VENAMCHAM: The cost of the Venezuelan food basket rises

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, May 28, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: Venezuela's National Teachers' Federation Social Documentation & Analysis Center announced that the cost of the basic food basket reached 395,019 bolivares, reflecting a 41,143 bolivar (11.6%) increase even before May comes to an end. This figure represents a little more than double the minimum wage, an indication of the deterioration of real salary levels in the Venezuelan economy.

The cost of the food basket is expected to rise again when the government begins relaxing the controls it has imposed on the foreign exchange market and prices. The potential increase in the cost of certain goods, because producers must revise their prices, will have yet another impact on consumer prices.

This situation is most dramatically reflected in the number of members of the Economically Active Population (EAP), estimated at 11 million, who are unemployed; they represent 20.4% of the total, meaning about 2.5 million workers have no formal jobs. Another very high proportion, in the neighborhood of 55%, are doing informal or part-time labor, and the unemployment rate is expected to reach 30% by the end of 2003.

Under any circumstances, inflation is projected at about 50% by the end of this year, meaning that Venezuelan consumers will see their purchasing power collapse and the lower-income population will be hardest hit by the deterioration of real salary levels, given the weakness of the Venezuelan labor market.