CARACAS, Venezuela — Shortly before lunchtime, Freddy de Freitas sat behind the bar of his restaurant in central Caracas and scrolled through messages from his food providers.
“Coca-Cola,” he read out. “Twenty-four bottles, 394 sovereign bolívares.”
“Galician bread, 180.”
In one week, prices of products had more than doubled, said De Freitas, 39. He turned to a computer screen and started adjusting the prices of 100 menu items on a spreadsheet.
He has gone through the same process once a month for most of this year. But since President Nicolás Maduro announced drastic economic measures in mid-August, De Freitas will have to change his menu every other week, he said.
“If you don’t update your prices on time, you can’t survive,” De Freitas said.
Petroleum-rich Venezuela is undergoing a deep economic crisis, due to the government’s failed socialist policies and years of relatively low oil prices. Recorded inflation for August was the highest in the country’s history, according to private economists and the opposition-controlled National Assembly. It is expected to reach an annualized rate of 1 million percent by year’s end.
For business owners, an already dramatic environment is steadily getting worse. Many stores have kept their doors closed in recent days, and proprietors are wondering whether they will have to reduce personnel. More than 130 managers and employees of businesses have been arrested in the past few weeks, accused by authorities of “speculation” because they have hiked their prices.
Maduro, a former union leader and the successor to populist president Hugo Chávez, who died in 2013, has sought to stabilize the economy by slashing five zeros from the currency — the bolívar — as well as raising the value-added tax and adopting a 30-fold hike in the monthly minimum wage. But economists say core problems have not been addressed, including price controls, distorted exchange rates and, especially, the central bank’s feverish printing of money to fund government spending.
Earlier this month, the government eased currency controls and announced that private banks will be allowed to sell foreign currency for the first time in two decades. But economists are skeptical that the measures will be implemented in a way that will make much difference.
“The worst of all possible worlds” is how Ricardo Cusanno, vice president of Fedecamaras, the country’s main business federation, described the new economic plans. “Maduro raised the [minimum] salary, which was necessary, but announced a series of punitive measures that create no incentive for investment and no trust, and are set to decrease production.” They include additional price controls and threats to jail managers if they raise prices to cover the salary increase.
Already, there are signs that the plan isn’t working, with prices of items nearly doubling, the value of the new minimum wage falling from $30 to $18 at the commonly used black-market exchange rate, and many basic foods like chicken and eggs — whose prices the government regulates — disappearing from supermarket shelves.
Local consulting firm Ecoanalítica estimated monthly inflation in August had reached 225 percent — a record.
“I have never seen an economic plan fail so miserably so fast,” said Victor Maldonado, former director of the Venezuelan Chamber of Commerce. He said 75 percent of the country’s private companies disappeared in the last two decades. “Of the 140,000 left, I’m afraid that we’ll count by thousands the ones that will close after these measures,” he said.
Maria Carolina Uzcategui, president of Consecomercio, an organization that groups 120 regional and national chambers of commerce, said at least 25 percent of the country’s businesses have been paralyzed since the mid-August announcements.
Hundreds of schools are at risk of not being able to open this month given the new required minimum salary — and the massive numbers of students and teachers who have fled the crisis to live abroad, according to Fausto Romeo, head of a national association of private schools.
McDonald’s, which charges $3.60 for a Big Mac, a fifth of the new monthly minimum wage, closed an unspecified number of locations in Venezuela in late August. Separately, the owner of a Venezuelan fast-food chain said he thinks he will have to let go around one-third of his 1,800 employees and close at least 15 of 85 stores because of price hikes, scarcity of basic products and the wage increase. He spoke on the condition of anonymity because he did not want to scare his workers or prompt government reprisals.
“These days feel like when you’re waiting for a storm to come and don’t know what’s going to happen afterward,” he said.
De Freitas, who runs a Mediterranean-style restaurant, Posada de Cervantes, plans to keep his 15 employees. “The wage increase is soon going to be eaten away by inflation anyway,” he said.
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