The Black Market in Venezuela

Venezuela has been experiencing economic decline ever since the oil crisis under the Chavez administration. The effects of this crisis are ongoing, affecting everyday life for the entire country. This blog serves to analyze these effects, and trace their path from the oil crisis that began this economic turmoil. The first effect to be considered is the black market that has been established in cities throughout Venezuela. This black market provides an alternative way to purchase everyday items such as food, as well as a place to exchange currency. The market has grown to the point that its exchange rate is nationally recognized, overpowering government exchange rates. The government itself is doing little to regulate this informal market, leaving room for corruption and money laundering. The lens to look at this situation through though, is rooted in the massive inflation starting from the oil crisis, that had an extremely damaging effect on the country, leading to food shortages, lost job opportunities, and a drastically lowered standard of living.

The black market in Venezuela is an actual place in most cities, and if it isn’t, black market vendors can be contacted through Whatsapp, or Facebook. The black market is run by what are called, “bachaqueros,” black marketeers that resell products at incredibly inflated prices, most of them lining up on the outskirts of local market squares. Since there is a shortage of basic commodities and products throughout Venezuela, people sometimes wait days in line at local supermarkets. Although products are cheaper at the state supermarkets, many products are unavailable as illustrated by Noslen Ramos who states, “It’s common to sleep in line...there is no guarantee anything will be on the shelves when shoppers arrive. Even if items are available, each person can only buy two of any item in a week.” The black market, often called “el contrabando,” sells products any American can find at their local Safeway or Target; flour, eggs, medicine, diapers, soap, and virtually any basic product in our daily lives. However, the black market sells it at almost 17 times the price, making a loaf of bread cost $26, a dozen eggs for $18, and a pound of coffee for $38 (Tong) while the supermarkets sell eggs for about 980 bolivares, (less than $1). However, many Venezuelans cannot afford the prices of the Black Market, and are forced to live in hunger. The vendors get a hold of these products when distributors contact them, and sell them the products (Barbarani). A person walking past these illegal street vendors can also exchange bolivars for dollars, however, it would be at twice the exchange rate in order “to recover their investment.”

Since the election of Maduro in 2013, global oil prices have fallen dramatically, reducing the country's main source of income and paving the way for unprecedented inflation rates. Under the previous administration, President Chavez used oil revenue to import food and medicine because the country was unable to produce these products at a competitive rate. In 2014 however, the country's economic dependency on oil proved fatal and it was no longer able to supply its country with adequate food and medicine because of the declining oil prices. Subsidies and price controls have been neglected since the recent economic turmoil, allowing food and medical prices to soar dramatically as these resources are becoming harder and harder to find. Thus, the Black Market was established to provide people with basic and specialized supplies that are extremely difficult to find elsewhere.

In 2016, inflation rates are the highest in the country's history, and the Black market continues to dominate as the preeminent market in Venezuela. Recently, the government distributed it’s new currency to the people in an attempt to increase spending, but it only served to heighten inflation. Today, inflation has reached 481 percent according to the IMF, making it extremely difficult for people buy food and basic commodities at affordable prices.  According to CENDAS, a family of five needs to spend nearly 1.02 million Bolivars a month in order to feed, house, and clean themselves. Furthermore, the exchange rate in the Black Market is 4,283 Bolivars to 1 US dollar, and people are unable to get the supplies that they need unless the go through the black market. The Black market emerged through inflation and has continued to grow in the wake of economic turmoil, creating unstable and dangerous conditions for the Venezuelan people.  

After taking a closer look into the perpetuation of the economic crisis along with the black markets, the origins are quite startling. Back in 2004, the previous president Hugo Chavez, began handing over control of the food industry to the military, creating the Food Ministry. This process nationalized farms and food processing plants, taking land from people in order to redistribute wealth. However, the government intensely neglected the farms and food production lines, which dried up domestic production. Now, the government imports the vast majority of the country’s food, and corruption has gotten out of control. An AP News report stated that the annual Food Ministry report shows “significant overpayments across the board, compared to market prices… [Also,] the prices the government pays for imported foods have been increasing in recent years, while global food prices remain stable,” which is a direct indication of laundering hundreds of millions of dollars within the government officials.

Furthermore, instead of dealing with the food shortages head on, after his failed plan to redistribute wealth and resources within the state, the current president Maduro diverted complete food regulation to the country’s military last summer. According to NPR, as well as AP News, the Venezuelan military is now the main control behind the black markets for food, and individually getting extremely wealthy in the process. The soldiers are selling basic groceries for well above their original price, instead of restocking grocery stores, like they are supposed to. This is just another sign of corruption within the government, as Maduro has consciously chosen to turn a blind eye to the inherent situation, as he continues not to amend the situation. Critics say that this choice to relegate all food control to the military is an attempt to keep the soldiers and their families happy and fed, in order to avoid a potential military coups, which Venezuela has had frequent issues with in the past. In addition, last year Maduro declared an “economic war on the black market, deploying both police officers and the national guard to arrest illegal vendors,” yet obviously not cracking down on the military officials who are running the system behind the scenes.

The black market of Venezuela is an extremely complex network run by corrupt bachaqueros and military officials. Because of the high levels of corruptions throughout Venezuela as a whole, it is difficult to find legitimate data and information about the actual inflation, corruption, and government actions within the country, so the situation may be more extreme than what is expressed in this blog. The Venezuelan community has suffered immensely because of the market’s control of food prices, leaving families desperate and impoverished. As of right now, there is little hope of improvement because of the lack of effort from the government to regulate food supplies and prices. Until regulations are enforced and Venezuela regains the economic trust of international lenders, and is able to sustain sufficient imports, the country will continue to be at the mercy of the black market.

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