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Not Tokyo. Not London. Think south, and left.
The Venezuelan government has fought hard to deflect blame for the soaring costs — but the authorities do seem worried about inflation.
On Monday, Venezuela’s oil minister announced planned changes to the government’s dollar auction system that would provide a more favorable exchange rate to oil companies and tourists, The Associated Press reported.
And Bloomberg News reported Tuesday that Venezuela could make its biggest currency devaluation since 2010 by the end of March.
President Nicolas Maduro, a disciple of the late Hugo Chavez, has vowed to win an “economic war” he claims US-backed right-wing opponents are waging against the Venezuelan people. His government is clamping down on, and locking up, store owners accused of unfairly hiking prices, as GlobalPost reported in November.
But the “most expensive” title also plays into the hands of the haters.
Many critics blame the government’s economic policies — such as tight currency controls enacted by Chavez a decade ago — for prices here looking extremely skewed.
Venezuelans are only allowed to exchange a very limited amount of local money, the bolivar, to dollars every year at the official rate of 6.3 bolivares per greenback. Demand has helped breed a booming currency black market in which the dollar sells at more than 10 times the official value.
Importers, who need dollars to bring products in, struggle to get hard currency at the official rate. Many are forking over hefty sums on the black market and setting their prices accordingly.
Sounding emboldened after his party’s Dec. 8 election wins in most town halls across the country, President Maduro has promised to intensify his deflation-by-force approach.
“We're going in guns blazing,” he said last week.
Some economists are unimpressed. “If deepening the economic offensive means more controls, interventionism, and moving closer to central command economy, that is certainly not got news because those were the policies that got us the dismal economic picture we are living today,” said Alberto Ramos, an analyst at Goldman Sachs in New York.
That said, some expats in the world’s most expensive city may take heart from this fact: Caracas’ residents were among the few who actually voted against Maduro’s party candidate in favor of primarily opposition mayors.
Still, mayors can hardly wiggle around directives imposed from up top — perhaps even less so now that the president has won special decree powers.
How far will the cost of living rise? It’s hard to know. For many expats bearing the stress of life in Caracas, those $320 workouts actually sound worth it.