Andean Group - May 2008 (ISSN 1741-4466)

Inflation in April was 1.7%, much the same as it was in March. This means that annual inflation is running at an alarming 29.2%, well above the government's target of 19.5%. The rate for the first four months of the year is scarcely more encouraging: 8.9%. In 2007 inflation was 22.5%. The planning minister, Haiman El Troudi, claims that the inflation rate peaked at the end of 2007. The government's critics do not buy this argument. They say that inflation is out of control because prices which are set by the government s are rising just as fast as those that are set by the market. They claim that inflation will rise further in May because of the government's decision to increase the minimum wage by 30% on 1 May. The government's critics also allege that the government's decision to broaden the inflation index to take in cities other than Caracas only muddies things. They say that the abrupt switch to the new index (which has no back data) means that it is impossible for economists to see whether inflation is actually falling or is being manipulated downwards. The government has been setting prices on 400 food and household staples for the past five years. It also runs a system that is designed to control the exchange rate, but there is also a flourishing and sizeable black market for the dollar. The government has been gradually relaxing price controls on some key staples, such as milk; eggs; beef; chicken; maize flour and sorghum.

End of preview - This article contains approximately 258 words.

Subscribers: Log in now to read the full article

Not a Subscriber?

Choose from one of the following options

• Subscribe
• Sign up for a one-time, 14-day trial