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Venezuela: How rotisserie chicken explains the world’s highest rate of inflation

Rotisserie chicken used to cost 199 bolivars. Almost two years later, the same chicken at the same store costs 1,390.
21 Oct 2015 – 4:00 PM EDT

Rotisserie chicken used to cost 199 bolivars at that street corner in Caracas. That was in October of 2013, when Venezuelan journalist Luis Carlos Díaz took a photograph of a store he walks by everyday. Almost two years later, the same chicken at the same store costs 1,390 bolivars.

After twelve photographs and 21 months many other things have transpired: Venezuela has become the country with the highest rate of inflation in the world, shortages are a daily problem and looting, such as what occurred in recent days, all of which have affected more than a hundred businesses.

Since December, the Central Bank of Venezuela has not published any inflation figures. “Because we have no official indices in Venezuela, we have created our own indices, which perhaps do no fit in with the macroeconomic aggregates, but it is the closest thing to a registry of inflation figures when official figures are not being published,” explains Anabella Abadi, a Venezuelan economist with ODH, a consulting group.

Even though Luis Carlos Díaz is in no way a central bank, his photos, which he shares with his more than 85,000 followers on Twitter, serve as a kind of reference thermometer for some. “There are domestic indices that can explain much larger processes,” explains the father of the idea of periodically taking a photograph of the store in order to maintain a certain inflation tally.

His photos of the place of business make up the Índice de Pollo en Brasa - Rotisserie Chicken Index , which also has an acronym: IPB. For a Venezuelan earning a minimum wage of 370 bolivars per day, the whole chicken – without a beverage or hallaquitas (small Venezuelan tamales wrapped in banana leaves) as an accompaniment – currently will cost him or her almost four days’ wages.

When the Venezuelan authorities published price levels for the last time, back in December of 2014, the rate of inflation was 68.5%, compared to 2.9% in Colombia and 6.3% in Brazil. The  International Monetary Fund estimates that inflation will reach 96.8% this year. Some analysts fear it may exceed 100%. The cost of living very likely doubled in one year.

“Rotisserie chicken tells you something about the national productive apparatus, and the reason it is so expensive is because chicken production is down,” is the analysis given by the journalist and blogger. This goes beyond the shortage of chickens for sale: there is a shortage of vaccinations and food for the birds; the electric blackouts in the central part of the country have resulted in thousands of chickens dying from the heat. And this goes even further. Of the goods reaching Venezuelan consumers, 70% are imported from abroad, according to data from the Brooking Institute, a center for political research.

And importations are not easy: to the complicated regulations governing purchases abroad, one has to add government controls over foreign currency exchange, something that has created a labyrinth for commercial activities. In Venezuela there are three official foreign exchange markets, each having its own preferential rate, and dollars are extremely hard to obtain in each of them. Purchasing dollars on the black market can turn out to be 100 times more expensive.

Retail prices for products that are not basic foods, or for medicines, are going sky-high. An importer of sunflower oil, considered to be a basic product by the government, needs 6.30 bolivars to obtain one dollar in order to pay for the merchandise, yet an importer of cellular telephones will normally need 198 bolivars in order to purchase that same dollar and have the devices shipped in from abroad.  

A dependence on black gold

During the good times for petroleum, this country of 33 million inhabitants bet a good portion of its cards on black gold. Its economic structure now depends mainly on the exportation of petroleum and related services, while the manufacturing sector, public as well as private, has been dismantled to such an extent that it now plays a secondary role.

“Petroleum provides 96 out of every 100 dollars that enter Venezuela, and the lack of sufficient savings for confronting the drop in the price per barrel has laid bare an economy that has magnified the dependence on importations during the last ten years,” stated specialized journalist Víctor Salmerón in the digital magazine Prodavinci this week. 

“The consequences are shortages, long lines at the supermarket doors, rationing, looting, and a galloping inflation that dwindles the purchasing power of people’s wages,” he wrote.

During recent months, product inventories have gone into a free-fall. In April, the last time the official index for measuring the shortage of products was leaked, three out of every ten basic consumer goods were not available. In Caracas this shortage may already be at six out of every ten, according to a survey conducted in June by the public opinion firm Datanalisis.

In recent months, no corn oil, no ground coffee nor any pasteurized milk can be found, and it becomes difficult to find meat, fish, diapers, shampoo and toothpaste, among other things.

Uneven prices

As food becomes scarce on the store shelves, prices are on the rise.

Furthermore, 15 years ago in Venezuela, there was one bolivar in circulation for every bolivar generated by the economy; today for every bolivar produced there are 124 in circulation. Since 2007, the Central Bank has not been autonomous but instead depends directly on the executive branch. Out on the street, a given product draws many bills, of which there is an abundance, perhaps a surplus. While prices for products such as oven-baked chicken have gone sky-high, other subsidized foods maintain a stable price. But subsidized prices do not affect all products nor do they reach everybody.

Food distributed by the government-owned network of stores reaches a minority of the population: between 8% and 15%, depending on whether the data are drawn from private or official government sources.

At stores belonging to the government-owned network, one can find uncooked chicken at 60 bolivars per kilo; at a private store it can be purchased for some 300. The waiting lines for a subsidized product have already become a daily hallmark. They require waiting six or seven hours, or even overnight.

Among those who stand in line one finds people who make a living out of waiting, waiting, waiting, buying and reselling: the bachaqueros – named after the fire ants that transport large amounts of food one crumb at a time. For economist Anabella Abadi, the multiplication of bachaqueros on the streets gives us a hint as to where the economy is headed: toward greater shortages and more inflation.

Also giving us hints are the price of the cheapest item on McDonald’s menu (or in the case of Venezuela, the least expensive), the cutbacks in store hours, and the thousands of businesses that have closed down – for lack of inventory.

“They are indicators, yet they allow a family to see how the situation is evolving,” explains Abadi from Caracas. “In order to measure inflation, what Luis Carlos Díaz does is ideal: capture a fixed indicator, at the same store, and see how it evolves.”

Last Friday, the highest judicial court in Venezuela declared the non-admissibility of a lawsuit against the president of the Central Bank for failure to publish macroeconomic data. Transparencia Venezuela, an NGO, argued unsuccessfully that it was an obligation of the authorities to publish the figures.

Given the absence of data, the father of the rotisserie chicken index, Luis Carlos Díaz, sees it very clearly: “The chicken gives us a very important photograph of the country.”

The image presented is that of a country without any macroeconomic data, but with galloping inflation, and that is but a single portion of the picture.

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