Search

 

Cablegate: Inflation Continues Relentless March with Food

VZCZCXYZ0000
PP RUEHWEB

DE RUEHCV #0956 1911954
ZNR UUUUU ZZH
P 091954Z JUL 08
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 1434
INFO RUEHBO/AMEMBASSY BOGOTA 7819
RUEHLP/AMEMBASSY LA PAZ JUL LIMA 1058
RUEHQT/AMEMBASSY QUITO 2872
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 000956

SENSITIVE
SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MEWENS
NSC FOR JSHRIER
COMMERCE FOR 4431/MAC/WH/MCAMERON
SECSTATE PASS AGRICULTURE ELECTRONICALLY

E.O. 12958: N/A
TAGS: ECON AMGT ALOW APER AFIN ABUD VE
SUBJECT: INFLATION CONTINUES RELENTLESS MARCH WITH FOOD
PRICES LEADING THE WAY

REF: A. CARACAS 493
B. CARACAS 313
C. CARACAS 376
D. CARACAS 769

1. (U) According to the national consumer price index
(CPI-N) compiled by the Central Bank and the National
Statistics Institute, inflation for the month of June was 2.4
percent and reached 15.1 percent for the first half of 2008.
Annualized inflation (June 2006 to June 2007) topped 32
percent in Caracas. (Note: The CPI-N is a new measure; for
historical comparisons before January 2008, the Caracas CPI
must be used (ref A). End note.) Food prices continue to be
a leading driver of inflation: inflation in the food and
non-alcoholic beverages category was 19.3 percent for the
first half of 2008 and reached an astounding 49.6 percent in
Caracas over the last 12 months. Other leading drivers of
inflation were restaurants and hotels (23.1 percent in the
first half of 2008), transportation (17.5 percent), and
health (16.6 percent).

2. (U) Inflation has worsened in 2008 despite BRV attempts
to reduce it with a more restrictive monetary policy and by
controlling the parallel foreign exchange rate (ref B and C).
These measures have certainly slowed the growth in demand:
as one economist pointed out, wealthier Venezuelans (and
foreigners) who have the primary part of their savings (or
income) in dollars have seen effective local prices rise 150
percent (i.e., what used to cost the equivalent of USD 1 now
costs the equivalent of USD 2.5) from November 2007 through
June 2008, taking into account inflation and the fall in the
parallel rate. Nevertheless, the government's measures have
not yet slowed inflation for several reasons. Inflationary
expectations have been fueled by President Chavez' recent
announcements of 30 percent hikes in the minimum wage, in
most public-sector salaries, and in military salaries; there
is also a widely held expectation that fiscal spending will
increase in the run-up to the November regional elections.
Other reasons the BRV's measures have not slowed inflation to
date include poor incentives to invest in increased local
production and the BRV's intermittent raising of prices of
price-controlled goods (or, in some cases, lifting the
controls altogether) to reduce shortages.

3. (SBU) Comment: As noted in refs B and D, inflation is a
key political issue given the fact that many Venezuelans, and
especially poor Venezuelans (i.e., Chavez' political base),
are feeling their real purchasing power start to decline.
Food prices are of special concern to the BRV given the
importance of food in the consumption basket of poor
Venezuelans. President Chavez and his cabinet, including new
Minister of Finance Ali Rodriguez, have claimed that
increasing domestic food production is a top priority, but to
date BRV policies have certainly failed in containing food
prices. End comment.
DUDDY

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC