Tuesday, June 23, 2015

The High Cost of Communism in Venezuela

from Time Magazine, March 23, 2015

In recession-stricken Venezuela, where inflation runs at 68%, extreme shortages of imported goods have combined with stifling currency controls to drive the official price of everyday household items into the stratosphere.

The Official Rate
The government controls the prices for imported essentials like food and medicine using an official exchange rate of 6.3 bolivares to $1. At this rate, the minimum wage is approximately $890 a month.

The Black Market
To buy most other goods, locals without dollars rely on the currency black market, where around 250 bolivares will buy you $1. That same minimum wage is a paltry $22 a month on this market, roughly equal to minimum pay in Ethiopia.

The Result
The disconnect means many products are out of reach for ordinary Venezuelans. An iPhone 5, available at online retailer Mercadolibre for 88,999 bolivares, costs $14,127 at the official rate (or $356 in black-market dollars).

An unopened iPhone 5 -- $14,127

A bag of dog food-- $316

A jar of instant coffee -- $190

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