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 Sky-rocketing consumer prices and shortages of nearly a third of
basic goods have helped push Maduro's approval rating to 37 percent
and weakened his standing as the heir to the wildly popular late
socialist leader Hugo Chavez.
He has launched reform measures over the last year that were
applauded by Wall St., such as easing Chavez's rigid currency
controls, but they have not stopped growth from slowing or prevented
inflation from rising to the highest level since current records
began in 2008.
The central bank blamed May's 5.7 percent inflation reading on three
months of opposition protests, but economists say the true culprit
is a doubling of the money supply since the start of last year and a
17 percent increase this year.
"It's easier to blame the protests than to cut spending and maintain
fiscal discipline, which has a high political cost," said Asdrubal
Oliveros of Caracas-based Ecoanalitica. "If you don't reduce
monetary distortions, you won't control inflation."
Annualized inflation hit 60.9 percent in May, a headache for foreign
companies such as Colgate-Palmolive <CL.N> that are struggling under
rising costs as well as the hefty devaluation caused by recent
currency measures.
Any long-term stabilization of prices will require cutting state
spending, which the government is loathe to do because it would like
exacerbate the sharp GDP slowdown of 2013. First-quarter GDP figures
were due out last month.
Soaring prices have cut into the social development gains achieved
by the late Chavez, who won repeated elections by lavishing oil
revenue on the country's poor through free health clinics,
subsidized food and stipends for single mothers.
Poverty dropped by almost 25 percentage points during Chavez's
14-year rule, but inflation helped drive it back up by 4 percentage
points on average in 2013 from 2012.
Typically dry macroeconomic discussions have become fodder for jokes
among Venezuelans, who use Twitter or long waits in supermarket
lines to chuckle about the country's economy.
"With this ferocious inflation, it's an investment to buy green
plantains and eat them as they ripen," wrote social media pundit
Luis Carlos Diaz, referring to sweet plantains often served with
rice or meat.
'ECONOMIC WAR'
Maduro says the problems are the result of an opposition-led
"economic war" backed by Washington, blaming saboteurs and
speculators for pushing up prices. In December he won praise, even
among the opposition, by ordering merchants to cut prices of goods
ranging from televisions to car batteries.
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Even opposition skeptics still trust central bank figures, citing a
core group of economists that have resisted pressure from some
politicians to manipulate the figures.
But the bank is routinely delaying the release of indicators,
publishing April's 5.7 percent inflation reading nearly a month
after the legal deadline. It came out about an hour after the
opening match of the World Cup.
Wall St. has hailed some signs of pragmatism including an easing of
the 11-year-old exchange controls to reduce import bottlenecks and
limit product shortages.
Many applauded this week's removal of Planning Minister Jorge
Giordani, an advocate of interventionist economics, from the central
bank's board.
But Maduro has stepped up enforcement of price controls that rarely
keep up with inflation, which puts the squeeze on consumer goods
companies that cannot pass costs on to consumers.
Colgate reported a 7 percent drop in first-quarter profit at its
Latin America unit driven in part by Venezuela's inflation.
And the new foreign exchange measures devalued the bolivar currency
by as much as 88 percent, creating accounting losses for
multinationals ranging from DirecTV <DTV.O> to GM <GM.N>.
State inspectors appear nearly every day on television upbraiding
merchants for "speculative" profit margins, which business leaders
say will do little to rein in prices.
"They increase inspections, they bolster the economic offensive, and
things get worse. Are they attacking the true causes of inflation?"
wrote Henkel Garcia of private think tank Econometrica
(Reporting by Brian Ellsworth; editing by Andrew Hay)
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