Venezuela's inflation rate is traveling at ludicrous speed. Colombia has been unable to help, despite allowing for Venezuelans to come into the country's supermarkets in droves. Venezuela, led by Nicolas Maduro, is the region's only failed state.
There has been zero relief on food inflation thanks to the inflow of goods likely being resold at a premium, and surely unable to meet domestic demand. In one month, food prices in Venezuela rose 30% with annualized inflation now at 773% year-over year ending July. It's official, we are now approaching four-digit hyper-inflation within the next few months.
To make matters worse, inflation is expected to worsen on the 50% minimum wage hike announced by Maduro this week. That takes effect on September 1, a gift to pro-Maduro locals who will watch thousands of opposition activists take to the streets calling for a recall vote this year.
Sadly for Venezuelans, the 50% hike is mere political posturing by the Socialist Party of Venezuela (PSUV). With inflation over 700%, Maduro would have to raise minimum wage by 780% to get a net 5% hike. Good luck with that.
Cumulative YTD inflation is 289% against cumulative wage hikes so far of 80%. In Venezuela, inflation is Usain Bolt and Maduro is akin to a middle-aged man running in steel toe boots, with Achilles tendinitis and a bum knee.
Maduro needs "24 minimum wages to cover the consumer price basked of food items in July," says Siobhan Morden,
Colombia at least has helped squash the looting of supermarkets in Venezuela. Maduro is great at making rhetorical speeches about the plight of the poor and the evils of capitalism; not so great at stacking shelves with bread and milk.
Recent social indicators by the Conflict Observatory (OVCS) reflect the continued economic stress even with a decline in food protests and looting. Social stress remains elevated with the large scale political protest for September 1 fast approaching. Maduro said he will treat anti-government activists with the same force handed down to Turkey's coup plotters by Recept Erdogan, the country's president.
However, Morden believes the economic stress factor will outweigh political loyalties to PSUV, the party of deceased president Hugo Chavez. Any violence against activists would likely backfire. PSUV is up for local re-elections in October. And any crackdown on political rights, already dubious in Venezuela, would make it hard even for the most ardent left wingers in the U.S., Brazil and Europe to back Maduro.
If the protest goes off without a hitch, there is a chance Maduro and members of PSUV will go ahead with a transitional government sooner rather than later.
