Venezuela's paper shortage signals economic difficulties

Shops running out of toilet paper was the big story in Venezuela recently but that little problem was just the latest sign of problems with the economy.

Women wait in line at a supermarket in Caracas. Reuters/Jorge Silva

“There is no toilet paper, there is no flour … sometimes there isn’t even soap to bathe with,” said Roosvely Aguilar, a 22-year-old student standing outside a supermarket in Caracas.

Shopping here in Venezuela for basic items can be a struggle. But as well as shortages, the country suffers from eye-watering inflation. Earlier this month, the annual figure was announced by the government to be at 35.2%, one of the highest rates in the world.

The news follows the recent death of Hugo Chavez, Venezuela’s popular and charismatic president for 14 years. Chavez chose as his successor Nicolas Maduro, who was subsequently elected. Maduro's government is attempting to tackle severe economic and social issues.

Carlos Ortiz, a graphic designer based in Caracas struggles to run his business. He is unable to get hold of the most fundamental requirement for it: paper.

“It’s the spine for our business,” he said. “Not having paper is not having a job. Some of our competitors have shut their businesses.”

The problem is primarily down to both currency controls enacted a decade ago, which have led to a severe shortage of US dollars which are vital for imports, and price controls which often take away the incentive to produce.

The currency controls were brought in by Chavez to prevent capital flight.

However, the local currency - the bolívar, named after Latin American independence hero and Chavez idol Simon Bolivar - is so grossly overvalued now that it sells for four and a half times less than its official value on the black market.

It is bad news for Venezuelans who struggle to get hold of dollars to spend abroad - or to import products for business - but good news for foreigners who earn in hard currency, and are able to purchase products priced internationally, such as flights at four and a half times less than their foreign value.

“These people don’t believe in supply and demand,” said Angel Garcia Banchs, an economist at Econométrica in Caracas.

That is a fundamental problem, believes Garcia Banchs, for Venezuela’s economy, though it will not change overnight.