Venezuela’s annual inflation rises to 63.4%

A woman grabs packages of corn flour at a supermarket in Caracas (21 August 2014)When scarce staples become available, Venezuelans often take advantage and buy in bulk

Venezuela’s annual inflation rate has risen to 63.4%, the highest in Latin America, according to official figures published on Tuesday.

The figures are the first released by the central bank since May, which has led critics to accuse the government of withholding data for political reasons.

The poor state of the economy, among other issues, triggered mass anti-government protests earlier this year.

They have since died down, but many continue to grapple with shortages.

The central bank did not publish its scarcity index, a measure of goods that are missing from store shelves, but shortages of basic items such as flour, milk and toilet paper continue to be the bane of many shoppers.

‘Protest slump’

While the bank said that month-to-month inflation had eased in August for the third straight month to 3.9%, the annual inflation rate reached a six-year high.

The government of President Nicolas Maduro blamed the soaring inflation on the protests, which rocked the country earlier in the year.

Opposition supporters hold a national flag during a rally against President Nicolas Maduro's government in Caracas (22 March 2014)In February and March, there were mass opposition rallies in the capital, Caracas, and in other key cities

Officials have argued that roadblocks erected by opposition activists hampered trade, and violent clashes between protesters and the security forces often forced shops to close early.

But many international economists argue that massive government spending and exchange rate controls are to blame.

Smugglers’ paradise

Price controls have also ensured that many products are much cheaper in Venezuela than in neighbouring Colombia, making the smuggling of goods a profitable business.

The government estimates that 40% of subsidised goods are smuggled into Colombia, further exacerbating shortages in Venezuela.

In an attempt to cut down on smuggling, the Venezuelan government announced last month that it would close the border at night time.

Venezuelan troops search for smuggled goods in a car heading to Colombia in the border city of San Cristobal (20 August 2014)President Maduro says that more than a third of subsidised goods are smuggled out of Venezuela
Venezuelan troops close the Venezuela-Colombia border in San Cristobal (11 August 2014)Venezuela’s border with Colombia has been closed between 22:00 local time and 05:00 every night

The Venezuelan prosecutor general said more than 350 people had been detained as part of the operation.

The government in Caracas has not yet revealed its gross domestic product (GDP) forecast for 2014, but a number of international economists have been gloomy in their assessment.

London-based economic research consultancy Capital Economics has predicted that Venezuela’s GDP will contract by a cumulative 5% in 2014-2015.

It also warned of a “growing risk of a much deeper recession and default”.

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