Home' Trinidad and Tobago Guardian : January 23rd 2014 Contents BG12 REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 2014 • WEEK FOUR
Venezuela faces a host of chal-
lenges in 2014: it has one of the
highest murder rates in the
world and is deeply politically
polarised. But arguably it is the
poor state of its economy that
is the most pressing of the prob-
lems facing President Nicolas
Maduro. The BBC s Irene Caselli
in Caracas takes a closer look
at Venezuela s economy.
What are Venezuela s economic prob-
An employee of a business closed during
a blackout stands behind the door with a
notice reading "There s no electricity" in
Caracas on September 3, 2013. Blackouts,
common in some rural parts of Venezuela,
have also hit the capital, Caracas, in 2013
Venezuela suffers from the region s highest
inflation, also one of the world s highest
rates. The country s annual inflation rate
for 2013 was 56.2 per cent. There are short-
ages of certain staples, such as milk and
toilet paper, and large queues at supermar-
kets when those items are available. There
are also regular blackouts; Caracas was hit
twice in 2013, but they are much more fre-
quent in the rest of the country. And there
is a dollar black market.
Why is there a black market in dol-
The Venezuelan government imposed
controls over foreign exchange in 2003, fol-
lowing a troubled year which saw a coup
against the late president, Hugo Chavez, as
well as a three-month long oil strike which
undermined the country s economy.
Chavez decided to impose controls on
foreign exchange to avoid capital flight and
to control the prices of food staples. The
government set a fixed rate at which the
dollar could be bought and started control-
ling sales of foreign currency.
People and businesses can now receive
US dollars at the official rate only by applying
to a government currency agency, and then
only for the purpose of importing goods or
to pay for foreign travel. The amount of
dollars available at the official rate is restrict-
ed, but the demand remains high. This caus-
es the black market to flourish.
How does the black market work?
While changing money on the black mar-
ket is a crime, it is very easy to find a trader.
The official exchange rate is currently 6.30
bolivars to the dollar. On the black market,
the exchange rate is ten times higher.
Venezuelans calculate their cost of living
according to the black market exchange
rates, and prices of property as well as used
cars grow according to the black market
Why is the black market a problem
for the economy?
Analysts say the black market creates dis-
tortions in the economy and leads to a dual
This means that those Venezuelans who
earn in dollars or have easy access to dollars
have a growing buying power thanks to the
black market, because their dollars buy more
bolivars every day. At the other end of the
spectrum there are Venezuelans whose
salaries lose buying power because of the
high inflation rate. While the government
has raised minimum wages, this has not
been enough to catch up with inflation.
Analysts also say the fixed exchange rate is
to blame for other problems the Venezuelan
economy is experiencing, such as short-
Why are there shortages?
Venezuela depends on imports for many
products. If companies cannot easily access
dollars, imports become difficult.
This, combined with inadequate domestic
production of food staples, is creating short-
According to Venezuela s central bank,
the scarcity index is close to 20 per cent,
meaning that for every 100 goods, 20 are
not available. Toilet paper, sugar, milk and
certain medicines are not easy to find. Some-
times they can be sourced at higher prices
on the black market. The government blames
shortages on businessmen who are trying
to boycott the system.
What is the government doing?
In November, President Nicolas Maduro
ordered the seizure of a chain of electronics
stores, accused them of overcharging, and
forced them to lower their prices. A few
weeks later, the National Assembly granted
Maduro special decree powers that allow
him to pass laws without the assembly s
approval. After receiving decree powers, the
president signed several laws governing the
economy. He established caps on profits
and fair prices for consumers. He also signed
a decree that regulates the price of cars.
The government has also signed agreements
with private firms, such as Samsung, in
order to provide more electronics for the
Are these measures working?
Opponents say these measures will only
deepen the economy s distortions, creating
more shortages and a more rampant black
market. The government accuses opponents
and unscrupulous businessmen of sabotage.
Many expect the government to announce
a new devaluation of the bolivar soon, in
order to close the gap with the black market.
But the devaluation would be a hard blow
for many Venezuelans, and the government
so far has been careful not to create dis-
Does Venezuela s crisis affect the
overall economy of the region?
Venezuela has the world s largest proven
oil reserves. Hugo Chavez used oil to expand
his political clout. He founded PetroCaribe,
an alliance that provided countries in the
region, such as Cuba, Guatemala and
Nicaragua, with oil at below-market prices.
But Venezuela may be slowly pulling the
plug, cutting shipments and modifying
repayment terms, as the country is in need
of more liquidity. In November, Guatemala
announced that it was leaving the alliance
as costs increased. (BBC)
Venezuela's economic woes
Taiwan is providing an EC$13.1 million (one EC dollar =
US$0.37 cents) grant to St Lucia to fund three projects
identified by the Kenny Anthony administration.
A government statement said that EC$8.3 million will
be used for the Constituency Development Programme
(CDP); EC$$4.2 m for the St Judes Hospital Reconstruc-
tion project and just over half a million dollars to up-
grade the island's fishing industry.
"It is my firm belief that through our joint effort and
cooperation programme, the existing close relations be-
tween St Lucia and the Republic of China (Taiwan) will
be further strengthened and continue to bring benefits
to our two peoples," said Taiwanese Ambassador James
Prime Minister Anthony said given the tough eco-
nomic situation facing St Lucia he was thankful for the
"I hope that these grant funds are seen as good news
for our country especially at this time. Our friends mat-
ter at all times but they are even more precious in these
stern and challenging times. With their help we con-
tinue to begin planning for reconstruction and rebuilding
a stronger, more prosperous, more resilient nation," he
Anthony said the EC$24 million allocated to the CDP
during the 2013/2014 financial year had now been fully
received and assured the Taiwanese diplomat that 17
constituencies had benefited from the programme.
"By the end of March 2014 the programme should
also be in a position to provide a comprehensive annual
report of all works done and the overall impact in terms
of employment generation," he said.
Earlier this year, Ambassador Chang presented a
US$200,000 cheque towards the rehabilitation of the
island following the passage of a low level trough that
killed six people and left millions of dollars in damage.
With growing competition to capture tourism spend,
small businesses are finding new ways to differentiate
themselves and improve the service to their customers.
An example of this can be found in Marino Santana, a
taxi driver in Punta Cana, who was able to meet his
clients' increasing demands for faster and safer pay-
ment options and increase his sales simply by accepting
cards. Marino is the latest business owner to be fea-
tured in MasterCard's Cashless Pioneers global cam-
paign, which highlights the impact of electronic
payments among businesses around the world.
"International travelers have come to expect card
payment options; many of them are used to paying with
plastic in their home country and don't like to carry
cash," said Deanna Canedo, vice president of acceptance
for MasterCard's GeoCentral division, who introduced
Santana's story at the Caribbean Hotel and Tourism As-
sociation Marketplace Conference in Montego Bay, Ja-
"More and more merchants in the Caribbean are
noticing this trend and making the switch in order to
better cater to their clients' needs. Not having the card
payment option can represent the loss of a sale, so it's
encouraging to see more merchants adapting the tech-
Marino Santana is just one of the numerous taxi driv-
ers in Punta Cana that has partnered with MasterCard
to extend credit facilities to cardholders, both local and
for those visiting the destination. With this agreement,
MasterCard users using this taxi fleet may pay trans-
portation services through an innovative mobile card
reader, without a minimum fee. Lastly, the executive
added that MasterCard has experienced significant
growth in the number of SMEs that accept cards in the
Caribbean in 2013, and expect it to continue growing in
funding for projects
in St Lucia
Caribbean business owners
capitalise on tourism
spend by going cashless
Links Archive January 22nd 2014 January 24th 2014 Navigation Previous Page Next Page