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Venezuela About To Run Out Of Food Despite Fresh All Time High In Its Stock Market | Zero Hedge

Venezuela About To Run Out Of Food Despite Fresh All Time High In Its Stock Market | Zero Hedge.

Venezuela can be proud: while the US stock market has gone exactly nowhere in 2014, the Caracas stock exchange of the socialist paradise has continued kicking ass and taking names, just today printing a fresh all time high.

.. And the performance over the past year has been nothing short of breathtaking.

However, as everyone knows, there are trade offs to soaring stock markets in all socialist countries, be they paradises or not. By now everyone knows that Venezuela has had a rather systemic issue when it comes to procuring toilet paper, and from what we understand, the local population is still forced at times to wipe with stock certificates.

Alas, things are about to get worse. As a result of Maduro’s recent policies which have Lenin, Stalin and Engels positive beaming from the grave, the country may soon add another shortage to its growing list of daily product in short, or no, supply. Food.

Bloomberg reports that Empresas Polar SA, Venezuela’s largest privately-held company, said in an e-mailed statement that foreign suppliers of food, packaging, and equipment have closed credit lines because of the government’s delays in giving the company dollars at official rate. Empresas added that dollar delays are now the longest since the introduction of currency controls in Feb. 2003.

In other words, with the country doing everything in its power to allocate dollars “fairly” (while making sure nobody has profit margins higher than 30%), very soon the biggest distributors of staples are about to run empty.

Oh well, at least they have their stock market and the “wealth effect”…

And now, in praise of socialist paradises everywhere, let’s all sing along:

Soaring Stock Market Fails To Fix Venezuela’s Shortage Of Food (Or Toiler Paper) | Zero Hedge

Soaring Stock Market Fails To Fix Venezuela’s Shortage Of Food (Or Toiler Paper) | Zero Hedge.

Having just missed out of +500% returns in the Caracas stock market last year, the reality of a hyperinflating world continue to cause chaos in the real world of Venezuela. As Bloomberg reports, the bolivar’s 73% decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue. Smuggling to Colombia has exploded as “professional shoppers” traffic in wheat flour, corn flour and milk leaving more than one in five basic goods out of stock at any given time. Regulated foods are just too cheap to stay on the shelves, “you can’t get anything in the shops here… it is taken to Colombia like a locust plague.”

 

Via Bloomberg,

Venezuelan taxi driver Jose Sotomayor drives four hours through army checkpoints every week from the city of Maracaibo to buy rice in Colombia for his family at 10 times the government-set price back home.

 

You can’t get anything in the shops here, I don’t even bother going to them for basics anymore,” Sotomayor, 39, said in a phone interview. “All of our food is taken to Colombia, it’s like a locust plague.”

 

Sotomayor hasn’t seen rice for sale in the shops of Venezuela’s second-largest city since July, as smugglers snap up the staple for a maximum of 7.2 bolivars ($1.14) per kilogram, just $0.11 at the black market exchange rate.

 

How hyperinflation works…

The bolivar’s 73 percent decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue…

 

A weaker bolivar reduces Venezuelans’ purchasing power by making imported goods more expensive.

 

 

Under a decade-long system of currency controls, the government provides about 95 percent of dollars in the economy to selected companies and individuals at 6.3 bolivars per dollar. The exchange rate on the illegal black market is about 64 per dollar, giving foreigners and Venezuelans with access to dollars about 10 times more bolivars for their currency.

 

 

Which means hordes of prefessional shoppers from neighboring (non-hyperinflating) countries are taking advantage…

Price controls introduced by Maduro’s predecessor Hugo Chavez in 2003 to boost nutrition among the poor have fueled demand for staples such as flour, rice and milk as shoppers snap up products whose prices don’t change amid 56 percent annual inflation, the highest in the world.

 

Dozens of people take shifts to line up outside supermarkets in Maracaibo, a city of 2.1 million people located 800 kilometers (500 miles) west of the capital, waiting for the next delivery of regulated goods. The new stock is bought up as soon as it hits the shelves, leaving shops barren of products such as meat, grains and toilet paper.

 

The goods are then loaded onto trucks and taken to Colombia. Many of these professional shoppers are native Guajira Indians dressed in bright floral-print dresses who have double nationality and are exempt from border controls.

 

 

More than 300 trucks with everything from rice to car tires made the 130-kilometer drive from Maracaibo to the border through eight army and police checkpoints when a Bloomberg reporter did the journey on Nov. 10. Drivers of cars carrying food pay those staffing the checkpoints anywhere from 20 to 300 bolivars for quick passage, according to Sotomayor.

 

“Regulated goods are just too cheap to stay on the shelves.”

Nationally, the central bank’s scarcity index was 22.4 percent in October. That reading, the highest since January 2008 and up from 16.1 percent a year earlier, means that more than one in five basic goods were out of stock at any given time.

 

 

“It’s an endless caravan,” said Sotomayor. “The price difference is so great, no amount of soldiers can stop it.”

Still, things must be going great because the Caracas Stock Index was up 480% last year – think of the confidence-inspiration and wealth effect!!

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