Speaker 1: I mean, really, there's no country in the world that's
Speaker 1: got inflation anywhere near these levels. You don't see that
Speaker 1: anywhere else in the world right now. Hello, and welcome
Speaker 1: back to Bloomberg Benchmark Show about the global economy, and
Speaker 1: a very happy new year to all of our listeners
Speaker 1: and fans. I'm Scott landman and economics editor with Bloomberg
Speaker 1: News in Washington. Today I'm flying solo as your host
Speaker 1: because Dan and Kate were unable to be with us,
Speaker 1: but I'm very glad to have my colleague David Popadopoulos,
Speaker 1: Managing editor at Bloomberg in New York, joining me today
Speaker 1: for the show. Hey, David, how's it going excellent? Scott. Economics,
Speaker 1: in one sense of the word, is what we call
Speaker 1: the tracking of the blizzard of indexes that we get
Speaker 1: on a regular basis all over the world to track
Speaker 1: the relative strength of different economies. UH covers everything from
Speaker 1: GDP to the labor market to inner national trade and
Speaker 1: and also whether prices are rising or falling. And it's
Speaker 1: that last measure that we are here to discuss today.
Speaker 1: The country is Venezuela, and the index is something we
Speaker 1: created all by ourselves. It's called the Cafe con La index, Yes, Scott, So,
Speaker 1: Unlike most inflation indexes, this one isn't exactly scientific. Um.
Speaker 1: It tracks just one product, a single cup of coffee
Speaker 1: serve piping hot at a baker in eastern Caracas, the
Speaker 1: capital of Venezuela. Yet the index plugs a gap in
Speaker 1: Inflation is rising so fast in Venezuela, and the government
Speaker 1: is so embarrassed by the pace of price increases that
Speaker 1: it stopped publishing the data a long time ago. Uh So,
Speaker 1: and the drum roll, please, excellent drum roll, Scott. As
Speaker 1: of this week, our capic N index reached eight hundred
Speaker 1: and forty nine percent. That is the annualized inflation rate
Speaker 1: we have from the index. Now, we don't have a
Speaker 1: full year's worth of data yet um on the price
Speaker 1: of coffee in our index. But since we began collecting
Speaker 1: the figures back in August, we've seen massive, back to
Speaker 1: back to back price increases in just a span of
Speaker 1: several weeks in some occasions. And that that's compared with
Speaker 1: what like two percent, just under two percent really right
Speaker 1: now in the US. And you had inflation peaking attent
Speaker 1: in yeah and and beyond the U s Scot I mean, really,
Speaker 1: there's no country in the world that's got inflation anywhere
Speaker 1: near these levels right now. Hyper inflation. Of course, there's
Speaker 1: been plenty of episodes in the past where hyper inflation
Speaker 1: was kind of in vogue. I mean in the bad
Speaker 1: sense of the word. You know that you you had
Speaker 1: hyper inflation every bouts into their places. You don't see
Speaker 1: that anywhere else in the world right now. Uh. Steve
Speaker 1: Hankey of Johns Hopkins University has kept track of this,
Speaker 1: and nothing remote compares with Hungary in forty six, which
Speaker 1: get this, it hit a monthly rate of forty two
Speaker 1: quadrillion percent, which means prices doubling every fifteen hours. Do
Speaker 1: do we ever use quadrup don't. I don't even know
Speaker 1: what mathematically that would look like. That it was it
Speaker 1: was ten to the sixteen power Um. You know got
Speaker 1: Germany's Weimar Republic in the nineteen twenties hit a mirror
Speaker 1: twenty nine thousand five percent, which is, you know, it's nothing.
Speaker 1: Even though that's held out as the main example in
Speaker 1: recent years, Zimbabwe has often made headlines with its hyper inflation.
Speaker 1: About ten years ago that was at eighty billion percent.
Speaker 1: Now we're going to get an underground perspective of this issue.
Speaker 1: Joining us on the phone is Fabio, a correspondent in
Speaker 1: our Caracas bureau who has helped get these regular updates
Speaker 1: for the cafe index. Fabiola, thanks for joining us, Thanks
Speaker 1: for having me here. So what does a cafe con
Speaker 1: l a cost? Right now? In Venezuela, Benesela has two
Speaker 1: sets of prices. One is the due to the official
Speaker 1: eccentch rate and the other the unofficial exchange rates, so
Speaker 1: the prices vary a lot. So um. By the official
Speaker 1: exchange rate, you can buy a couple of carin let
Speaker 1: a cafe or a cup of coffee for one dollar
Speaker 1: and six or three cents. That's the official exchange rate.
Speaker 1: That it's around six hundred and seventy believers per dollar.
Speaker 1: But if you if you compare it to unofficial rate,
Speaker 1: it's about thirty five cents the cup of coffee, so um,
Speaker 1: because the unofficial rate is around three thousand and two
Speaker 1: hundred boliveries per dollar. So that gives you the whole
Speaker 1: view of the difference of prices of cafe con letter here.
Speaker 1: So when it comes to the actual hit to somebody's pocket,
Speaker 1: what does it feel like for people in Venezuela. Is
Speaker 1: it the thirty two cents or is it the dollar sixty? Uh? Well,
Speaker 1: people in Veneseta here have that consuming because it's very
Speaker 1: that the price go prices go up every two months,
Speaker 1: as the index shows. So um, a couple of coffees
Speaker 1: really a luxury here? Is there any way David to
Speaker 1: kind of put in perspective what what this means in
Speaker 1: someone's wallet in Venezuela with a scarcity, like just a
Speaker 1: regular cup of coffee at Starbucks here costs two dollars,
Speaker 1: you can you can spend a few dollars if you
Speaker 1: want something more complicated like a latte and other drinks.
Speaker 1: What are we talking about? So in our index we
Speaker 1: have and this is actually a price that Fabiola gets
Speaker 1: from from a cafe a bakery in eastern Caracas. We
Speaker 1: have it at roughly one thousand, one hundred bowl of ours.
Speaker 1: And and and for a little bit of perspective on
Speaker 1: that one thousand, one hundred bull of ours I leave
Speaker 1: is uh is a very significant actually chunk of what
Speaker 1: the the essentially the minimum wage would be in Venezuela.
Speaker 1: Fabula correct me if I'm wrong. I believe the minimum
Speaker 1: wage when you include um, food subsidies and everything that
Speaker 1: people get is something like what a hundred and thirty
Speaker 1: thousand bolivars a month? Is that right? What's the exactly? Yes,
Speaker 1: that's correct, that's the latest. So when when you're when
Speaker 1: you're for and and there are many folks who would
Speaker 1: be around that minimum wage number, you're making a hundred
Speaker 1: thirty thousand boliv ours a month, and one cup of
Speaker 1: coffee uh is one thousand, one hundred bole of ours. Uh.
Speaker 1: It's a significant amount of money. So Scott in other words,
Speaker 1: of your yeah, your monthly expenses exactly. So if you
Speaker 1: that you do in one day exactly if you were
Speaker 1: and I you or I were to show up in Venezuela, uh,
Speaker 1: and and you know most people frankly buying sell dollars
Speaker 1: in the black market, it would be pennies for us,
Speaker 1: it would be insignificant. But if you are in Venezuelan
Speaker 1: earning in bouliv oars the local currency, yeah, it's suddenly
Speaker 1: become prohibitively expensive. So it's business gotten a lot slower.
Speaker 1: Fabiola places that you know that sell cafic on late chase,
Speaker 1: those kinds of cafes. Cafricnetto was usually what you got
Speaker 1: in the morning, you stopped at the local bakery and
Speaker 1: got a cup of coffee and something to eat very fast.
Speaker 1: But nowadays the bakeries, you know, they're not selling him
Speaker 1: very much. Cafric Connette there, it's become luxury to the
Speaker 1: Venezuelana don't have any of those places had to close. No, no, no,
Speaker 1: not too close because they sell all the things. But um,
Speaker 1: you know, the really complex thing about the cafric Connett
Speaker 1: is that it's a product made of the staples that
Speaker 1: are very scarce here in Venezuela with the current crisis.
Speaker 1: It's sugar, milk and coffee, and those are the three
Speaker 1: staples that we Venezuela has to import these days. For instance,
Speaker 1: back in ten ten years ago, we were so sufficient
Speaker 1: in milk and coffee and sugar, but nowadays we have
Speaker 1: to import roughly seventy five percent of the coffee. We
Speaker 1: we can shu him that it's a that's it's a
Speaker 1: very big dramatic paint for the cafic one. They say
Speaker 1: here as as a staples say it said. At the beginning,
Speaker 1: my thought was that you know what I remember when
Speaker 1: I lived in Venezuela in the ninety nineties, actually right
Speaker 1: up to the time Hugo Chavez took office. In you
Speaker 1: you walk into any one of these bakeries and the
Speaker 1: cafe was something that just they just moved massive quantities
Speaker 1: of It was almost kind of like a lost leader, right.
Speaker 1: It was helped was what you did. You sold to
Speaker 1: help get people in the door. And then they were
Speaker 1: in the door, they bought a cafe, and they bought
Speaker 1: a they bought a loaf of venezuela and bread, and
Speaker 1: then they know, they see something else and something else
Speaker 1: and something else, and you know, it was just something
Speaker 1: that's just sort of helped churn you. You would turn
Speaker 1: massive volumes and and you really get the sense that, yeah,
Speaker 1: that that is slowed quite a bit. So are we
Speaker 1: gonna have to change this index pretty soon? If if
Speaker 1: nobody nobody's buying, well, you know, Fabiola and I will
Speaker 1: certainly think about it. I think the issue you have
Speaker 1: is that I don't know that people are consuming much
Speaker 1: of anything, So we would start to uh have to
Speaker 1: think hard about what we would latch onto if it
Speaker 1: weren't Catholic. On that well, well, maybe Fabila can talk
Speaker 1: about you know what about other basic goods in Venezuela.
Speaker 1: I mean, how are people Can we measure inflation by
Speaker 1: their prices or how are people paying for them? Are
Speaker 1: they fixed prices and how does how does that work?
Speaker 1: As I said before, it's like two works to dimensional
Speaker 1: economy because you have fixed prices. The government has set
Speaker 1: prices for stables like sugar, coffee, milk, meat, but you
Speaker 1: can also find those tables at an official rate. So
Speaker 1: you have like two economies. And yes, these tables sugar, coffee, milk,
Speaker 1: So there they have hit the cyling, I mean, and
Speaker 1: they're very very scars and you have to accute a
Speaker 1: lot to get uh coffee, these tables on the fixed
Speaker 1: price if you want, if you can't afford to queue
Speaker 1: for five hours for three hours, or you just can't
Speaker 1: find them in in your neighborhood, or you have to
Speaker 1: buy them at an official rate. So um, yes, you
Speaker 1: can measure inflation by these tables like flour, corn flower.
Speaker 1: Uh they're going up every every month if you measured
Speaker 1: it by the an official rate. But the fixed prices
Speaker 1: of the government they have to They have been adjusting
Speaker 1: these tables uh every three to four months and the
Speaker 1: last uh year that's uh, that's it tour the kind
Speaker 1: of at prices, uh you see on every product now
Speaker 1: one puzzle for a lot of us outside Venezuela, the
Speaker 1: outside looking in is you know, things have been in
Speaker 1: such bad shape now for some time, but we wonder why,
Speaker 1: uh Mr Maduro continues to remain in power. You know,
Speaker 1: what point does you know, does the pressure become so
Speaker 1: overwhelming that there is some kind of political regime change
Speaker 1: in Venezuela. Right, Well, it's Scott. That's kind of the
Speaker 1: million dollar question. And that's something that folks have been
Speaker 1: asking for an awful long time. I mean, you know,
Speaker 1: I was recalling the other day that you know, his predecessor,
Speaker 1: Chob is the man who essentially h hand picked Mr
Speaker 1: mother Would to run the country and succeed him. Um,
Speaker 1: you know, there was there was the scuttle button caroc
Speaker 1: Is back in the late nineties when Chob was taking
Speaker 1: office that oh that he was going his administration was
Speaker 1: going to collapse imminently at any point in time, and
Speaker 1: that he was going to be impeede immediately. And here
Speaker 1: we are twenty years later, and uh, and and the
Speaker 1: and the regime as it's to be understood, uh with
Speaker 1: Mr Motherwood was succeeding him is still there. Uh. I mean,
Speaker 1: I think it is a head scratcher even for a
Speaker 1: lot of Venezuelans um because when you look at just
Speaker 1: how bad things are, how dysfunctional that place has become. Uh,
Speaker 1: it's hard to understand how they're holding on. I will
Speaker 1: say this that there has been a big push to
Speaker 1: recall the president. Uh they the opposition certainly has gathered
Speaker 1: enough signatures to make that happen. But but the government
Speaker 1: has put up one obstacle after another after another to
Speaker 1: block it. And Uh, you're in this sort of holding
Speaker 1: pattern that we've seen, frankly for for a pretty long time.
Speaker 1: And is the country still able to sell oil or
Speaker 1: has that stuff? It does? It does? Oil production is down,
Speaker 1: exports are down, but it still does uh export. I
Speaker 1: believe it's producing. I mean again, there are no official
Speaker 1: figures really, but estimates would put it in the ballpark
Speaker 1: of two and a half million, I believe all the day.
Speaker 1: You know, before Mr Travis took office in the late nineties,
Speaker 1: the vision of the previous administration was to ramp up
Speaker 1: output to somewhere around five million barrels or so plus.
Speaker 1: This is the country with the world's largest oil reserves.
Speaker 1: And yet all we've seen, unfortunately over the past two decades,
Speaker 1: certainly unfortunate for the Venezuela and people who are now
Speaker 1: becoming deeply impoverished is declining output. So fabiola. You know,
Speaker 1: if you had to sum up the mood of people,
Speaker 1: uh that you talked to on a regular basis, or
Speaker 1: people around Caracas, around Venezuela looking at how you know,
Speaker 1: how how much the economy has sung, how much inflation
Speaker 1: is growing, what would you say? Well, if you asked
Speaker 1: me the question about six months ago, people were very angry,
Speaker 1: I mean up until December, very angry at the situation,
Speaker 1: very frustrated, but in more and more openly talking against
Speaker 1: the government at every corner, at every street. UM. In
Speaker 1: contrast to a year or two years ago where people
Speaker 1: did not connect the bat shape of the economy to
Speaker 1: the running of the politics. But nowadays, after well the
Speaker 1: major blow at December that there was not going to
Speaker 1: be a referendum, UM, the mood in the streets is
Speaker 1: very depressed. People are very sad. The mood is pretty
Speaker 1: h low. UM. In contrast to three months ago where
Speaker 1: UM many Venezuela thoughts. The reference recal was going to
Speaker 1: happen some way, and there were demonstrations as the streets
Speaker 1: and but um slowly the government curtailed um that possibility
Speaker 1: at the High Court ruled against it. So um, the
Speaker 1: mood is very um sad I mean U that's how
Speaker 1: I perceive it today. Well, it doesn't sound like a
Speaker 1: good situation by any means, But Fabriola, we will definitely
Speaker 1: look forward to your reporting in the coming months on
Speaker 1: the situation there. Thanks so much for joining us, Fabriola perfect,
Speaker 1: Thank you, and thank you David for joining us to
Speaker 1: my pleasure. Benchmark will be back next week and until then,
Speaker 1: you can find us on the Bloomberg terminal and Bloomberg
Speaker 1: dot com, as well as on iTunes, Pocketcast, Stitcher, and
Speaker 1: the revamped Bloomberg app. While you're there, take a minute
Speaker 1: to rate and review the show so more listeners can
Speaker 1: find us. Let us know what you thought of the show.
Speaker 1: You can follow me on Twitter at at scott Landman.
Speaker 1: Our guest Fabriola is at at Z E R P
Speaker 1: I U S and just one final note. Benchmark is
Speaker 1: produced by Sarah Patterson. The head of Bloomberg Podcast is
Speaker 1: Alec McCabe. Thanks for listening, See you next time. The
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