Venezuela has launched a new currency aimed, in part, at curbing1 high inflation rates in the oil-producing nation. Prices have risen in Venezuela due to soaring consumer demand, creating shortages of milk, sugar and automobiles2. VOA's Brian Wagner has more.
Soaring international oil prices have been a boon3 for Venezuela's economy. Higher prices have generated windfalls for the state-run oil company and its employees, and pumped new money into consumer lending banks. The result has been a soaring demand for luxury items and automobiles, especially trucks and other large vehicles.
Car salesman Rigoberto Guaramata says dealers4 are struggling to keep up with supply and demand. He says, "Many car dealers now have waiting lists because demand for vehicles is growing, but supply has not kept pace."
Easy credit and low gasoline prices have helped car sales. A tank of gas costs only a couple of dollars. Interior designer Laura Lozano says, like many others, she is taking advantage of favorable conditions to buy a second car. "Everyone should have a car, so they don't have to take the subway or taxi and wait in line. In your own car, you also avoid the risk of getting mugged," she adds.
High demand for many goods also pushed up inflation to more than 22 percent last year. Government price controls in recent years have led to shortages for cars as well as milk, sugar and other foods, prompting officials to seek another solution.
On January 1, Venezuela launched a newly designed currency that removed three zeroes from denominations5. Goods once priced at 80,000 Bolivares, now say 80 [equivalent to US $32.]
In a televised speech, Central Bank President Gaston Parra said the change will strengthen the economy. "It was necessary to leave behind a history of problems caused by high inflation," he said.
Some economists6 say the new currency alone may do little to ease inflation. Salesman Guaramata says there is concern that retailers7 will take advantage of the change to raise their prices. "The new currency could allow car dealers to raise prices, as much as 50 percent on new cars," adds Guaramata. "In fact, many dealers raised their prices before the change."
International oil prices have surged even higher in recent days, suggesting Venezuelan shoppers may continue spending well into the new year.
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