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Double-digit Venezuelan inflation

By Chris Kraul
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Venezuela’s inflation rate hit its highest level in a decade last month, reaching an annualized rate of 24.1% , which also is the highest in South America.

The reason is classic economics: Demand is outstripping supply in a nation where consumers are flush with oil dollars. And price controls imposed as part of Hugo Chavez’s socialist revolution inhibit production.

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Inflating even faster are rents, which rose an average 25% between June and December, according to the Venezuelan Real Estate Chamber. The same law applies: Urban growth caused by rural migration and foreign residents is pushing demand for housing while rent control and the government’s encouragement of squatters are discouraging builders from breaking ground on new projects.

The worst may not be over, according to a study by Jose Guerra, Orlando Ochoa and Oscar Garcia Mendoza. High inflation could continue for years to come, caused in part by high government spending.

-- Chris Kraul in Bogota

La Plaza
Chris Kraul

Chris Kraul covered South America for the Los Angeles Times from his base in Bogota, Colombia. He joined the paper in 1987 and was business editor of the San Diego edition until it closed in 1992. He then began covering the border and Mexican economies until his assignment to The Times’ Mexico City bureau in 2001. He reopened the paper’s Bogota bureau in 2006. He has also covered the wars in Afghanistan and Iraq. He is a graduate of the University of South Florida and also has been a reporter at the San Jose Mercury News, San Diego Union-Tribune and the San Diego Business Journal.

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