Thursday, December 1, 2016

Strange Things Afoot - Inflation

2 1/2 months at post and "strange things are afoot at the Circle K." (Circle K is a convenience store chain founded in Texas and referenced in Bill & Ted's Excellent Adventure. Be excellent to each other!)

It's already hard to find some items like milk, sugar, toilet paper, deodorant, or other various imports people actually need for a normal life. Regardless of their lack of Circle K stores, I have a feeling strange things are afoot here. Prices are all over the place from really cheap to expensive when I compare them to home.

There's 3 different exchange rates at play. It makes it harder to understand why anything is priced the way it is. I'm sure a lot of the pricing troubles are caused by these various exchange rates.

First, there's a preferred rate that rarely changes. It's 10 bolivars to 1 USD for important basic stuff like milk, sugar, and cornmeal. It's part of how those products are subsidized along with the price controls. Low prices on some stuff does nothing to help curb demand, which makes those items run out faster when they have them.

There's a second official floating rate currently at 663 to 1. It hasn't moved much for several months. It's supposed to be for everything else, but it's also government controlled and hard to access for foreign currency exchanges even though it's supposed to be the official rate. I think some stuff is imported at this rate.

Finally, there's a "parallel rate" or unofficial street rate. A lot of money transfers are around the parallel rate and some stuff is imported at this rate too. Well, that rate just took off like a rocket over the last couple of weeks. I'm paid in dollars and spend in bolivars so I don't know what to think of this new financial environment we live in now.

Inflation was bad before. The parallel rate went from 173 to 833 in 2015 or 381% for the year. It seemed to stabilize and was at 1,023 when I got here, but in the last 2 1/2 months it shot up 348% (428% for the year) to 4,587 with huge jumps in the last 9 days:


It took a little over 2 months to double from 1,023. It quickly shot up in the last 9 days to 4,587 which is more than another doubling in a much shorter time. Recent inflation has been 7% to 24% per day to achieve that feat. Inflation in the U.S. averages around 2% per year. I can do the math but I don't know what to do with it for daily living since I've never been in this kind of environment.

$100 when I got here is worth $22.30 now. That's not the worst part. If I transferred $100 just 9 days ago then it's worth $51.98 now. That's losing half in just 9 days. I can't wrap my mind around the steep curve we just entered. Is this the start of hyperinflation? I've been reading about previous hyperinflation in Yugoslavia and Zimbabwe. It won't be good for anyone if it reaches those levels.

It's bad if you move money or goods back and forth out of the country, which I don't. I only transfer money here to buy local things as I need it. It isn't a quick process so I'm losing value just waiting on the transfer, but then prices aren't shooting up as fast as the exchange rate so some things get cheaper for now. People who have been here longer say price increases will catch up with the exchange rate and more shortages will probably happen as a result. Import prices will increase which causes more scarcity which increases prices which... makes my head spin.

All I know is a stack of 20,000 bolivars (below) was worth $19.55 when I first got it and now it's worth $4.36. It's good to have a local currency debit card instead of bags of cash as prices go up. The highest denomination is currently 100 but I hear higher bills are on the way. If hyperinflation truly sets in then it may not be enough. Zimbabwe had a 100 trillion dollar banknote at one point! Things can always get worse.

The only thing I can do right now to deal with inflation is to transfer only what we need because it loses a lot of value every day. Strange things are afoot indeed...


Monday, October 31, 2016

Caracas Apartment

I finally moved out of the hotel and into the apartment after 6 weeks at post. I came in at the end of the summer rush and post had to expand their housing pool again, so my assigned apartment was still being renovated when I arrived. It might be another 3 weeks until our stuff arrives including a much delayed Unaccompanied Air Baggage (UAB), so living out of 2 suitcases continues. It's good that my wife was held up with a visa issue and doesn't arrive until tomorrow.

Let's see, pack out was 1 week before departure, 6 weeks of home leave, 4 weeks in DC for training, and now 6 weeks at post to get into an apartment. That's 17 weeks of feeling homeless since the end of June. I've never lived out of 2 suitcases for so long and I'm still doing it! Well, at least we have a nice apartment to start feeling like home again. We'll get more familiar belongings delivered and then it will be a home for 2 years. After that, it's time to start the whole process all over again. :-)

Here's a few pictures of the nicely renovated and furnished place. The bed will be replaced with our own, but otherwise the rest of the furniture is here to stay. The first picture is the very important water tank added because of frequent water outages, which should really hit hard during the dry season in the spring. There's also a filter for the sink because of quality issues. We may get power outages but not enough to justify a generator... yet. Otherwise, it should be a nice apartment to live in while avoiding all of the crime outside.













Saturday, October 8, 2016

Sambil Mall and Hard Rock Cafe

I finally ventured out and went to a big mall to see how it is here in Caracas. Sambil may be the biggest with plenty of American and local stores. There are American fast food places like KFC, Wendy's, McDonald's, Burger King, Subway, Quiznos, and a few others I'm probably forgetting. There's 3-5 floors to this place depending on which area. There's a really nice Hard Rock Cafe on the 5th floor with covered outdoor seating.

Plenty of people wandered around. There were huge lines for the ATMs and banks as people need lots of cash with the inflation. The restaurants were kind of dead but the fast food places were busy. It seemed like a lot of people were there like me to mostly look around since it was a nice place to do it. I didn't see a whole lot of shopping even though the stores were full of stuff to buy.

Prices ranged from a little cheaper to a bit outrageous from my perspective. Most of it hovered around U.S. prices as far as I could tell with the exchange rate. Local wages haven't kept up with inflation so everything's probably much more expensive without dollars to transfer into the country. It's good for me that I get paid in dollars. :-) If this is what their inflation has done so far then I'm not looking forward to next year if it gets more expensive than this. Hopefully the exchange rate keeps up with inflation. Here's some pics of the mall:







There were a few other customers in Hard Rock Cafe, but with a burger and 2 small local beers for 18,500 Bs then maybe it isn't so affordable to have a lot of customers. Let's say that was around $18.50 for me with easy math. They had the standard Caracas menu of food without prices and a printed price sheet in the back to easily change out for frequent price changes.








Lenny Kravitz

The Edge

Joe Walsh

Stevie Nicks

Here's two examples of prices with very rough exchange rate math:

Converse on sale for 24,999 Bs or about $25 which sounds good.

Samsung 55" Curved TV for 3,551,550 Bs or about $3,550.
It's $900-$1000 in the U.S. so I wouldn't buy it here!