and murder rates have never been higher. Hospital emergency rooms are bursting at the seams. But these shortages have impacted the Venezuelan healthcare system as well. There is dearth of antibiotics and other medications, even anesthetics required for surgery, and the lack of simple basics like surgical sponges and gauze, had caused many qualified medical professionals to leave the country in frustration and have increased the mortality rates at local hospitals by as much as 150%.

While the number of malnourished Venezuelans has fallen from 15% to 5% of the population according to the United Nations Food and Agriculture Organization, a major accomplishment of the Chavez-Maduro tenure, the economy is otherwise literally unraveling. Qualified professionals are slowly finding ways of leaving the country to build new lives for themselves elsewhere.

Somewhere along the road, someone lost the vision that required common sense. While government can help stabilize inequality, level the playing field, impose reasonable financial regulations and environmental controls that can only come from legal mandates, forcing human beings to behave in ways that cannot and do not make sense in a modern world will always be a non-starter. Somewhere along the road, someone forgot about balance.

I’m Peter Dekom, and the road of pragmatism is never at the extreme of an unregulated free market or a completely strangled market system; it is always in the middle somewhere.