The Bolivarian Republic of Venezuela is situated on the northern coast of South America. Home to an estimated population of 29.1 million, it covers around 916,445 square kilometres which includes the Andes mountains and the Amazon Basin Rainforest. Its main export is oil. Venezuela was colonized by Spain in 1522 but continued resistance led in 1811 to it becoming the first Spanish American country to declare independence. A chequered political history followed which saw dictatorships rise and fall, as well as military coups. The current president is founder of the Revolutionary Bolivarian Movement-200, Hugo Chávez.
Venezuela June inflation soars to 40pc
Annualised inflation rate highest in five years
Venezuela’s June inflation slowed from the previous month to 4.7 per cent, the central bank said, but the annualised rate soared to 39.6 per cent following a currency devaluation and heavy state spending last year.
The annualised figure tops all the yearly inflation rates since 2008, when the central bank changed its inflation methodology and consumer prices rose 30.9 per cent.
Though it represents a decline from a record 6.1 per cent increase the month before, the news points to a stagflationary panorama for President Nicolas Maduro following a sharp slowdown in economic growth during the first quarter.
The June reading, which takes inflation to 25 per cent for the first half of the year, was spurred by a 6.4 per cent jump in transport costs and a 5.8 per cent rise in food and non-alcoholic beverage prices.
The annualized rate is higher than any annual inflation since 2008, when the new measurement began, with 30.9 per cent being the highest
A devaluation of the bolivar currency in February, and heavy government spending throughout last year when the late Socialist leader Hugo Chavez won re-election, have exacerbated price pressures in Venezuela, which has suffered from high inflation for decades.
Consumer prices could come under further pressure as the central bank revamps the foreign exchange system, known as Sicad, which is meant to boost the supply of dollars to counter nagging shortages of consumer products.
Sicad is expected to sell dollars for as much as double the official rate of 6.3 bolivars, further weakening the bolivar currency and boosting the cost of imported goods.
A lack of hard currency has left businesses struggling to import key consumer products. Long queues at shops, and even scuffles, have become common as Venezuelans face shortages of basic goods such as toilet paper and wheat flour.
The May figure was the worst under a new measurement system started in 2008. The worst previous monthly figure, under an old measurement based on major cities, was 7.1 per cent in 1996.
Critics say mismanagement by Maduro and the late Chavez have left the country in a dire economic situation even as the price of oil, the OPEC nation’s principal import, remains at a comfortable $100 per barrel.
Government supporters point to advances in social welfare over the last decade, thanks to the government’s spending of oil revenue on programs such as free health services and subsidised groceries, as reasons to back Chavez’s “21st century socialism.”