Venezuelan consumers fear inflation, dump cash after Chávez devalues bolivar
Venezuelans mobbed stores this week to buy imported electronic goods after the government's sharp devaluation of the currency heightened fears that prices would soon skyrocket.
President Hugo Chávez's decision, announced Friday, comes as Venezuela's sputtering economy grapples with energy and water shortages. Now in his 12th year in power, Chávez has the support of half of the country's 28 million people, polls show, but rising inflation would most hurt the lower classes that are the pillar of his movement.
The first devaluation of the bolivar since the introduction of currency controls in 2003 quickly spurred a shopping frenzy, as Venezuelans rushed out to buy televisions, computers and other goods that would hold their value.
"The typical Venezuelan is saying, 'My savings are going to be worthless,' " said Robert Bottome, editor of the business newsletter Veneconomia in Caracas, the capital. "The store shelves are pretty much empty right now."
The energy shortage has affected industrial hubs and far-flung hamlets. On Tuesday, the government announced rolling blackouts in big cities to prevent what Electricity Minister Angel Rodríguez called "a total shutdown of the country."
With a prolonged drought lowering water levels in the country's mammoth Guri dam, Chávez has already restricted the hours of operation for malls and casinos and instructed Venezuelans to limit showers to three minutes.
At the same time, Venezuela's relationship with the Obama administration has worsened in recent weeks as Chávez has warned that the United States might be planning an invasion from military bases in Colombia and Dutch-held islands in the Caribbean. The Obama administration has denied the accusations, which Chávez's critics say are part of a ploy to deflect attention from problems at home.
In announcing a measure he said would spur the economy, Chávez said the exchange rate, which had been 2.15 bolivars to the dollar, would rise to 2.6 bolivars for essential items such as food and medicines. The exchange rate for non-essential items, including airplane tickets and cars, would rise to 4.3 bolivars to the dollar.
Among those who quickly went shopping was Rafael Rodríguez of Caracas, an architect who snagged a television set Saturday and a Nintendo game system for his kids Tuesday.
"People always feel that prices are going to rise, and that is what happened here before, so everyone went to the stores," Rodríguez said by phone from Caracas. "In theory, prices should go down. But that never happens."
Chávez responded angrily this weekend to predictions that merchants would soon raise prices, warning that businesses that did so would be closed. By Tuesday, the Venezuelan Institute for the Defense of People in Their Access to Goods and Services had inspected and closed dozens of stores.
"There is no reason for anybody to be raising prices," Chávez said Sunday on his national television show. He explained to listeners that the "bourgeois" in Caracas society would plan price increases but that they would fail.