| CARACAS, June 13
CARACAS, June 13 Venezuela's inflation soaring
above 60 percent has boosted pressure on President Nicolas
Maduro to speed up a transition toward a market-driven economy
as the OPEC nation's model of state-controlled socialism heads
Sky-rocketing consumer prices and shortages of nearly a
third of basic goods have helped push Maduro's approval rating
to 37 percent and weakened his standing as the heir to the
wildly popular late socialist leader Hugo Chavez.
He has launched reform measures over the last year that were
applauded by Wall St., such as easing Chavez's rigid currency
controls, but they have not stopped growth from slowing or
prevented inflation from rising to the highest level since
current records began in 2008.
The central bank blamed May's 5.7 percent inflation reading
on three months of opposition protests, but economists say the
true culprit is a doubling of the money supply since the start
of last year and a 17 percent increase this year.
"It's easier to blame the protests than to cut spending and
maintain fiscal discipline, which has a high political cost,"
said Asdrubal Oliveros of Caracas-based Ecoanalitica. "If you
don't reduce monetary distortions, you won't control inflation."
Annualized inflation hit 60.9 percent in May, a headache for
foreign companies such as Colgate-Palmolive that are
struggling under rising costs as well as the hefty devaluation
caused by recent currency measures.
Any long-term stabilization of prices will require cutting
state spending, which the government is loathe to do because it
would like exacerbate the sharp GDP slowdown of 2013.
First-quarter GDP figures were due out last month.
Soaring prices have cut into the social development gains
achieved by the late Chavez, who won repeated elections by
lavishing oil revenue on the country's poor through free health
clinics, subsidized food and stipends for single mothers.
Poverty dropped by almost 25 percentage points during
Chavez's 14-year rule, but inflation helped drive it back up by
4 percentage points on average in 2013 from 2012.
Typically dry macroeconomic discussions have become fodder
for jokes among Venezuelans, who use Twitter or long waits in
supermarket lines to chuckle about the country's economy.
"With this ferocious inflation, it's an investment to buy
green plantains and eat them as they ripen," wrote social media
pundit Luis Carlos Diaz, referring to sweet plantains often
served with rice or meat.
Maduro says the problems are the result of an opposition-led
"economic war" backed by Washington, blaming saboteurs and
speculators for pushing up prices. In December he won praise,
even among the opposition, by ordering merchants to cut prices
of goods ranging from televisions to car batteries.
Even opposition skeptics still trust central bank figures,
citing a core group of economists that have resisted pressure
from some politicians to manipulate the figures.
But the bank is routinely delaying the release of
indicators, publishing April's 5.7 percent inflation reading
nearly a month after the legal deadline. It came out about an
hour after the opening match of the World Cup.
Wall St. has hailed some signs of pragmatism including an
easing of the 11-year-old exchange controls to reduce import
bottlenecks and limit product shortages.
Many applauded this week's removal of Planning Minister
Jorge Giordani, an advocate of interventionist economics, from
the central bank's board.
But Maduro has stepped up enforcement of price controls that
rarely keep up with inflation, which puts the squeeze on
consumer goods companies that cannot pass costs on to consumers.
Colgate reported a 7 percent drop in first-quarter profit at
its Latin America unit driven in part by Venezuela's inflation.
And the new foreign exchange measures devalued the bolivar
currency by as much as 88 percent, creating accounting losses
for multinationals ranging from DirecTV to GM.
State inspectors appear nearly every day on television
upbraiding merchants for "speculative" profit margins, which
business leaders say will do little to rein in prices.
"They increase inspections, they bolster the economic
offensive, and things get worse. Are they attacking the true
causes of inflation?" wrote Henkel Garcia of private think tank
(Reporting by Brian Ellsworth; editing by Andrew Hay)