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Venezuela's silly gimmicks can't fix its disastrous inflation problem

Members of the national police confront demonstrators during a protest against the government of Venezuelan President Nicolas Maduro in Caracas on April 20, 2014.
Members of the national police confront demonstrators during a protest against the government of Venezuelan President Nicolas Maduro in Caracas on April 20, 2014.
FEDERICO PARRA/AFP/Getty Images

Venezuela has a serious inflation problem. The official annual inflation rate hit 57 percent in February. This week the Venezuelan central bank released new figures showing that the monthly inflation rate in March was 4.1 percent. The central bank declined to provide an annual inflation rate for March.

Of course, this isn't going to fool anyone. People know how to add up a bunch of monthly inflation statistics to get an annual one. And a 4.1 percent monthly inflation rate corresponds to an annual rate of about 60 percent.

And some statistics suggest that Venezuela's inflation rate is much higher than that. Steve Hanke is an economist who collects data on the black-market exchange rate between the dollar and various global currencies. His data suggests that the value of the bolívar has collapsed over the last year. And if domestic prices are rising as rapidly as the bolívar/dollar exchange rate, the real inflation rate is more than 100 percent:

Venezuelan-inflation

Steve Hanke

It's important to note that that's a big "if." In the long run, domestic prices should rise at about the same rate the bolívar falls on international exchange markets. If the value of the bolívar falls in half in international markets, domestic prices should double. But it can take a while for the full effects of a plunging bolívar to be felt in the domestic economy.

Still, it's clear that Venezuela has a serious and growing inflation problem. No amount of statistical gimmickry is going to hide that fact.