Matt O’Brien explains how price controls lead to empty supermarkets in Caracas:
Venezuela imports most of its basic goods, so it’s only profitable to sell them at the official prices if you can buy them overseas with dollars you got at the official exchange rate. Businesses that have to pay 60 bolivares for one dollar aren’t going to spend it on things the government will only let them sell for, say, 20 bolivares. They’ll leave their shelves empty instead.
But it’s even more perverse than that. The companies that are lucky (or corrupt) enough to get cheap dollars don’t always use them on what they’re supposed to. That’s because they can make more money selling their subsidized dollars in the black currency market than they can make selling their subsidized goods at the official prices. So they’ll fake invoices that show them importing what they said they would, and then flip some dollars for a quick profit—or maybe hoard them for a bigger profit later. That’s why, as Francisco Toro puts it, Venezuela’s “‘butter importers’ are no such thing” but are rather “currency arbitrageurs, with a loss-making side-business in butter imports.”
Similarly, Sarah Rainsford shares her shopping frustrations in Cuba:
I once approached my big local supermarket full of optimism. I now know I’m likely to find a mixture of half-bare shelves and ones stacked with a single product: cheap ketchup, say, or adult incontinence pads. Basic items disappear whenever Cuba struggles to meet its import bills. For weeks there was no toilet paper or cartons of milk. Now even the delicious local coffee is “lost,” as Cubans say – “esta perdido”.
(Photo: An empty shelf inside a private market in Caracas on June 17, 2014. By Leo Ramirez/AFP/Getty Images)
The Dish 