Jul 25, 2016

Venezuelans Flock to the Brazilian Border to Purchase Food

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Venezuelan economy is in total collapse with basic food items nearly impossible to purchase by the average citizen. Lines start to form in front of supermarkets the night before in the hope that there will still be something to purchase when it's their turn to enter the store the next morning.

According to a recent report in the newspaper Folha de Sao Paulo, the lack of available food forced Venezuelans to travel to nearby Columbia to purchase basic food stuffs such as rice, sugar, flour, and cooking oil. The Venezuelan president closed the border with Columbia stating that it was to prevent counter ban items from entering the country.

Two months after the border with Columbia was closed, the government authorized the importation of food from Brazil, which is further away and harder to get too. Even though it was not as convenient as neighboring Columbia, it started a stampede of Venezuelans to the Brazilian border in search of basic food stuffs.

The northernmost state in Brazil is Roraima where a highway connects the two countries. During the last two months, Venezuelans have poured into the Brazilian border city of Pacaraima to purchase basic food items. The 12,000 residents of the city describe a "gold rush" mentality as merchants stock their stores and even residents stack food on the sidewalks to accommodate the onslaught.

Most Venezuelans arrive at the border with Brazil by bus with some traveling as long as 12-24 hours to reach the border. They cross the border on foot carrying backpacks, suitcases, even sacks full of money and they return with those parcels full of basic food items.

One Venezuelan indicated to the newspaper that he spent 200,000 bolivars (the Venezuelan currency) or approximately $200 using the black market exchange rate, to purchase food for four families that will last them for one month. Even though they have to pay for the bus ticket, they feel it worth the effort to purchase food that is not available in Venezuela.

The merchants in the city accept bolivars and they price their items in bolivars to facilitate sales. There are no currency exchange houses in the city so merchants exchange the bolivars to Brazilian reals on a nightly basis with entrepreneurs who charge a fee on the transaction. Inflation is so high in Venezuela that the exchange must be done as quickly as possible in order to avoid losing money.

The Venezuelans making the trip are concerned that the Venezuelan president will close the border with Brazil just as he did with Columbia.

The state of the Venezuelan currency is very confusing because there are three different exchange rates in the country. The "official" exchange rate is US$ 1 = 10 bolivars. This rate is used for the importation of food and medicines, but basically only businesses associated with the government are allowed to use this rate.

The fluctuating exchange rate is US$ 1 = 642 bolivars. This rate is used for exports and travel outside of the country.

The black market exchange rate is US$ 1 = 1,005 bolivars. This is the exchange rate used by most individuals in their everyday lives. These are the exchange rates as of late last week and they change on a daily basis.