Inflation in Venezuela free essay sample

When speaking about the country of Venezuela, Nelson Merentes, the president of the Central Bank of Venezuela (Banco Central de Venezuela) also known as BCV said that an average inflation of 14% and 16% is estimated for this year, talking about 2013. In the other hand, William Neuman, New York Times writer says that â€Å"Inflation for the 12 months ended on Jan. 31 was 26%, one of the highest rates in Latin America. † Venezuela is the fifth largest economy in Latin America, but during the last decade, its been the worst performer in GDP growth, says Arturo Franco of the Center for International Development at Harvard University. What is GDP? It means Gross Domestic Product. â€Å"An inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as constant-price, inflation-corrected GDP or constant dollar GDP. said by Investopedia. Deflation is also a term used in the economics, according to the web page Crisis Times, deflation is a fall in the general price level. We will write a custom essay sample on Inflation in Venezuela or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page - Venezuela’s governmet continues to insist that the problem is caused by speculation and by monopolies. One problem that complicates their economy is the exesive printing of money. This means that there is more money but with less purchising power. People have more money with less value, so they want to spend it and accumulate goods, when there are not enough goods to satisfy their demand, then of course we have an increase in prices. The high inflation rate made the government create price controls, this causes product shortages leading campanies/businesses into a difficult situation sometimes driving them to bankrupcy. - Due to the huge inflation in Venezuela economists insist that an â€Å"Inflation Spiral† may occur. This has a feedback effect, the spiral affects the rising prices for goods/services, wages, labour cost and the increase of cost of production. This starts by an initial rise in a the price of all goods/services then people start searching for higher wages and this makes the labour cost increase as well. The higher labour cost leads to an increase of cost of production and then the price of the goods/services given may increase drastically. Unenployment rate is higher when this â€Å"Inflation Spiral† beggins. - - Venezuelanalysis informs that in November 22nd 2011, â€Å"The Law for Fair Costs and Prices†, was created to give stabilization to the prices of goods, this law will reduce inflation, currently at near 26% per year. This law also allows the government to control or limit the prices of goods/services. Representatives of the ministries of food, commerce, basic industries and mining, planning and financing, and the Venezuelan Central Bank (BCV) were involved in the elaboration of the law. - - - - - - - - - - - - - - Bibliography * â€Å"Definition of inflation† Medium: Internet, Seen: May 27 (http://www. investopedia. com/terms/i/inflation. asp) * â€Å"BCV estimates 14% 16% if inflation†, Author: VTN, Medium: Internet, November 3rd 2012, Seen in May 28. (http://www. vtv. gob. ve/articulos/2012/10/23/bcv-estima-inflacion-entre-14-y-16-para-2013-5070. tml * â€Å"Venezuela’s Inflation rate Causes-Solutions†, Author: Social_Critic, Medium: Internet, Feb 05 2011, Seen: May 28. (http://www. democraticunderground. com/discuss/duboard. php? az=view_allamp;address=40547875) * â€Å"Venezuela Devalues Currency by a Third Amid Shortages and Inflation † , Author: William Neuman, Medium: Internet, Feb13 2013, Seen: May 29. (http://www. nytimes. com/2013/02/09/world/americas/venezuela-devalues-currency-amid- shortages-and-inflation. html? _r=0) * â€Å"Inflation Rate†, Medium: Internet, Seen: May 29 (http://www. nflationworld. org/facts. html) * â€Å"Inflation Effects and How to Survive† , Medium: Internet, Seen: May 29 (http://crisistimes. com/inflation. php) * â€Å"Venezuela’s Law of Fair Prices Goes into Effect†, Author: Tamara Pearson, Medium: Internet, Nov 23 2011, Seen: May 30 (http://venezuelanalysis. com/news/6649) - - - - -